[WestCoastFunding]

It's smart that CAN decided to retrench and cut back on new fundings so they can determine how their lending portfolio is really doing. Too many funders are concerned with funding as much as possible. The problem is that rapid growth conceals problems. We saw this happen with credit card companies over a decade ago. They experienced hyper growth through aggressive mailings and generous balance transfer programs. After a few years of stellar growth, their bad debt caught up with them and caused them to scale back tremendously. Now credit card companies are a lot more selective in customer acquisition.

New accounts take time to build up a payment history, become delinquent, and go to writeoff, and the volume of newer current receivables helps to conceal the true rate of writeoff. To further complicate matters, far too many accounts that normally should be written off or cut off from further funding keep being renewed or are put on a ridiculously low "payment plan" to remain a "good" and active account. This just prolongs their inevitable demise and funders end up throwing good money after bad to make the books look good. I think after CAN gets a good grasp on delinquent accounts and writeoffs, they'll be able to tighten their underwriting standards and get back on track. You probably won't see any more hyper aggressive rates and long terms coming from them though. Too many funders are now realizing that low rates/lengthy terms in this uncollateralized space carries far too much risk for the reward and is not a sustainable business model. I think you'll see the same thing happen to On Deck at some point.

Agree with pretty much everything you said, but I can't knock a funding for putting a merchant on a reduced payment plan. Seems like the best way to recoup as much money as possible. The alternative may be instant default.