Accord Business Funding Makes New Marketing Hire
April 3, 2018
Houston-based Accord Business Funding recently hired Aldo Castro to lead its marketing efforts. His title is Vice President of Sales & Marketing.
“We are excited to have Aldo join our team,” Adam Beebe, co-founder of Accord Business Funding, told deBanked. “Aldo comes to us with over twenty years of experience in business-to-business sales and marketing experience… [and he] will use his experience and feedback from the ISO community to help Accord find new ways of adding value to our partners’ businesses.”
Prior to Accord Business Funding, Castro worked as a strategic marketing consultant and co-founded two digital marketing agencies in Texas. Founded in 2013, Accord is a B paper funder with terms between four to eight months and merchants that include auto dealers and trucking and construction businesses, among others. The company of 20 employees is entirely driven by ISOs.
“Accord offers our ISO associates a unique combination of integrity, speed, and flexibility, helping them close their deals faster and easier,” Beebe said.
Strategic Funding Builds Executive Team
April 2, 2018
New York-based Strategic Funding has announced the expansion of its executive team with the appointment of a new CFO and the addition of two new roles, Chief Risk Officer and Chief Product Officer.
“It’s a very competitive world and you have to be able to offer more capabilities and have the right players on the field,” Strategic Funding CEO Andrew Reiser told deBanked regarding the creation of these new positions.
Jeffrey Newman will take on the new role of Chief Risk Officer and his responsibilities will be to enhance Strategic Funding’s credit, risk, and fraud management models.
“We’re rolling out 3.0 of our credit risk modeling,” Reiser said.
As Chief Risk Officer, Newman will also play a key role in managing the company’s portfolio to ensure that it meets profitability goals. Newman is not new to this role. Since 2010, he was Chief Risk Officer of Consumer & Small Business for Citigroup.
The role of Chief Product Officer will be filled Arun Narayan, who has been with Strategic Funding since 2014, most recently as Senior VP of Risk and Analytics. Raiser said that this role is very data oriented and deals a lot with the customer experience, for both brokers and merchants. The role will be about “keeping the process smooth, fast and predictable,” Reiser said.
The Chief Financial Officer, not a new role, will be filled by Anthony Rose. Rose developed strategic and financial initiatives at JPMorgan Chase, Credit Suisse and, most recently, at Dime Community Bancshares, a publicly traded finance company.
Founded in 2006, Strategic Funding primarily offers MCA financing and business loans, but also does some equipment financing and factoring as well. The company has 240 employees spread across four offices in New York, NY, Williamsburg, VA, Rockwall, TX, and Boca Raton, FL.
Funding a Deal Near the Holidays?
March 30, 2018
With the Easter / Passover holidays upon us, deBanked wondered if closing deals is easier or harder during this period. Josh Feinberg, founder of Everlasting Capital, a funding company, told deBanked that he thinks it’s easier to close a deal in the two weeks before a major holiday.
Why? Because he said that merchants are preparing to go on vacation and often want to get major decisions out of the way, while funders are looking to fund as much volume as possible.
At the same time, Feinberg said that application flow typically goes down the week before and after a major holiday as many people are out of their offices.
From the broker side, Anthony Frisone, founder of the ISO Nest Planner, told deBanked that there’s no shortage of merchant demand for capital during the holiday time.
“I’m overloaded with deals,” he said. “It’s busier than usual, but I also have fewer employees because they’re taking off for vacation.”
Peer IQ Insights for Q1 2018
March 30, 2018Peer IQ released its 2018 first quarter “Lending Earnings Insights,” which analyzes lender performance with a focus on credit performance trends. They analyze data across three main lender segments: Fintechs and Non-banks, Large banks, and Card issuers. Below are some highlights from Peer IQ’s analysis on this year’s first quarter:
Credit re-normalization continues
“Credit re-normalization continues across all major lending groups. Credit performance this quarter is mixed. We observe improvements, and record low delinquencies from ONDK, OMF, and FinTechs in particular. LendingClub expects 31 bps lower charge-offs going forward due to tighter credit standards. At Discover – a bellwether for personal loan performance – the net charge off rate jumped 92 bps YOY to 3.62% – the largest increase in several years.
Card issuers
“Card issuers are increasing loan loss reserves at a higher rate than loan growth, indicating expectations of higher losses going forward. American Express increased loan loss provisions 33% although loan growth was only 14%.”
Banks and FinTech
“Bank FinTech partnerships, and M&A continues. Banks are either partnering with FinTechs or investing in beefing up their technology capabilities in payments, lending, digital banking and wealth management. Banks like JP are partnering with Amazon by rolling out co-branded checking accounts and credit cards. A specter is haunting financial services – the specter of Amazon.”
Lenders Pass the Buck on to Borrowers
“Lenders are taking actions to pass rising rates on to borrowers to protect margins and investor returns. Lenders are also trying to reduce all-in funding costs by reducing the credit spreads on their securitizations.”
Twitter Bans Crypto Ads As Its CEO Praises Bitcoin
March 28, 2018
Following in the footsteps of Facebook and Google, Twitter banned cryptocurrency ads on its platform as of Tuesday. Facebook initiated this policy on January 30 and Google did the same on March 14.
“Under this new policy, the advertisement of Initial Coin Offerings (ICOs) and token sales will be prohibited globally,” a Twitter spokesperson told CNBC.
As with Facebook and Google, the rationale behind the ban is to protect users from fraud related to cryptocurrencies.
“We are committed to ensuring the safety of the Twitter community. As such, we have added [this] new policy for Twitter Ads relating to cryptocurrency,” the spokesperson said.
Ironically though, Twitter CEO Jack Dorsey has praised Bitcoin and said as recently as last Wednesday, to The Times UK:
“The world ultimately will have a single currency. The Internet will have a single currency. I personally believe that it will be Bitcoin, probably over ten years, but it could go faster.”
Google and Facebook also have complex relationships with cryptocurrencies.
According to Cointelegraph, even though Google banned cryptocurrency ads, it owns a handful of companies that rely heavily on the use of cryptocurrencies, like Storj, which runs on the company’s native SJCX cryptocurrency, or Veem, which uses Bitcoin for its payments.
Meanwhile, in a post from January 4 of this year, Facebook founder Mark Zuckerberg wrote of cryptocurrencies as a promising counter balance to an increasing centralization of power among technology behemoths:
“There are important counter-trends to [centralization] — like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.”
Pearl Beta Funding Decision a Boon to MCAs, as Long as They’re True to Their True-ups
March 26, 2018While the recent Champion Auto Sales, LLC et al. v Pearl Beta Funding, LLC decision was a win for MCA companies because it determined at the appellate level that an MCA contract issued by Pearl Beta Funding to Champion Auto Sales “was not a usurious transaction,” many lawyers are saying that, more than anything, this decision has demonstrated the importance of having strong contracts with merchants.
So what made Pearl Beta Funding’s contract so strong in the eyes the judges?
“I would say that there were a variety of factors,” said Steven Berkovitch, who represented Pearl Beta Funding in this case along with lawyers from DLA Piper. “The first thing that the judges look for is if there’s a way for the merchant to modify their payments.”
This, in essence, is what is known as the “true-up” in an MCA contract. More specifically, Berkovitch said that the true-up is a contractual obligation on the part of an MCA funder to adjust the daily payment it receives from a merchant to more accurately reflect the percentage of receivables it is owed.
Pearl Beta Funding CEO Sol Lax takes this seriously. He told deBanked: “Our front line servicing guys are well trained to respond when a merchant says ‘My deposits are down, my business is down, can I do something?’ They’re trained to know that the answer is ‘Yes. Send us some bank statements, we’ll look at it and we’ll adjust accordingly.’”
In this case, Berkovitch said that Champion Auto Sales did not use the true-up clause and did not request a payment modification when it was available to them.
“We have, literally, dozens upon dozens of cases where we’ve done the true-up,” Lax said. “So, it’s not just a contract. If [an MCA company] violates the true-up in practice and a merchant calls you and you say ‘hell no,’ that would be, not just a contractual violation, that would put a hole in your true-up clause.”
Many have remarked on how the decision of this case has already impacted the MCA industry. Berkovitch can see that himself. After the case was decided, he said that opposing attorneys have contacted him to withdraw their cases against his other MCA company clients.
Lax acknowledges, with modesty, what this decision means for the MCA industry at large: “You have a safe harbor now for the first time where, if you have a well-drafted contract, then you have active compliance [and] you’re pretty well off. Until this was settled in court, it was still up in the air.”
But Lax doesn’t take this victory for granted.
“You may still see challenges on specific [fact] patterns where a client can show that they had called, they asked for a true-up, and they were told ‘No true-up is available. You got to pay or we’re going to take all of your stuff,’” Lax said. “If they can show a pattern like that, then the MCA company is in trouble. They’ll have a hole blown right through their contract.”
Experian To Stop Reporting All Tax Lien Data
March 24, 2018
According to a March 19 letter sent by Experian to its clients, the company will remove all remaining tax liens from its consumer credit reporting database beginning the week of April 16.
This finalizes the move by credit bureaus (including Equifax and TransUnion) to stop including civil judgments and tax liens on consumer credit reports.
When Experian started to omit this information last summer, many funding companies were in shock.
“The IRS could come in and seize credit card processing accounts and prevent the lender from getting paid,” David Goldin told deBanked last summer in regards to the potential risk of lien data being hidden. (Goldin is the CEO of Capify, a funding company with offices in the UK, Australia and formerly the US.) “Once you have a judgment, a creditor could come in and freeze bank accounts.”
Yellowstone Capital CEO Isaac Stern also expressed concern last summer. But fears about this have mostly been mollified as funding companies have found other ways to obtain the same information. By last fall, Yellowstone started using the Clear platform, provided by Thomson Reuters, in more thorough ways in order to obtain the same information that was no longer available to them on Experian.
“You have to dig through it,” Stern said of the vast data to be found on Clear.
Experian did not respond to requests for comment.
Lawyers Weigh in on Champion Auto Sales, LLC v. Pearl Beta Funding, LLC
March 22, 2018In light of the recent Champion Auto Sales, LLC et al. v Pearl Beta Funding, LLC decision, which decided that the particular MCA contract at issue “was not a usurious transaction,” deBanked spoke to a handful of lawyers, including the plaintiff’s lawyer, Amos Weinberg, to get their thoughts on the decision.
“The contract at issue in Champion Auto v. Pearl Beta Funding was really no different than the contracts reviewed over a hundred years ago by the United States Supreme Court, in Home Bond Co. v. McChesney, 239 U.S. 568 [1916], where our nation’s highest court agreed that “the transactions were really loans, with the accounts receivable transferred as collateral security,” and “[i]n so far as the contracts in question here use words fit for a contract of purchase they are mere shams and devices to cover loans of money at usurious rates of interest.” Like most patrons of funding providers, Champion Auto was a one-person company that needed immediate, overnight cash. Presiding Justice Rolando T. Acosta of the Appellate Division remarked, at the argument, that Champion was a “sophisticated” party that “knew what they were getting into.” It is therefore painfully obvious that even though the NYS Legislature criminalized and voided loans to corporations exceeding 25% interest, and even though all victims of loan sharking knew what they were getting into, the courts are loathe to be used as escape hatches for companies trying to get out of paying back loans.”
Giuliano, McDonnell & Perrone, LLP
“It’s an appellate ruling a lot of people have been waiting for. It handles the usury issue in passing, almost as if it goes without saying.”
Hudson Cook, LLP
“The court confirmed that under New York law, a properly structured MCA transaction is not a loan. But I want folks to focus on the ‘properly structured’ piece of that…The court’s decision did not indicate much. But it did say that based on the documentary evidence, which is the contract, that the transaction was not a loan. So it’s important for folks to understand that for [an MCA contract] not to be a loan, it needs to be properly described…this case really shows us how important the contract is.
This case does not mean that all MCA companies are all in the clear. What it means is that MCA companies with properly drafted contracts, and good practices and procedures, are not making loans.”
Harris Beach, PLLC
“First of all, it was a unanimous decision by the three justices in the first department. That doesn’t always happen, so that’s a good thing. I personally would have liked to have seen more discussion out of the appellate department, but the language that’s there happens to be great for the industry. The one thing that I would caution, though, is not to interpret that all merchant cash advances are outside of transactions that would be subject to usury because it really is dependent on the language of the agreement.
[The decision] is a great tool in the arsenal, but I don’t see it as the tool that is going to prevent challenges.”
Hudson Cook, LLP
“This is a very important decision because New York State has a high volume of merchant cash advance companies…so having favorable case law in New York is great for the industry.”
Mavrides, Moyal, Packman, Sadkin
“I am very pleased with the outcome. There are more cases [to be decided], but this is very beneficial. It’s a win for the industry and I hope to see other decisions go in the favor of the advance industry.”
Platzer, Swergold, Levine, Goldberg, Katz & Jaslow, LLP
“The impact of the Champion decision was direct. We represent several MCA clients and we have a number of cases where Amos Weinberg is representing the merchant. And in one of our cases where a motion to open up a default judgment is at issue, the judge’s law clerk directly emailed us and wants to conference the case based on the Champion Auto Sales decision.”
[Lafont also pointed out that even though it was a short decision, one of its two citations was to Feld v Apple Bank for Sav., which deals with overdraft protection and has interesting parallels to MCA.]
Platzer, Swergold, Levine, Goldberg, Katz & Jaslow, LLP
“Based on the email we just received from the court clerk today, this decision could expedite [future] litigation, and it could decrease certain attorney’s fees for a lot of MCA companies involved in this litigation.”
