- Our community’s voice :
- Yesterday Lending Times wrote : “Another of Jefferies’ securitization breaks triggers: Loan Depot. I am not an expert in securitization, nor in investment banking. But it looks to me that Jefferies’ made securitizations have by far the highest probability of breaking triggers. This is very strange. See Circle Back and OnDeck’s. And now LoanDepot’s.”
- Our readers commented: ” the Jefferies point is a very good one… The Jefferies MPLT shelf has had every deal breach except AVNT. We see 2 or 3 more deals breaching in the next few months. “
- Today’s main news: Zopa’s securitization priced; Lending Club’s new General Counsel; A VC behind Lending Club’s raised a $300m second fund; OnDeck’s amazing marketing.
- Today’s main analysis: Chase Bank’s medium business lending; Fed’s report on small business lending; A review of Beechum v. Navient Solutions;
- Today’s main thought provokers: Bondora’s customer referral program’s price; And Steve Eisman’s comments put in perspective with the top 4 largest public companies.
- Clarence Nunn, ex-head of GE Capital, is now leading Chase’s focus on lending to Medium Businesses ($20m to $500m). All in all, revenue has grown to $351 million since 2008. “Building organically, banker-by-banker, client-by-client, loan-by-loan, we’ve essentially created a nice size bank from scratch.” First I am surprised they didn’t have this product before 2008. Second I am surprised that a bank of the size of Chase only did $350m in revenue from this market segment. Third, this is a great reference point for our readers.
- A great report from the Fed on small business lending. A great alternative point of view to the article just above. A must read.
- A short overview of Beechum v. Navient Solutions . Very interesting, especially in perspective to CFPB vs CashCall and Madden vs Midland.
- Orchard’s weekly online lending snapshot. To note: UK’s listed P2P investment funds are inching up again. Lending Club’s stock is now 76% higher than the bottom. And borrower’s interest rates uptick. It all looks like noise to me, no overall trend.
- One of the VC firms behind Lending Club , Canvas Ventures, raised $300m in a 2nd fund.
- New General Counsel, ex-PayPal ex-PriceLock, and ex-E*Trade, joins Lending Club. Lending Club has made 3 (CFO, GC, head of capital markets) very expensive hires recently on top of the generous package given to the existing executive team to stay in place. The objective of shoring up credibility with investors and lenders seems to be going well.
- The current state of Marketplace Lending and Investing, a podcast from Pepper Hamilton’s legal firm. A useful detailed discussion after Beechum v. Navient Solutions.
- A very interesting question, when will marketplace lenders offer mortgages, to which the article offers no real answer or analysis. And our readers may be aware that some platforms (like SoFi) already offer mortgages.
- In my eyes the best answer to Steve Eisman’s “Silicon Valley is clueless” is the answer “these platforms have been built by people with deep financial markets experience”. In addition, I would point out that the top 4 largest public companies in the world were built more or less by Silicon Valley (Apple, Alphabet, Microsoft and Amazon). I believe in looking at the data.
- OnDeck’s amazing marketing campaign continues with a partnership with Barbara Corcoran.
- Zopa’ securitization priced today. We will seek for our readers more details.
- Funding Circle funded £1.5 billion to date. A wonderful milestone celebrated with an infographic.
- Folk2Folk’s CEO, one of the few CEO ladies in the industry, believes in face to face and therefore in brick and mortar lending stores. They have facilitated £115 million in loans to date.
- Bondora launches a referral program. It is interesting to our readers to know that the referral earns 5% of their referred friend lent amount for the 1st 30 days. PledgeMe in New Zealand had a flat $500 for friends referred who invest over $50,000 which is much harder to achieve. Lending Club’s marketing campaign at some point was probably a better idea : “We will give you $50 to invest in Lending Club notes”. Hard to say not to “free” $50.
- United States
- Chase’s Push Into SMB Lending, (Payments), Rated: AAA
- Fed Report on Online Lending for Small Businesses, (Crowdfund Insider), Rated: AAA
- Rejecting “True Lender” Arguments, California District Court Dismisses Claims Against Student Loan Servicers, (JD Supra), Rated: AAA
- Orchard Weekly Online Lending Snapshot, (Email), Rated: AAA
- Canvas Ventures raises $ 300 million fund to back startups, (Reuters), Rated: A
- New GC takes Helm at Lending Club, (Crowdfund Insider), Rated: A
- The Current State of Marketplace Lending and Investing, (Pepper Hamilton), Rated: A
- When Will Marketplace Lending Platforms Offer Mortgages?, (CFA Institute), Rated: A
- Silicon Valley Clueless? Orchard Says Contrary to Popular Belief ABS Industry Positive Towards Online Lending, (Crowdfund Insider), Rated: A
- Celebrated Entrepreneur Barbara Corcoran And OnDeck Team Up In New Campaign Highlighting The Importance Of Financing For Small Businesses, (Email), Rated: A
- United Kingdom
- Debut securitisation for Zopa loans, (FT)
- Funding Circle lent over £1.5 billion to British businesses, (Funding Circle), Rated: A
- Folk2Folk CEO Jane Dumeresque Shares Vision of P2P Lending, (Crowdfund Insider), Rated: A
- European Union
- Estonia’s Bondora P2P lending platform launches referral program, (SMN Weekly), Rated: A
Chase’s Push Into SMB Lending, (Payments), Rated: AAA
Clarence Nunn was the head of GE Capital’s franchise business before General Electric decided new regulations gave it a good reason not to be in that business anymore. So now Nunn has a new mission — building out Chase’s U.S. expansion in mid-sized business lending in the southeastern U.S. Nunn will oversee a region including Florida, Georgia, Tennessee and the Carolinas, where the bank is expanding its middle-market lending into eight more cities this year.
Firms with $20 million to $500 million a year are becoming an increasingly important subset of Chase’s business — while other segments in smaller business lending have seen contractions, Chase has expanded lending in this segment into 30 new service regions. In the same period, lending in areas targeted for expansion increased nearly six-fold to $10.7 billion.
“Middle market growth has averaged 46 percent a year. As the economic recovery is continuing to really take hold, Chase is committed to keeping credit available for the businesses that are really pushing recovery,” Chase commercial banking chief Doug Petno told investors earlier this year.
All in all, revenue has grown to $351 million since 2008 — and executives have a long-term target of $1 billion.
“We’ve made a huge amount of progress in a very short amount of time in these new markets,” said Petno. “Building organically, banker-by-banker, client-by-client, loan-by-loan, we’ve essentially created a nice size bank from scratch.”
Fed Report on Online Lending for Small Businesses, (Crowdfund Insider), Rated: AAA
Online alternative lender websites are alluring, but trigger concerns about data security and privacy.
Using information typically provided on online alternative lenders’ websites, small businesses ﬁnd it difﬁcult to compare credit products.
Virtually all the focus group participants want clearly stated product features and costs and an easier way to compare product offerings.
Cash ﬂow and cash-related problems are what keep many of the participants up at night.
Potential borrowers appear to consider “online” a place, not a category of loan.
Rejecting “True Lender” Arguments, California District Court Dismisses Claims Against Student Loan Servicers, (JD Supra), Rated: AAA
In Beechum v. Navient Solutions, Inc. this past Thursday, September 22, a federal district court in the Central District of California dismissed an action raising usury claims against several student loan servicers, rejecting the plaintiffs’ arguments based on the “true lender” doctrine.
The decision comes on the heels of a decision by another judge of the Central District of California in U.S. Consumer Financial Protection Bureau v. CashCall, Inc. (covered here), which relied on the true lender doctrine to rule in favor of plaintiff CFPB. The two cases illustrate contrasting approaches to the application of true lender doctrine to marketplace lending models.
The plaintiffs in Beechum v. Navient Solutions, Inc. obtained student loans from Stillwater National Bank and Trust Company.
Although the decision is a narrow one based on California State law, it adds yet another data point to the growing body of law on the true lender doctrine. The court’s analysis is potentially noteworthy for several reasons:
- The court’s focus on the face of the transaction is a departure from cases like CFPB v. CashCall, which have, in similar contexts, applied a “predominant economic interest” test to scrutinize a transaction.
- The defendant servicers argued that the court should dismiss the complaint on the alternative ground that application of State usury law to loans originated by Stillwater would run afoul of federal preemption under the National Bank Act. Because the court dismissed on the ground of a State law usury exemption, however, it did not reach the federal preemption issue. This may signal reluctance to wade into thorny preemption issues created by the Second Circuit’s May 2015 decision in Madden v. Midland Funding, LLC.
- Although the court does not explicitly mention the principle that a loan valid when made cannot become usurious as a result of a subsequent transfer, the result in the case adds to the body of case law standing for that proposition.
Orchard Weekly Online Lending Snapshot, (Email), Rated: AAA
Source: Orchard Platform
Source: Orchard Platform
Source: Orchard Platform
Source: Orchard Platform
Canvas Ventures raises $ 300 million fund to back startups, (Reuters), Rated: A
Silicon Valley venture capital firm Canvas Ventures has raised a $300 million fund to make new investments into startups working on fintech, healthcare, artificial intelligence and other cutting-edge technology.
Its previous investments include marketplace lending company Lending Club Corp. (LC.N), which went on to raise more than $1 billion in its 2014 initial public offering; mobile payments company Check, which was acquired by Intuit (INTU.O); and Wifi camera company Dropcam, which was acquired by Alphabet’s Google (GOOGL.O).
New GC takes Helm at Lending Club, (Crowdfund Insider), Rated: A
Russell Elmer has been named as the new GC replacing Jason Altieri who has been Lending Club’s GC for the past seven years. As one would expect, Elmer will be reporting to Lending Club CEO Scott Sanborn.
Most recently Elmer has been Deputy GC and Corporate Secretary at PayPal so he has plenty of Fintech/ payments exposure. Elmer has also been General Counsel at Pricelock and General Counsel at E*Trade. He was also a Partner at Gray Cary Ware & Freidenrich (now DLA Piper) where he spent nearly a decade. Elmer is expected to oversee all legal matters including corporate securities, M&A, corporate governance, government and regulatory affairs and litigation.
The Current State of Marketplace Lending and Investing, (Pepper Hamilton), Rated: A
Recent legal and regulatory developments are affecting the ways that marketplace lenders and investors do business — and their impact will continue to be felt well into the future. This is a turbulent time in this developing industry and senior members of Pepper Hamilton’s Marketplace Lending practice sat down for a podcast to discuss some of the industry’s most significant issues and their implications leading into the 2016 Marketplace Lending + Investing Conference taking place in New York this week.
This podcast with Julia D. Corelli, Richard P. Eckman and Gregory J. Nowak, members of Pepper’s Marketplace Lending team, covers topics including Madden v. Midland Funding; the CashCall case and the true lender analysis; a discussion on the recent FDIC guidance; and the CFPB complaint portal among other issues.
When Will Marketplace Lending Platforms Offer Mortgages?, (CFA Institute), Rated: A
Marketplace lending is so popular that Foundation Capital’s Charles Moldow predicts that by 2025 these platforms will originate $1 trillion in loans globally.
On the other hand, marketplace mortgages could divert billions of dollars of income from banks, which would hurt their already thin margins and shake up — even transform — the credit sector.
Several marketplace lending entrepreneurs I interviewed said they avoid direct competition with banks. They prefer to serve a small segment of the credit sector that banks have little to no interest in.
Such modesty is uncalled for. Marketplace lending is an explosive idea with enormous potential.
But when my colleague,Ioannis Akkizidis, and I stress tested a portfolio of marketplace loans from one of the major US platforms, returns diverged toward zero already under moderate stress. In addition, if banks manage to compete with the interest rates offered by these lending platforms, a wave of prepayments could ripple through the sector, curtailing interest income. Medium and strong stress resulted in losses for investors, which was accelerated by the absence of collateral.
Silicon Valley Clueless? Orchard Says Contrary to Popular Belief ABS Industry Positive Towards Online Lending, (Crowdfund Insider), Rated: A
At ABS East conference Steve Eisman was quoted saying;
“The central problem is that these lending startups, their founders and backers in particular, don’t have a lot of experience making loans to consumers, and some of them approach loan-making as they would retail sales…When you go to Amazon and buy a book, you buy it and the transaction is over. But when you take out a loan, that is just the beginning of the transaction — it’s like a relationship. Silicon Valley, I think, is clueless”
Hoopes explained (via an email to Bloomberg) that;
“Traditional Wall Street occasionally forgets that online lending has a long track record and that these platforms have been built by people with deep financial markets experience. Borrowers and investors are turning to these online products because they are delivering enormous value compared to the traditional alternatives.”
Celebrated Entrepreneur Barbara Corcoran And OnDeck Team Up In New Campaign Highlighting The Importance Of Financing For Small Businesses, (Email), Rated: A
Beginning this month, Ms. Corcoran will be featured in television and radio commercials and customer communications emphasizing OnDeck’s unique ability to provide small businesses across the United States access to much-needed financing. She will also serve as a contributing editor to the OnDeck blog, offering advice to OnDeck’s customers and small business readers.
The launch of the Barbara Corcoran marketing campaign follows a busy summer for OnDeck, which unveiled a new brand identity with the enhanced www.ondeck.com, featuring a deep focus on personalized customer service for small businesses seeking financing. According to Andrea Gellert, chief marketing officer of OnDeck, the decision to collaborate with Ms. Corcoran was driven by her passionate interest in and respect for what it takes to be a successful small business owner.
A recent study by economic consulting firm Analysis Group and commissioned by OnDeck, measured the impact of the first $3 billion lent by OnDeck to small businesses and found that these loans have powered $11 billion in business activity and created 74,000 jobs nationwide. Since then, OnDeck’s innovative data-driven model has substantially increased the flow of capital to Main Street year-over-year, expanding growth opportunities for thousands of small businesses. To date, OnDeck has delivered over $5 billion in small business loans across approximately 700 industries in all 50 U.S. states.
Europe’s first securitisation backed by unsecured consumer loans from an online platform has priced today, in the latest sign of nascent integration between new lending companies and institutional funding markets. The £150m deal is backed by loans originated on the Zopa platform, which were made and previously held by P2P Global Investments PLC.
Deutsche Bank was the sole arranger and manager on the Zopa deal. P2P Global Investments PLC will retain a “net economic interest” in the deal for the duration of the transaction.
Funding Circle lent over £1.5 billion to British businesses, (Funding Circle), Rated: A
Folk2Folk CEO Jane Dumeresque Shares Vision of P2P Lending, (Crowdfund Insider), Rated: A
While embracing technology that facilitates the lending process, Folk2Folk maintains numerous brick and mortar locations as they believe in dealing with people – not just websites.
Folk2Folk is a small business lender that provides “responsible” credit. LTVs only go up to 60% of the value of the security.
To date, Folk2Folk has facilitated over £115 million in loans.
Our vision is to replicate our unique and successful business model across the UK in 2017. This expansion will help us scale the business to reach our target of a loan book of over £1 billion by 2020.
There has been an industry slowdown, which I believe has been down to a number of factors from seasonality, Brexit uncertainty as well as increased competition in borrowing rates as the BoE has reduced rates.
The important factor is that despite the slowdown, or bump in the road as you put it, the industry is still growing well above 50% year-on-year.
We are fortunate in being a very well diversified business and currently over 75% of our staff are female.
Estonia’s Bondora P2P lending platform launches referral program, (SMN Weekly), Rated: A
Peer-to-peer (P2P) lending platform Bondora said last week it has launched a Refer-A-Friend program, under which investors can earn 5% from the amount their referred friends lent in the first 30 days of signing up via the platform.
Late last month, PledgeMe, a New Zealand-based crowdfunding platform, also launched a referral program, PledgeMe.Friends, under which users get a $500 reward if a friend they’ve referred launched a successful campaign that raises more than $50,000.
Bondora is an leading Estonia-based P2P lending platform. The platform has facilitated the disburse of more than €66 million. The average Bondora loan is €2,370, but loans range from €500 to €10,000. Bondora also operates a secondary market for P2P loans where investors can buy and sell their existing investments.