School Worker Scammed by Predatory Lender

DETROIT, MI (September 24, 2018) - A financially strained school cafeteria worker was led to believe she had qualified for a $4,000 loan and saw it deposited in her bank account, only to discover that the check was fake and that she owed her bank $4,800 after spending the scam loan money.

"The number one message that is important for people to understand is that just because the check has cleared doesn't mean it's good," said Nessa Feddis, senior vice president of consumer protection and payments for the American Bankers Association.

Predatory lender con artists send phony loan checks, gift cards or Western Union transfers and need victims to spend quickly, before the bank realizes the check is a fake.

Read the article here.

New York State Investigates Online Lending Industry

NEW YORK, NY (August 3, 2018) - The New York Department of Financial Services submitted recommendations for regulating predatory online lenders this week, now being reviewed for legislation by the governor and state legislature.

The DFS promotes better protections for borrowers and the expansion of usury laws and licensing requirements for all online lenders, who have previously been exempt from standard lending regulations.  

Read the entire article here.

Ohio Passes Bill Protecting Consumers from Predatory Lenders

COLUMBUS, OH (July 27, 2018) - A new bipartisan bill passed in Ohio prohibits loan interest rates and fees from exceeding 60 percent of the original loan, as well as ensuring that monthly payments do not surpass seven percent of monthly income.  

Ohioans pay some of the highest rates for payday loans, with average interest rates over 500 percent.

“HB 123 provides a fix to a loophole that has allowed predatory lenders to rig the system against working Ohioans,” said state Representative Michael Ashford, one of the bill’s sponsors. “These protections put money back into the pockets of consumers and gives them a chance to get a fair deal for an opportunity to get ahead.”

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Protecting Business Owners Against Predatory Lenders

CHESAPEAKE BEACH, MD (May 16, 2018) excerpt via BLACK ENTERPRISE - Eighty-seven percent of small business owners support measures that would protect against predatory lenders and boost the availability of traditional loans, according to a new study by Small Business Majority.

Predatory lending costs Americans an incredible $25 billion each year. The lack of transparency and integrity among online lenders is a major concern: three out of four small business owners support the Consumer Financial Protection Bureau, which works to regulate lenders and financial service providers.

“Online lenders are largely unregulated and can take advantage of small businesses that are desperate for capital,” said Sharon Levy, owner of Taking Tea InStyle in Princeton, New Jersey. “Small business owners simply don’t have enough good lending options, which is why we need better policies in place to give small businesses a level playing field and a safer environment in which to conduct business.”

Research shows that small business owners prefer to secure financing from trustworthy, traditional sources over predatory online lenders. 77% of small business owners desire a policy to increase the amount of small business loans from credit unions, and 62% support policies that require banks to invest in low-income communities.

“Far too many entrepreneurs have difficulty obtaining the capital they need to start and expand their business,” Small Business Majority CEO John Arensmeyer said. “When they are able to get financing, they need that capital to be safely and responsibly administered. As these poll results show, small business owners are strongly supportive of policies and institutions that increase the availability of small business loans from traditional sources like small banks and credit unions, while also shielding them from predatory lending practices.”

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Exposing Online Lenders: Hidden Interest Rates & Fees Can Bankrupt Businesses

NEW YORK, NY (April 12, 2018) excerpt via ENTREPRENEUR - Online lenders are facing increased scrutiny as lawsuits and investigations uncover the sky-high interest rates, hidden fees and unsustainable repayment plans that can devastate small businesses.

Mark Abell reports in Entrepreneur that online lender Kabbage Inc. is being sued for allegedly partnering with a bank to offer interest rates that surpass the legal limit.

The state of New York may begin regulating online lenders after a Federal Reserve study determined that there was “significant potential for unscrupulous online lenders to exploit consumers through predatory practices such as unusually high interest rates, lack of disclosure of hidden fees, and unclear loan terms.”

Read the entire article here.

Dispelling Myths About Business Financing

NEW YORK, NY (April 4, 2018) excerpt via FORBES - The world of small business lending can be mystifying and immensely frustrating to entrepreneurs, with copious misinformation from predatory online lenders and questionable sources.

Levi King at Forbes presents a guide to dispelling common misunderstandings about business loans, and what it takes to qualify for one. He describes his dismay at the proliferation of misleading online articles, “perpetuating business credit myths and misconceptions that cost me thousands of dollars when I was starting my own small business. This bad advice is continuing to cost American entrepreneurs millions of dollars each year -- and, for many of them, their dream.”

King additionally reports that only 46% of business owners are satisfied with loans from online lenders, according to a study by the Federal Reserve Bank of New York, illustrating the significant problems that come with the convenient but predatory online lenders.

Read the entire article here.

Exposing Peer-to-Peer Lending Myths

 CLEVELAND, OH (November 13, 2017) The Federal Reserve Bank of Cleveland has released a new report uncovering the predatory nature of peer-to-peer (P2P) lending services that leave many Americans facing unexpected and dire consequences:

"We find that, on average, borrowers do not use P2P loans to refinance pre-existing loans, credit scores actually go down for years after P2P borrowing, and P2P loans do not go to the markets underserved by the traditional banking system. Overall, P2P loans resemble predatory loans in terms of the segment of the consumer market they serve and their impact on consumers’ finances. Given that P2P lenders are not regulated or supervised for antipredatory laws, lawmakers and regulators may need to revisit their position on online lending marketplaces."

Read the entire report "Three Myths about Peer-to-Peer Loans" here. 

Advocates: Small Businesses Need Protection Against ‘Predatory’ Lenders

ANN ARBOR, MI (September 29, 2017) excerpt from INSIDE SOURCES - Anytime they take out a loan, American consumers enjoy protections embodied by a handful of decades-old laws designed to ensure that they know how much credit costs, and that they can comparison shop. But the American small business owner enjoys no such benefits, something a new coalition is trying to change.

As banks have reduced lending to small businesses in the wake of the 2008 financial crisis, other lenders have swarmed into the sector, creating what critics call a rising tide of abuse — this time aimed at struggling business owners — that resembles the subprime mortgage sector that led to bailouts and the worst recession since the Great Depression.

“Small business owners are human beings, and they get taken advantage of the way consumer human beings do. But they don’t have the kinds of protections in the law that consumers have,” said Michael Barr, a law professor at the University of Michigan and a former assistant secretary of the Treasury.

Read the entire article here. 

5 Ways Small Businesses Can Avoid Predatory Loans

HOUSTON, TX (September 18, 2017) — "Imagine starting your new business and going online to take out a loan. You find what you think is an attractive yearly rate of 9 percent. You think you are set until — after you sign — you are shocked to realize it’s 9 percent per month.

These kinds of soul-crushing predatory loans can put you out of business, sometimes before you’ve even started. Millennials, in particular, can be susceptible, as they are most likely to go online to search for a loan.

If you Google “small business loans,” ads for several FinTech lenders pop up even before the U.S. Small Business Administration’s (SBA) site. One lender offers loans from $15,000 up to $2 million, while another seeks customers by promising they can “get funded as fast as 24 hours.”

Some lenders condition their loans on switching to their merchant card-processing service, then add excessive fees to every transaction and subtract their payment from every credit card sale, eroding profits. Others charge interest rates north of 50 percent annually.

Another red flag is the prepayment terms. Often, these loans have a prepayment penalty equal to the sum of the remaining payments. So even if you pay it off early, you pay all of the interest and fees that would have been paid off if you made the scheduled payments."

To read the entire article, click here.

‘Fintech’ Loans: A Sometimes Costly Lifeline for Small Business

RICHMOND, CA (September 12, 2017) — Che Al-Barri remembers feeling like he was drowning in debt last year. He had taken out a $70,000 loan for his small cleaning company, but was struggling to repay it.

The lender, a financial technology — or fintech — company, automatically collected $331 from his bank account daily, Monday through Friday. The frequent hits depleted his income and took a toll on his business, he said.

“If you get hit every single day you have no time to breathe,” said Al-Barri, 45, who grew up in Richmond. “It put me up against the wall. There was many times I pulled the covers over my head and just laid there like, ‘Oh my gosh, what am I going to do?'”

To read the entire article, click here.

Fintech Helps Banks Disburse More Loans

NEW YORK, NY (September 4, 2017) — Two years of fin tech driven reach has helped banks grow about 15 to 20 per cent indicating that banks’ dependence on `feet-on-street’ to campaign for loans may recede in a few years. Bankers said nearly a third of their customers below 30 years were on-boarded through the digital platform. 

Banks are using FinTech players to qualify good customers faster and give on the fly credit. Significant reduction in time used for taking better credit decisions have led to higher conversion in disbursal of loans.

To read the entire article, click here.

Lending as a Service (LaaS) and Why it Matters

NEW YORK, NY (August 23, 2017) — Traditional financial services providers have tightened their lending requirements, leaving many small business owners with few channels to uncover the capital they need.

The financial crisis of 2008 caused global shockwaves, wrecking businesses and wiping away thousands of dollars’ worth of individuals’ savings. World markets are still recovering to this day, and governments have enacted strong reforms to prevent a repeat occurrence. These new, stricter regulations have deeply changed the financial world. Along with shifts in consumer preferences, banks and lenders are now faced with a vastly different financing landscape.

To read the entire article, click here.

Startups Still Struggle Finding Funds (Fueling Online Lending’s Growth)

NEW YORK, NY (August 10, 2017) — While startups and small business are often (rightly) hailed as the engines that power growth in the American economy, when it comes time to secure funds — the situation gets tricky. Stated simply, ten years out of the financial crisis and small business lending remains a chronically sluggish and difficult to work in environment.

According to a report by the country’s 12 regional Federal Reserve banks, over half of all startups report difficulty in securing loans and 81 percent report having had to dip into their personal funds to cover gaps in their corporate cash flow. Startups, as defined by the new report, are firms that are less than two years old and employing less than 500 workers.

“Given the importance of startups for the economy, the question of startup capital is of central importance,” according to the 2016 Small Business Credit Survey Report on Startup Firms. “While funding is the lifeblood of every company, capital is especially critical for startups. To reach scale, startups need to be able to secure expansion capital.

To read the entire article, click here.

Online Lending Has Reached a Tipping Point

NEW YORK, NY (May 1, 2017) - Online lenders have been facing an uphill battle recently as investors question whether they are truly getting the loan transparency they need to confidently invest in this young industry. Investors, credit providers and ratings agencies are worried about loan data integrity as well as collateral and ownership rights behind the loans.

To read the entire article, click here.

When Does a Lender Become a Loan Shark?

NEW YORK, NY (April 5, 2017) - At what point does a lender (good) become a loan shark (bad)? The question has exercised philosophers—and unhappy borrowers—from antiquity to the present.

To read the entire article, click here. 

Alternative Lenders Peddle Pricey Commercial Loans

With Credit for Businesses Tight, Nonbank Lenders Offer Financing at a Price.

PHILADELPHIA, PA (January 7, 2014) - When Khien Nguyen needed $180,000 to open his 13th nail salon near Philadelphia in November, he didn't go to a bank. Mr. Nguyen's credit score had dropped during the recession, so he figured a bank would put him through weeks of aggravation, then reject him.

Click here to read the entire article.