News Archives - Lend Academy

Judge Rules OCC Unable to Issue Fintech Charters

A federal judge ruled yesterday that the OCC does not have the authority to issue fintech charters

October 22, 2019 By Ryan Lichtenwald 3 Comments

We’ve been following the OCC Fintech Charter since it was first formally proposed in December 2016. Since then it has been slow going and with no application granted. If successful the charter would have allowed a fintech to be able to operate nationally without having to go the route of state licensing.

For background, here is our previous coverage:

New Fintech Charter Proposed by the OCC (December, 2016)
The OCC Publishes Details on the Fintech Charter (March, 2017)
OCC Announces Fintech Charter on the Heels of US Treasury’s Report on Fintech (July, 2018)

Since our last coverage, prospects of a OCC Fintech Charter have remained in gridlock. At the heart of the problem were lawsuits that came from states including New York. Representatives from the Conference of State Bank Supervisors and the New York Department of Financial Services who challenged the fact that the OCC had the authority to even issue a charter. Due to the uncertainty, no fintech had formally applied though many had expressed interest.

Yesterday, a federal judge ruled that the OCC does not have the legal authority to issue bank charters to non-banks. Judge Victor Marrero ruled on the fact that a clause in the National Bank Act’s business of banking requires that only firms which take deposits can receive a national bank charter.

An OCC spokesperson wrote to American Banker that the agency “disagrees with the decision and the court’s interpretation of the authority the National Bank Act grants the OCC. The agency plans to appeal the ruling to resolve this issue.”

Our Take

We’ve seen firsthand the positive impact that fintech firms are having across many areas, but they are still burdened by a complex set of legacy regulations. The state by state regulatory environment which most fintechs have to go through is an expensive proposition and it stifles innovation in our country. Those that oppose the fintech charter argue that issuing charters would create an unfair playing field but the reality is that these fintechs would still go through rigorous vetting by the OCC. Obviously this news is a huge blow to the OCC and the fintech community and we’ll continue to follow developments here as the OCC plans to appeal the judge’s decision.

FDIC and OCC Weigh in on Madden Decision

The FDIC and OCC file a joint amicus brief with a Colorado court calling the Madden decision "unfathomable"

September 12, 2019 By Peter Renton 1 Comment

There were some new developments in the Madden case, something we have been following for many years here on Lend Academy (see here, here and here).

Law360 is reporting (subscription required) about a bankruptcy case in Colorado that involved a high interest small business loan that was originated by a bank in Wisconsin and then acquired by New Jersey-based World Business Lenders LLC. The Colorado company that is currently in bankruptcy proceedings claimed the loan was no longer valid because the interest rate exceeded Colorado usury laws. The judge disagreed and disallowed the exclusion of the loan stating that the loan’s interest rate was “permissible as a matter of federal law.”

What is most interesting about this case is that the FDIC and OCC jointly filed a 34-page amicus brief with the court. It contains some pretty damning language about the Second Circuit 2015 decision in the Madden case. Here is an excerpt from the brief:

Madden failed to consider the valid-when-made rule and the stand-in-the-shoes rule, either of which defeats the debtor’s usury claim. Madden’s disregard of two centuries of established law — without even addressing such law — is not just wrong: it is unfathomable. And it is doubly disconcerting given its negative impact on the credit markets and the banking system.

This is pretty damning language from the two banking regulators. They make it crystal clear that the Madden decision was wrongfully decided in their opinion and should be overturned. Last year there was a “Madden Fix” bill that passed the house with bipartisan support but it failed to progress in the senate.

I reached out to Nat Hoopes of the Marketplace Lending Association and this is what he had to say about this news from Colorado:

There is near total consensus in the legal and regulatory community that the original Madden case was wrongly decided. The FDIC-OCC joint brief in Colorado this week is a key development – it rebuffs Madden as precedent and again confirms the sanctity of the 200-year-old valid when made doctrine. But there is a human element here as well. Research produced by multiple independent academics has documented the many harms Madden produced – including a rise in personal bankruptcies and a sharp decline in available credit in the 2nd Circuit states. So the FDIC – OCC amicus brief in Colorado is also a strong defense of consumers and small businesses that seek to access more transparent, affordable credit options.

This last point that Nat makes is something that does not get enough attention. Because few lenders want to lend in second circuit states above the state usury rates (for consumers it is 12% in CT, 16% in NY and 12% in VT) many consumers find themselves unable to get a loan. So, they resort to payday loans or another form of expensive credit and fall into a debt trap that often leads to bankruptcy.

A legislative fix is still needed and the MLA as well as many other organizations are still pushing hard for it. This amicus brief should make the argument for this fix a little stronger now.

YieldStreet and LendingPoint Lead Fintechs on the Inc. 5000 List

The annual list of the fastest growing companies in the US features several fintech companies this year

August 14, 2019 By Peter Renton 1 Comment

Every year Inc. Magazine releases a list of the 5,000 fastest growing companies in the country. They call it the Inc. 5000 and it is a celebration of the entrepreneurial spirit. You have to be a fast growing company to make the list.

The 2019 list was announced this morning, but before we get to the successful companies on the list, here is a look at the criteria Inc. set for the entrants:

Have generated revenue by March 31, 2015
Have generated at least $100,000 in revenue in 2015
Have generated at least $2 million in revenue in 2018
Be privately held, for profit and based in the U.S.
Be independent (not a subsidiary or division of another company).

There were 239 companies that made the list in the financial services industry. Leading the pack was YieldStreet, who came in at #14 overall, closely followed by LendingPoint who was at #17.

In a statement on the YieldStreet website, CEO Milind Mehere said:

We’re proud to be named by Inc. as the 14th fastest growing private company in the United States, capturing the #1 spot in both the New York and Financial Services categories. We owe so much of our success to our incredible community of dedicated Investors.

LendingPoint CEO and Co-founder, Tom Burnside, had this to say about their achievement (more here):

Our platform saw more originations in 2018 than in 2015, 2016 and 2017 combined and at the same time our credit performance improved allowing us to facilitate more financing for consumers online and at the point of sale. We are incredibly grateful to our customers and proud of the LendingPoint team.

If you filter the list for financial services companies there are dozens of fintech companies that most of you would recognize. Here is the top 10 in the category that shows their growth percentage as well as their 2018 revenue.

Update: After I published it was pointed out that FundThatFlip also ranked highly on the Inc. 5000 (at #42) but were classified in real estate, not financial services. Honorable mention to them as well.

Credible Sells Majority Stake to Fox Corporation for $265 Million

Lending marketplace, Credible Labs, has reached a deal to sell 67% of the company to media giant Fox Corporation

August 5, 2019 By Peter Renton Leave a Comment

There is some big news out of Australia today. Credible Labs, based in San Francisco but listed on the Australian Stock Exchange, has reached an agreement with Fox Corporation (yes, that Fox) to sell 67% of the company for $265 million. This values the company at $397 million which is a 31% premium over the stock’s closing price on May 28, the day before receiving the offer from Fox. Fox Corp. will also provide $75 million in growth capital over the next two years.

Founder and CEO Stephen Dash (you can listen to my 2016 interview with him here) is an Australian who moved to San Francisco in 2012 to start Credible. He will remain head of the newly formed Fox subsidiary and will exchange shares equal to 33% of Credible’s outstanding common stock into units of this subsidiary.

I sent Dash a message last night but he did not respond by the time of publication. However, he did say this in the press release:

Fox Corporation’s record of innovation and focus on audience engagement will further enhance Credible’s position as a leading consumer finance marketplace in the United States, creating opportunities for organic growth and the expansion of the Credible platform. Credible’s industry-leading user experience, combined with FOX, will provide greater impact and scale for consumers.

New York-based Fox Corporation is actually a newly created media company controlled by the Murdoch family. It was formed out of the Disney acquisition of 21^st Century Fox and it began trading on Nasdaq earlier this year. It includes Fox’s television properties such as Fox News, Fox Business Network and Fox Sports.

Here is what Fox CEO Lachlan Murdoch said about the acquisition: [Read more…]

OnDeck Announces PNC Will Be The Second Bank On The ODX Platform

The ninth largest bank in the country is partnering with OnDeck subsidiary ODX to offer unsecured lines of credit for small business owners

October 22, 2018 By Peter Renton 1 Comment

It was back in December of 2015 that we first learned about OnDeck’s partnership with JPMorgan Chase. This was the first significant partnership between a large American bank and an online lending platform and it caused a lot of excitement in the industry back then.

A couple of times this year we have heard OnDeck CEO Noah Breslow hint that a second major bank was coming on as a partner soon. Today, we learned who that partner will be: PNC Bank. They are the ninth largest bank in the country, so this gives OnDeck two of the top ten largest banks as clients.

I caught up with Noah and Brian Geary, who heads up OnDeck’s new ODX division (we covered the story of ODX just last week) to talk about this new deal.

Noah started out by saying that the response to the ODX announcement has been very positive. Banks are excited to see OnDeck’s commitment to the banking channel and so that is helping conversations there. He also reminded me that OnDeck’s deal with Chase was renewed last year for another four years so Chase is clearly happy with their partnership with OnDeck.

As a reminder the Chase partnership is for term loans and only for existing Chase clients. Brian Geary said that the new deal with PNC is going to be different in two key ways. First, PNC will be offering an unsecured line of credit, not a term loan. Second, PNC will be offering this to existing as well as prospective clients.

ODX and PNC are still in the testing phase right now. They don’t expect to officially launch the offering until Q1 of next year. A quick look around the PNC website reveals they do currently offer an unsecured line of credit they call Choice Credit with lines up to $100,000. This is the product that ODX will be powering and when they launch it will have a completely different look than the somewhat dated offering on the PNC website today.

Speaking of user experience ODX will be providing the look and feel for PNC’s new offering. This will be a fully white labeled product with a mobile first design built within PNC’s branding guidelines. The bank is not changing their credit risk appetite so all loans will be made within PNC’s existing credit box.

Noah pointed out that what they are offering is not just the technology but the insights they have learned from lending over $10 billion. Not only that but OnDeck and ODX have people with deep expertise who can run this entire lending program for the bank.

My Take

When Chase came on board with OnDeck almost three years I would have expected that by now they would have had several large bank clients. In fact, I would have thought most banks by the end of 2018 would have online offerings for both consumers and small businesses. That has not been the case.

Eventually this will happen and all of the top 50 banks will have a broad product suite of online offerings. But when you look at bank websites today opening a new account (other than a credit card) still requires a trip to the branch in most instances. Moving to a 100% online customer onboarding process is inevitable for all bank products but the change is not happening as quickly as I expected.

I joked with Noah that I hope it is not almost three years before we see the third client for ODX’s lending as a service product. He is highly confident that won’t be the case as banks are now much more receptive to partnering with companies like ODX. Banks know they need to move online or they will be left behind by their competitors.

Many Fintech Names on the Inc. 5000 List of Fastest Growing Companies

Fintech has strong representation on the 2018 list of the fastest growing private companies in America

August 16, 2018 By Peter Renton Leave a Comment

Every year Inc. magazine publishes a list of the 5,000 fastest growing private companies in America called the Inc. 5000. These are the small companies that have grown the fastest between 2014 and 2017. Collectively, the companies on this year’s list amassed $206.2 billion in revenue in 2017, up 158 percent from $79.8 billion in 2014.

Of the 5,000 companies on this year’s list exactly 233 are in the financial services category. Below is a screenshot of the top 10 companies in this category. Leading the list is Fundrise, the real estate platform for individual investors, a name that would be familiar to Lend Academy readers (I interviewed CEO Ben Miller on the podcast last year). Another well known name is Fundera, the small business lending marketplace, who were the third fastest growing company in our category. I encourage you to explore the complete list here where you can search for specific companies or filter by industry, state and many other criteria.

Below is a graphic showing the top 10 companies in the financial services category. It is interesting to me that four of the top five companies on this list are based in New York City while San Francisco only has one company in the top 10.

LendIt Fintech Makes the List at #683

We are proud to be included on this year’s list in our first year of eligibility. LendIt Fintech made the list at #683 with a 736% growth rate from 2014 to 2017. Our conference grew from around 1,000 attendees in 2014 to 5,000 in 2017 but in that time we also added Europe and China events to our schedule. We expect to continue to grow and to be on this list again next year.

OCC Announces Fintech Charter on the Heels of US Treasury’s Report on Fintech

It was a busy day in Washington as the OCC and the US Treasury both make announcements that will impact the future of fintech

July 31, 2018 By Peter Renton Leave a Comment

The OCC Fintech Charter was formally proposed back in December 2016. Along with many other organizations we responded to their proposal in January of last year. Then a couple of months later the OCC released details on what the fintech charter might entail. Since then not much has happened. Until today.

Of course, the OCC went through a leadership transition with the new administration as former Comptroller of the Currency, Thomas Curry, ended his term in May, 2017. The OCC had a temporary leader, Keith Noreika, for six months until the current Comptroller, Joseph Otting, was sworn in. That was back in November and now eight months later the OCC has finally announced that they will begin accepting applications from fintech companies for this special purpose national bank charter. Here is what Comptroller Otting said about their new charter (from the press release):

The federal banking system must continue to evolve and embrace innovation to meet the changing customer needs and serve as a source of strength for the nation’s economy. The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses, and creates greater opportunity for companies that want to provide banking services in America.

Nat Hoopes, Executive Director of the Marketplace Lending Association, had this to say about the new charter (from Twitter): [Read more…]

Website Changes at Lend Academy

The first step in merging the Lend Academy and LendIt brands has begun as Lend Academy is now LendIt Fintech News Powered by Lend Academy

July 11, 2018 By Peter Renton Leave a Comment

If you are reading this article on the Lend Academy site (as opposed to an RSS Reader or email) then you will see some changes. Before I get to the changes let me give you a little back story.

This site started out in 2010 as sociallending.net (Social Lending Network). This was a blog I purchased when I decided I wanted to write about p2p lending or social lending as it was often called back then. It soon became apparent that the social lending term was becoming less relevant so I rebranded to Lend Academy in 2012.

Then in 2013 I started LendIt with my fellow co-founders. Little did I know how that company would take off. It is now the largest lending-focused fintech conference series on the planet and it is where I spend the majority of my time. Because of this success LendIt has become more well known than Lend Academy. So we have decided, after much internal discussion, to slowly phase out the Lend Academy brand and bring everything under the LendIt umbrella.

What you see now is the first phase of this project. Eventually Lend Academy, LendIt News and the LendIt blog will all be under the same domain. Right now, the Lend Academy domain will remain but eventually almost everything will move to lendit.com. Although I will be keeping the Lend Academy name on the podcast as well as the @LendAcademy twitter handle. For the time being Lend Academy is now officially LendIt Fintech News Powered by Lend Academy.

LendIt Fintech News is a Fantastic Resource

[Read more…]

Goldman Sachs Said to be Partnering With Apple on a New Credit Card

The new credit card will carry the Apple Pay brand and will be the first foray into credit cards for Marcus by Goldman Sachs

May 10, 2018 By Peter Renton 2 Comments

On stage last month at LendIt Fintech USA 2018 Omer Ismail, the Chief Commercial Officer for Marcus by Goldman Sachs, said that one of the new products his firm was looking at was credit cards. Not that surprising, really, for a company working hard to grow their consumer finance business.

Earlier today the Wall Street Journal broke the story that Goldman Sachs would be partnering with Apple on a new credit card. When I was thinking about potential ways Marcus would launch a credit card, a partnership with Apple was not what came to mind. It points to the many advantages that Marcus has over pretty much every other fintech company. They have the Goldman Sachs name behind them and have deep relationships with some of the largest companies on the planet. That opens doors that are simply not available to even the more established fintech platforms.

So how will this partnership work? I reached out to Goldman Sachs but not surprisingly they had no comment, so we will have to go with the information in the WSJ article:

The planned card would carry the Apple Pay brand and could launch early next year, people familiar with the matter said. Apple will replace its longstanding rewards-card partnership with Barclays, the people said.

Apple has had a card relationship with Barclays going back to 2005 so this is a significant move on Apple’s part as well. Given this is going to be an Apple Pay branded card Apple is clearly focused on building that part of the business. The WSJ states that the economics of any Apple Pay transaction would be significantly improved with this new Marcus card. [Read more…]

World Bank Releases the Latest Global Findex Database

The Global Findex Database and accompanying report give a clear indication of how fintech is impacting access to financial services globally

April 23, 2018 By Peter Renton 1 Comment

In 2011 the World Bank released the first ever Global Findex Database as “the world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk”. A new database was release based on 2014 data and last week the 2017 edition was released. The full database (in Excel format) and the summary and detailed report are all available for download here.

This is important work because it is the only in depth research of its kind that reaches to all corners of the globe. Here is the methodology quoted from the report:

Compiled using nationally representative surveys of more than 150,000 adults age 15 and above in over 140 economies, the 2017 Global Findex database includes updated indicators on access to and use of formal and informal financial services. It has additional data on the use of financial technology (or fintech), including the use of mobile phones and the internet to conduct financial transactions.

The Most Important Findings

One of the most interesting findings is that an additional 515 million people have opened some kind of financial services account between 2014 and 2017. This means that 69% of adults globally (around 3.8 billion people) now have an account, up from 62% in 2014 and 51% in 2011. This is an astounding change and one, I believe, that speaks to the growth of fintech around the world. Over the last six years it has become much easier to open an account digitally with both banks and non-banks.

What is even more interesting is that of the 1.7 billion adults who remain unbanked around two-thirds own a mobile phone. Now, this would not be a smartphone in most circumstances but many financial services are available on text-only flip phones. In China 82% of those people who are non-banked have a mobile phone, in India and Mexico it is more than 50%. This does speak to the potential to continue to increase the numbers of people with some kind of bank account in the coming years. [Read more…]