[Zach]

http://debanked.com/2015/12/jpmorgan...ck-partner-up/

Discuss.

[KTK]

Wow, huge news. That's a tremendous partnership. Game changer

I know guys who feel like they hit the lotto when they get one bank rep in one little branch to refer over his declines. Imagine landing CHASE BANK. Like, the whole thing!

I nailed this thing as a buy at 8 and change, and I've been hinting at that short squeeze. Stock up 27% in after hours. There is going to be a lot of covering tomorrow

[KTK]

Buy on rumor sell on news

[AndyYSCISOdept]

I have a quick question in reference to individual branches sending loan declines to ISO shops and or direct lenders, I thought that was kind of a no-no / illegal? Yah know the whole transfer of private information thing etc etc.

I am curious because that could open up potential revenue streams.

[ridextreme]

I have a quick question in reference to individual branches sending loan declines to ISO shops and or direct lenders, I thought that was kind of a no-no / illegal? Yah know the whole transfer of private information thing etc etc.

I am curious because that could open up potential revenue streams.

Usually they just give the rep their name and phone number as a referral. They don't send the whole file over.

[dpFund]

Ultimately I think this can be good for all of us since it lends implied legitimacy to the non-bank lending industry.

[AndyYSCISOdept]

Usually they just give the rep their name and phone number as a referral. They don't send the whole file over.

That makes a lot more sense, so it puts the onus on the merchant themselves to do the leg work and the bank kind of "washes their hands" of it? So my next question, assuming this is accutrate, "What's in it for the branches/banks?"

[Chambo]

Usually they just give the rep their name and phone number as a referral. They don't send the whole file over.

they legally cannot send any info over except name and phone number. Usually these referrals are put in the hands of the merchant. The merchant is given the MCA cust service number to call.

[KTK]

Exactly. One of my guys has a banker who just slides his card over with a wink and says we can't help but he can.

[AndyYSCISOdept]

Exactly. One of my guys has a banker who just slides his card over with a wink and says we can't help but he can.

That's gotta be a gold mine

[Chambo]

Exactly. One of my guys has a banker who just slides his card over with a wink and says we can't help but he can.

they legally cannot transfer over information on the merchant, nor can they be directly compensated

[AndyYSCISOdept]

they legally cannot transfer over information on the merchant, nor can they be directly compensated

Okay, the second part is what Im interested in. If they cant be directly compensated, then how are they compensated and whats in it for the banks.

[KTK]

The working relationship literally just started last month and has been sporadic to date. But, yes I am excited to see it ramp up...hopefully

[Chambo]

if the bank rep is compensated, that is construed as the bank taking compensation for alternative lending, which is illegal for bank to directly participate in, as it is considered usurious.

Now if some cash might hover around under a restaurant table, or if some mysterious delivery of Johnny Blue should show up at the home......

[AndyYSCISOdept]

Now if some cash might hover around under a restaurant table, or if some mysterious delivery of Johnny Blue should show up at the home......

Yah, that's sketchy or anything.

[mcaguru]

The question should be asked is JPM (Chase) doing this for current loan products or getting into MCA? I would imagine its for current loans and regarding ONDECK for all we know Chase will pay 15 bucks per file? I mean experian has a great credit report solution but its not a lot of money for funding companies to buy a report!

On another note it would be interesting if Chase came begging for the reports or did ONDECK push for a deal to enhance / add some revenues (do they see the funding business losing steam? competition?!!) and some PR? either way is ethical !! but it adds some light who went after who.


(I would also be curios if they see items on the report that would have them walk away from more loans? and BTW what happens if the default rate goes up with using the ondeck scoring system because JPM is not lacking the ability to UW a merchant in any way shape or form in seams like they are perhaps trying to cut some corners and take some more risk by way of relying on ONDECK !).

[Sean Cash]

The question should be asked is JPM (Chase) doing this for current loan products or getting into MCA? I would imagine its for current loans and regarding ONDECK for all we know Chase will pay 15 bucks per file? I mean experian has a great credit report solution but its not a lot of money for funding companies to buy a report!

On another note it would be interesting if Chase came begging for the reports or did ONDECK push for a deal to enhance / add some revenues (do they see the funding business losing steam? competition?!!) and some PR? either way is ethical !! but it adds some light who went after who.


(I would also be curios if they see items on the report that would have them walk away from more loans? and BTW what happens if the default rate goes up with using the ondeck scoring system because JPM is not lacking the ability to UW a merchant in any way shape or form in seams like they are perhaps trying to cut some corners and take some more risk by way of relying on ONDECK !).

From what I understand, OnDeck's platform would be doing the underwriting and processing, but the approval terms would be set by Chase. Chase is not getting into MCA. They are likely just going to be using the platform to spit out small dollar business loan approvals in minutes.

[staten]

From what I understand, OnDeck's platform would be doing the underwriting and processing, but the approval terms would be set by Chase. Chase is not getting into MCA. They are likely just going to be using the platform to spit out small dollar business loan approvals in minutes.

lots of issues here

1. No agreements are actually signed (kinda, sorta a huge f@#king deal)
2. Per chase the loans will have a Chase brand......so the rates will have to be significantly lower or Jamie will be "stepping in the pile of dogsh#t" he has been trying to avoid in regard to regulation.
3. Have a feeling the pilot might show some weakness in ondecks legacy tech issues.
4. If it works it will be UCCs falling from heaven

[KTK]

It is interesting if this deal is structured as you put it Sean, which is likely the case - Well then this deal opens up a major revenue stream to Chase that didn't exist yesterday and it will have a much stronger impact on Chase's bottom line long term than OnDeck. Meanwhile ONDK is the #2 gainer in the US and JPM closes down a buck. That's Wall St. for ya!

Also I couldn't disagree with the above statement more. There is no weakness here. Jamie Dimon isn't taking a flyer here. They have crunched these numbers to death, and have a very clear cut path ahead. This is a power move and if it works all the Well's and BofA's of the world will be following suit, quickly. Don't think they aren't watching this deal just as close if not closer than all of us.

If that happens and our customers realize they can get funded with ease & just as fast at their local bank who adheres strictly to the usury laws. Well then we can all kiss a good portion of our A Grade paper goodbye.

[Sean Cash]

If that happens and our customers realize they can get funded with ease & just as fast at their local bank who adheres strictly to the usury laws. Well then we can all kiss a good portion of our A Grade paper goodbye.

The alternative lenders who service A paper deals now adhere strictly to the usury laws too. "Lenders" such as OnDeck rely on actual chartered banks to issue the loans. OnDeck buys those loans immediately. This allows them to usurp state usury laws in the same way that all credit cards are able to and it's not very controversial. The National Bank Act and another similar federal law grant these powers. Alternative lenders who use the bank charter model have already been adhering in a strict sense. The only thing that possibly stands in the way of that is the very recent Madden v. Midland decision and what, if any consequences of that are yet to be determined.

And then there are lenders who are members right here on this very forum that don't use a chartered bank to issue the loans but actually comply with the laws of each individual state. Some will require formal licenses and others don't. These lenders too are already strictly adhering to usury laws.

Lastly, there are companies on here that strictly buy future receivables who are not lenders and should never be referred to as such. If they know how to properly run their business and vet their contracts, then they too adhere to usury laws.

I'm not talking to you specifically KTK at all, just using this as an opportunity to bring up something I've noticed with other people I've talked to. If you are reselling any kind of funding product, at the very basic fundamental level, you need to know what it is (loan or purchase) and all of the legality behind it.

If a merchant asks you how it's possible to lend at 30% APR in NY state for example, you better:
1. Make sure the product you're proposing is indeed a loan
2. Make sure the product you're proposing can be sold there
3. Make sure the company backing it is legally allowed to and understand how they do it

If it's not a loan, you better know the perfect answer as to why not and broker deals only for a funder whose contracts have been properly legally vetted. You bear some responsibility as a professional to perform due diligence on the funding company you're brokering for. It's not just all about how many points they will pay you.

You might be on the hook civilly or criminally if you say the wrong things or you broker a product in a state where you shouldn't have.

Merchants are recording their phone calls with you. Debt settlement companies and lawyers are telling them to watch what you do and to save what you email them. And if you do it wrong, not only could the funding company or ISO get in trouble, but there have already been lawsuits filed where the individual sales rep and the underwriter working for the funder have been sued for all sorts of claims.

If you don't fully understand the legal implications of your job or the products and their myriad nuances, ask your boss for a training on these materials. If they don't know the answers, work somewhere else.

One of the attractive parts about this industry is that you don't need to be licensed to sell the products. That doesn't mean there are no laws or that absent a license, you can't be held responsible if you don't follow established state and federal laws.

Some of you might feel like an insignificant dude or dudette in an industry full of thousands of more important or higher income earning people. I know what it's like to sit in a room dialing all day. The good news is that you are actually very important and that everything that you say and do matter very much. With no government licenses required, it's up to you to become the expert you are still required to be.

[KTK]

Great post Sean. Well said and informative, thank you.

A def misuse of words on my end as I meant it In a generality more vs legality - where that this deal, if used to quickly price and fund deals at "bank rates" and it works, with the other Majors that will likely follow suit - we could loose a portion of customers in the end and a lot of calls etc could turn into a general "why would I use you when I can go to my banker".

Also aide note, it was purely just a potential view at this, not a negative view at things from my end. I believe this deal is a very good thing and it will help pump more money into the lifeblood of our country, which is a great thing.

[AndyYSCISOdept]

^^ ^^ Sean all the points you make are great.

[jfranz17]

The alternative lenders who service A paper deals now adhere strictly to the usury laws too. "Lenders" such as OnDeck rely on actual chartered banks to issue the loans. OnDeck buys those loans immediately. This allows them to usurp state usury laws in the same way that all credit cards are able to and it's not very controversial. The National Bank Act and another similar federal law grant these powers.

This has me wondering how this partnership is really going to work. Right now, OnDeck uses Bank of the Internet to originate. Are loans funding through the JPM channel going to be originated by JPM? Is JPM keeping any of the deals on their balance sheet and/or package and sell on a secondary market? Will they be integrating their marketing? Or are they just going to send referrals/turn downs to OnDeck? If it's the latter, I don't see this partnership being a real needle mover for OnDeck. Will be interesting to see how this evolves.

[staten]

This has me wondering how this partnership is really going to work. Right now, OnDeck uses Bank of the Internet to originate. Are loans funding through the JPM channel going to be originated by JPM? Is JPM keeping any of the deals on their balance sheet and/or package and sell on a secondary market? Will they be integrating their marketing? Or are they just going to send referrals/turn downs to OnDeck? If it's the latter, I don't see this partnership being a real needle mover for OnDeck. Will be interesting to see how this evolves.

they are not testing a pilot until 2016. so a lot is TBD. thanks Sean, i tend to go from a to z quickly assuming people get the basic facts. the bottom line is that JPM will not have contracts that refer to cents on the dollar....they will have to disclose the APR. Does Jamie want headlines that its customers are being charged a 40% APR for business loans? No of course not. Most likely Chase will determine the underwriting criteria and pricing and ondeck will provide a white label service. Does ondeck get the declines.....that would be interesting, but if a chase decline was offered a 8 month 1.3 daily pay from ondeck...

[GoodCustomerService]

Chase is doing the funding, managing collections and legal. Underwriting and pricing by On Deck. Chase will be providing small business loans in the same time frame it takes for On Deck. And I'm sure people all know how fast that is. Pretty crazy news. Biggest I've ever seen in the space.