Cross River Bank Archives

The Bank Partnership Model Affirmed in Settlement With Colorado

This groundbreaking settlement resolves the "true lender" issue in Colorado and could be used as a regulatory framework across the country

August 18, 2020 By Peter Renton Leave a Comment

The issue of “true lender” has been one that has dogged the marketplace lending industry virtually since its inception. When a borrower takes out a loan from most marketplace lenders the loan is often originated by a partner bank then held on their balance sheet for a short time before being sold to the lending platform. There has been debate about who is the true lender in these circumstances.

In 2017, the Colorado Attorney General filed two separate lawsuits against Marlette Funding and Avant alleging violations of the state’s Uniform Consumer Credit Code by charging interest rates in excess of those allowed under Colorado law. These loans were originated by out of state banks, Cross River Bank and WebBank, who were also party to these lawsuits. These banks are allowed to export higher interest rate caps across state lines but Colorado was saying that this was all a scheme to lend above Colorado’s usury rate limited.

The upshot of these lawsuits was that Colorado consumers had less choice as both Avant and Marlette, along with WebBank, started excluding Colorado consumers from their loan offerings. And it even called into question the business models of Cross River Bank and WebBank as both banks have established long running partnerships with many marketplace lenders.

After years of back and forth, and much time and expense, today the Colorado Attorney General announced a settlement with all parties. It is hard to overstate how important this is for the industry. These lawsuits have been hanging over the industry for years and even though the OCC recently proposed a new true lender rule there was still a great deal of uncertainty.

With this settlement, which amounts to $1.55 million in total, the companies have “committed that they will not lend to Colorado consumers at rates above 36% and will provide consumers with other protections required by Colorado law. In addition, non-bank partners will maintain a Colorado lending license.” There are also certain oversight requirements and they laid out a model for successful bank-fintech partnerships in Colorado. It is this model that could be adopted by other states and become a de facto national standard. Which is why this is big news today.

The industry was clearly pleased with this settlement. I reached out to several parties to get their commentary on what this means. First, Nat Hoopes from the Marketplace Lending Association: [Read more…]

All of the Fintechs Involved in PPP Loans

We share all of the fintech lenders who are currently involved in the Paycheck Protection Program

April 16, 2020 By Ryan Lichtenwald 6 Comments

It has been an interesting to say the least as we have watched everything play out with the Paycheck Protection Program loan process. Fintechs were eager to help small businesses with the $349 billion initially allocated to small businesses but initially there wasn’t clarity on when it might be possible. For many who wanted to be among the first to apply, going through a bank was the only option as LendIt Fintech experienced firsthand. As we stand today there are now many fintechs, both lenders and banks involved in the process although the initial $349 billion allocated to the PPP has run out, according to Senator Rubio this morning. It is expected that Congress will appropriate additional funds soon.

Approvals started with small business lenders like Kabbage, made possible through an unnamed bank partner. Then this week we saw lenders get approved on a standalone basis. Other fintechs have taken an entirely different route. StreetShares had originally planned to offer SBA loans but then opted to instead partner with Fiserv. They are providing to them a secure portal for bankers to review and prepare documents while also providing application processing and eligibility checks.

If you’re looking for a full list of PPP lenders, Gusto has created this helpful Google sheet which continues to be updated with the status of each lender.

We will continue to update the list below as more fintechs get approved.

Approved Fintech PPP Lenders

PayPal
Quickbooks
Square
OnDeck
Funding Circle
Kabbage
Bluevine
Credibly
Fundbox

Fintechs Working with Partner Banks for PPP Loans

Fundera
Lendio
Brex
Nav
SmartBiz
Biz2Credit

Fintech banks processing applications

Cross River Bank
Celtic Bank
Radius Bank
Sunrise Banks

It is difficult to overstate the importance of the PPP for the health of American small business. For many, it will have come too late but for millions of small businesses this money will allow them to stay in business and keep paying their employees. Congress needs to set aside its differences and provide more money for this program immediately. There is still a huge number of small businesses that need this money.

Cross River Bank Partners with Stripe for Faster Payments

Cross River Bank's latest partnership adds a critical piece to their API platform.

January 9, 2019 By Ryan Lichtenwald Leave a Comment

Cross River Bank is one of the most forward thinking banks in the US. This is due to early embrace of fintech and their relationships with most of the major companies operating in fintech today. Today, they announced another significant partnership with Stripe, the popular online payments processor to better serve their customers.

This partnership is tackling the segment often referred to as the marketplace or gig economy, those who work in ridesharing, food delivery and other freelance occupations. Through Cross River’s API platform, workers will have access to their wages through push to card payments and most importantly the move will speed up the time in which they get access to their funds.

Gig economy companies like Uber have worked to providing a better experience to their drivers by delivering payments within hours instead of days. The main issue with issuing payments to debit card accounts is that there are 12 national debit networks and each bank isn’t on every network, slowing down the transaction time. Stripe has solved this problem allowing for transactions to post instantly no matter where the merchant or payment recipient is located.

Not only is Stripe’s network faster, but it also is more reliable as most payments systems rely on legacy infrastructure. According to PaymentsSource who interviewed Aite Group senior analyst Talie Baker, only 3% of freelance workers received payments via push-to-debit cards last year, so this is an area which has significant room for growth.

Cross River Bank Raises $100 Million Led by KKR

Fintech pioneer Cross River Bank has closed a large funding round led by one of the world's leading private equity firms

December 6, 2018 By Peter Renton Leave a Comment

Today, Cross River Bank (CRB), one of the leading banks supporting marketplace lending platforms, has announced they have closed a significant funding round, $100 million, led by private equity firm KKR. This is by far their largest funding round, dwarfing the $28 million they raised in 2016 and is a validation of the unusual path the New Jersey-based community bank has taken.

Chairman and CEO Gilles Gade shared his comments on this funding round in their press release:

We are very pleased that our growth and progress has the endorsement of leading investors such as KKR. We also welcome new investors CreditEase and Lion Tree Partners and are especially grateful for the continued confidence of our previous investors Battery Ventures, Andreessen Horowitz and Ribbit Capital. This is a very strong signal that we continue to execute on our plan and are poised to take Cross River through its next phase of successful development here in the U.S. and across the globe.

Started in 2008, which in itself was an interesting time to start a bank, CRB first got involved in fintech very early on when they partnered with GreenSky on home improvement loans. They have since become the go to bank supporting many leading marketplace lending platforms including Marlette, Upstart, Affirm and RocketLoans just to name a few. While maintaining their community banking roots they have become one of the driving forces in the growth of the marketplace lending space with their banking-as-platform solution. They have also become a significant player in broader fintech working with leading players such as Coinbase and Transferwise on payment processing.

CRB is also a founding member of the Online Lending Policy Institute, a nonprofit public policy organization based in Boston, MA whose mission is to encourage responsible innovation in online lending. Their leadership in that organization has helped the industry connect with regulators and lawmakers in Washington.

It is interesting to me that in his quote in the press release Gilles ends with “and across the globe”. I don’t know of any other community bank in America that has global aspirations but with CRB’s success in this country it seems that global expansion is on the horizon. However they choose to grow the company they now have a well funded war chest with which to attack any new market.

Cross River Bank and Marlette Funding Close $100 Million Securitization Transaction

In the newest marketplace lending securitization Marlette Funding and Cross River Bank are teaming up to share the equity tranche.

October 2, 2015 By Ryan Lichtenwald Leave a Comment

In the United States, almost all marketplace lenders use a partner bank. It adds to the operational efficiency of the marketplace lender by having a partner bank who can steer the platform through the myriad of state and federal lending laws, as well as handle much of the compliance and operational activity. A borrower will apply for a loan on a platform, but behind the scenes the loan is actually being originated by the partner bank. The loan is typically held on the bank’s balance sheet for just a few days before being assigned to the platform. Historically, this has been the extent of the involvement of the bank.

However, Marlette and Cross River Bank today announced a $100 million securitization that is a little different. Marlette Funding operates their personal loan business under the name Best Egg and originated nearly $1 billion worth of loans in just 15 months. As part of the transaction, Cross River Bank and Marlette Funding will share a 12.5% equity tranche with Deutsche Bank acting as the lender. This is the first time a marketplace lender and an FDIC-insured bank have completed a joint transaction. We spoke to Jeffrey Meiler, CEO and Founder of Marlette as well as Paul Ricci their CFO and also exchanged emails with the team at Cross River Bank to learn more about the deal. [Read more…]