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  1. #1

    Interesting paper from former SBA administrator

    Karen Mills discusses credit availability during and after the financial crisis. At page 55, she discusses the possible need for regulations covering alternative finance products as well as brokers.

    It's the first serious discussion by a (former) government official regarding the need for regulations that I've seen. But she takes a fair approach.

    http://www.hbs.edu/faculty/Pages/download.aspx?name=15-004.pdf

  2. #2
    Veteran Reputation points: 134971 Chambo's Avatar
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    Still think I am crazy Sean?

  3. #3
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Chambo View Post
    Still think I am crazy Sean?
    It's interesting because just about everyone I've spoken to at or around the CFPB has said the CFPB would have no authority over b2b transactions. One inherent problem with Congress delegating their law making authority to another body is that unelected officials make their own rules and are accountable to nobody. The CFPB actually can and does make its own laws.

    I think Karen Mills was just taking a random swing here when she says, "In the online small business lending market, the newly created Consumer Financial Protection Bureau (CFPB) may be the most likely to oversee this market. This regulator has authority to oversee payday lenders and similar entities that loan to consumers, and is bringing greater transparency for borrowers to credit card and mortgage markets."

    I've repeatedly been told that a business could not be construed as a consumer, not even a sole proprietorship. An individual or entity engaging in a commercial capacity is not a consumer and cannot be governed by consumer laws. That last line was said to me by someone at the CFPB.

  4. #4
    Veteran Reputation points: 134971 Chambo's Avatar
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    yeah, and corporations aren't people with unalienable rights. We see how that has turned out, haven't we?

  5. #5
    Quote Originally Posted by sean bash View Post
    It's interesting because just about everyone I've spoken to at or around the CFPB has said the CFPB would have no authority over b2b transactions. One inherent problem with Congress delegating their law making authority to another body is that unelected officials make their own rules and are accountable to nobody. The CFPB actually can and does make its own laws.

    I think Karen Mills was just taking a random swing here when she says, "In the online small business lending market, the newly created Consumer Financial Protection Bureau (CFPB) may be the most likely to oversee this market. This regulator has authority to oversee payday lenders and similar entities that loan to consumers, and is bringing greater transparency for borrowers to credit card and mortgage markets."

    I've repeatedly been told that a business could not be construed as a consumer, not even a sole proprietorship. An individual or entity engaging in a commercial capacity is not a consumer and cannot be governed by consumer laws. That last line was said to me by someone at the CFPB.
    Sean's correct, the CFPB has no authority to regulate business lending and I highly doubt that it would be granted any additional authority to regulate the industry. If new legislation was crafted to cover alternative lending, I would suspect it would provide bank regulators oversight responsibility. I think the argument would be that alternative lenders have become "systematically important" to the overall financial system and therefore should be under the purview of those agencies responsibility for the economy overall.

    However, any legislation is years away (if ever). I think Ms. Mill's paper simply signifies the beginning of what will be a flood of academic and governmental research trying to ascertain the size and impact of alternative lending. We as an industry need to be aware of and hopefully contribute to the overall conclusions of this research as it will be these conclusions that dictate the form of any future legislation.

    Basically, we need to be involved in and help shape the debate.

  6. #6
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Chambo View Post
    yeah, and corporations aren't people with unalienable rights. We see how that has turned out, haven't we?
    Chambo, if I had to describe you with a meme, this would be it:
    chambo.jpg

  7. #7
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Al1 View Post
    Sean's correct, the CFPB has no authority to regulate business lending and I highly doubt that it would be granted any additional authority to regulate the industry. If new legislation was crafted to cover alternative lending, I would suspect it would provide bank regulators oversight responsibility. I think the argument would be that alternative lenders have become "systematically important" to the overall financial system and therefore should be under the purview of those agencies responsibility for the economy overall.

    However, any legislation is years away (if ever). I think Ms. Mill's paper simply signifies the beginning of what will be a flood of academic and governmental research trying to ascertain the size and impact of alternative lending. We as an industry need to be aware of and hopefully contribute to the overall conclusions of this research as it will be these conclusions that dictate the form of any future legislation.

    Basically, we need to be involved in and help shape the debate.
    At Lend360, a conference coming up in October that I'm participating in organizing, there will be a lot of discussion dedicated to best practices, collective self-regulating, and lobbying. Also plenty of technology showcasing and other valuable experiences. If anyone is interested in best practices or starting an early movement towards collaborating collectively, I suggest you sign up and go!

  8. #8
    The B2B market seems like a stretch of the CFPB mandate. After all the C does stand for Consumer!

    The real challenge is how can we better share the message that our industry provides fairly priced credit to an underserved small business market with little or no access to traditional bank financing. OnDeck's, Noah Breslow, does a great job of sharing this message. Check out the PBS NewsHour segment OnDeck was featured in,

    http://www.pbs.org/newshour/bb/small...rs-banks-bail/

    Robert S Bloink
    EVP of ISO Partnerships
    Direct: 313-218-4663
    Email: bb@cooperasset.com
    Web: www.cooperasset.com
    logo-01smaller.jpg

  9. #9
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by BB_Cooper View Post
    The B2B market seems like a stretch of the CFPB mandate. After all the C does stand for Consumer!

    The real challenge is how can we better share the message that our industry provides fairly priced credit to an underserved small business market with little or no access to traditional bank financing. OnDeck's, Noah Breslow, does a great job of sharing this message. Check out the PBS NewsHour segment OnDeck was featured in,

    http://www.pbs.org/newshour/bb/small...rs-banks-bail/

    Robert S Bloink
    EVP of ISO Partnerships
    Direct: 313-218-4663
    Email: bb@cooperasset.com
    Web: www.cooperasset.com
    logo-01smaller.jpg
    Noah is trying to push the message for merchants to come to him direct. He gives them his buy rate (no commish added), and there are no garbage fees attached.

    When presented like that, their offers are considerably more attractive than anything a broker would present

  10. #10
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Chambo View Post
    Noah is trying to push the message for merchants to come to him direct. He gives them his buy rate (no commish added), and there are no garbage fees attached.

    When presented like that, their offers are considerably more attractive than anything a broker would present
    Then how do their sales reps get paid? On salaries? You and I have both seen direct funders charge more for going direct than when submitted through third party brokers. The whole "it's cheaper to go direct" mantra is bogus.

  11. #11
    Quote Originally Posted by sean bash View Post
    It's interesting because just about everyone I've spoken to at or around the CFPB has said the CFPB would have no authority over b2b transactions. One inherent problem with Congress delegating their law making authority to another body is that unelected officials make their own rules and are accountable to nobody. The CFPB actually can and does make its own laws.

    I think Karen Mills was just taking a random swing here when she says, "In the online small business lending market, the newly created Consumer Financial Protection Bureau (CFPB) may be the most likely to oversee this market. This regulator has authority to oversee payday lenders and similar entities that loan to consumers, and is bringing greater transparency for borrowers to credit card and mortgage markets."

    I've repeatedly been told that a business could not be construed as a consumer, not even a sole proprietorship. An individual or entity engaging in a commercial capacity is not a consumer and cannot be governed by consumer laws. That last line was said to me by someone at the CFPB.
    Ok-so here is a thought. If the owner signs as a guarantor of the "loan"/or advance made to the business he or she owns, he/she is signing the guarantee as an individual (ie. consumer). This may indeed be the window and or avenue that the CFPB uses to claim jurisdiction. Also -the whole BFS/California Lawsuit stemmed from an advance made to a sole prop and I think the argument was that the advance was indeed a consumer loan. Would absolutely love to hear how I am wrong on this! What am i missing, if anything??

  12. #12
    Veteran Reputation points: 157541 J.Celifarco's Avatar
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    Quote Originally Posted by sean bash View Post
    Then how do their sales reps get paid? On salaries? You and I have both seen direct funders charge more for going direct than when submitted through third party brokers. The whole "it's cheaper to go direct" mantra is bogus.
    Direct or broker means nothing. What the merchant is charged falls on one person and that is the sales agent working the deal. How much upsell and additional fees that are charged fall on the sales guy. If they want to bang the merchant over the head they will and it wont matter if they work directly for one of the big banks or for a small iso

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