2016-01-27
Online Lending Under a Microscope
When a market experiences the type of explosive growth that alternative lending has experienced in recent years, it’s only a matter of time before it draws scrutiny from regulators and lawmakers.
What regulators are doing in Utah
A recent article by the Wall Street Journal revealed that regulators are looking into lending standards of leading alternative platforms such as Prosper and LendingClub. Of particular focus is the use of WebBank and other Utah-based banks for lending. Banks like WebBank make loans to borrowers and back the loans temporarily until an investor on an alternative platform ultimately takes over responsibility for the loan, usually within two days. Utah has no state usury limit, meaning that WebBank and others have no interest rate cap on their loans. In addition, WebBank’s legal status as an “industrial bank” in Utah means that it has not been subject to oversight by the Federal Reserve, which regulates the majority of state-chartered banks and bank holding companies. Critics of the current system argue that the partnership between banks like WebBank and alternative lenders means that the two entities are collectively acting as a bank and should be regulated as such.
U.S Treasury
The U.S. Treasury department is taking a broader scope. In the fall, the department issued a request for information on a variety of alternative lending companies. Among the topics the Treasury wanted insight on were how customers were marketed to, how the government could help innovation and how each platform managed the credit underwriting process. Over 40 companies responded to the inquiry, ranging from Cross River Bank to OnDeck. Even online payments giant Paypal was included and in a response, the company said it was “well regulated” under existing law. “[A]dditional regulation could stifle the innovation these products bring to the market and the benefits they provide to consumers and small businesses,” Richard Nash, Paypal’s Head of Government Relations wrote at the time. SoFi echoed a similar tone. The alternative student lending platform addressed the notion that it and its competitors are not subject to consumer lending laws and operate without oversight. “This is not correct,” SoFi wrote. “As a private education lender, SoFi is a covered person under Title X of the Dodd Frank Act and is subject to examination by the Consumer Financial Protection Bureau.” Other respondents, like Lending Club, also said consumer protection regulations offer borrowers protection.
Six regulatory themes emerge
The latest update to the inquiry is a response from the Treasury, where officials noted “six themes” that emerged from lenders’ responses. According to legal firm Manatt, Phelps & Phillips, the themes are:
- Alternative lenders could do a better job to address small businesses.
- Existing underwriting models haven’t been tested in a full credit cycle.
- Credit underwriting algorithms are often seen as a black box.
- Loan terms, conditions and warranties need better standardization and transparency.
- Alternative lenders are developing more partnerships with banks and CDFIs.
- Risk retention is a major topic of debate, something journalists have noted before.
It’s possible the Treasury will issue an update in the New Year, but exact details are thus far unknown. An unfortunate comparison Attention from regulators is pushing critics to make unfortunate comparisons between alternative lenders and the mortgage lenders of yesteryear. The process in which industrial banks profit by collecting fees on loans that they then pass along to be packaged as securities gives some onlookers an eerie feeling of déjà vu. Without the appropriate oversight, this type of model can quickly turn into the out-of-control and irresponsible subprime lending culture that was responsible for the 2008 Financial Crisis. During the housing bubble, lenders raked in record profits by lending to anything that moved, knowing that the mortgages would quickly be passed along to Fannie Mae or Freddie Mac for securitization and would not be kept on the books in the long-term.
What’s next?
Despite the growing cloud over the space, regulatory scrutiny could actually serve to boost the public’s confidence in the new industry.
If alternative lenders continue to uphold a fair and honest level of practice, government inquiries and investigations will churn up an environment that consumers can continue to trust. Rules, regulations and oversight are simply part of the game in the world of finance to prevent fraud and criminality and protect the interests of consumers. If anything, this type of attention serves as a further indication that alternative lending is making a major disruptive impact on the financial world.
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Even
Even Financial Adds Tally's Low-Interest Line of Credit to its Embedded Finance Marketplace
NEW YORK, NY, March 15, 2022 -- Even Financial ("Even"), the category-leading embedded finance marketplace and independently managed subsidiary of MoneyLion, Inc. (NYSE: ML), has announced a new partnership with Tally, a leading financial automation company, to include the company's low-interest credit offerings on its platform.
"Tally has built a powerful tech-enabled system to help people solve one of the biggest financial problems today: paying off credit card debt," said Phill Rosen, Founder and CEO of Even. "We're thrilled to welcome Tally's line of credit offerings to Even's unparalleled network of financial services providers."
Tally is designed to help its members pay off their debt faster and save them money on interest and late fees. Members can lower their monthly payment with Tally's lower-interest line of credit, if eligible. Typically, at least a 580 FICO score is needed. Tally's system is customized to save people as much money as possible.
"Americans today owe nearly $1 trillion in credit card debt. We know from our research that many want to pay down their debt but struggle to get started. That's where Tally comes in," said Jason Huynh, VP of Credit, Analytics & Operations at Tally. "Our system combines financial automation with a low-interest line of credit to give people the help they need to get on track to pay off their credit card debt for good. We're thrilled that our partnership with Even will allow Tally to help even more people."
The launch of Tally on the Even platform enables consumers to get matched with Tally's custom, low-interest line of credit accounts of up to $25,000 in just a few minutes. After getting matched, eligible consumers complete the process through the Tally app. There are no out-of-pocket costs.
Tally is the latest partner to join the Even marketplace, a growing network of over 400 financial services partners and 500 channel partners covering a breadth of financial services including loans, credit cards, mortgages, savings, and insurance products. Even's marketplace technology enables any company to add financial products to its business, with full compliance and security, at scale.
About Even Financial
Even digitally connects and matches consumers with real-time, personalized financial product recommendations from banks, insurance carriers, and fintech companies on mobile apps, websites, and other digital touchpoints through its marketplace technology. Even's infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridging financial services providers (such as SoFi) and channel partners (such as TransUnion) via its industry-leading API and embedded finance marketplaces. Even enables any company to add financial products to its business, with full compliance and security at scale. Even was named one of "America's Best Startup Employers'' by Forbes for 2021 and was named to the 2021 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world. Learn more at www.evenfinancial.com.
About Tally
Tally is a consumer financial tech company pioneering full-service financial automation to help people save money, pay down their debt and reach their goals sooner. Founded in 2015, the company built the first fully automated debt manager to help put billions of dollars back in people's pockets. In 2021, Tally was named to Fast Company's Most Innovative Companies list and to Quartz's Best Companies for Remote Workers. Previously, Tally made Forbes' Next Billion Dollar Startup list, Forbes' Fintech 50 list, and the app won Real Simple's Smart Money award. Learn more at meettally.com.
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HAVEN LIFE
Haven Life’s All-Digital Life Insurance Application Experience Launches on Even Financial’s Leading Life Insurance Search Engine
Even features the industry's largest multi-carrier, all-digital life insurance marketplace
New York, New York August 16, 2021Even Financial (Even), the leading search, comparison, and recommendation engine for financial services, has announced the launch of Haven Term and Haven Simple on its life insurance marketplace platform. Leveraging machine learning and advanced data science, Even solves a significant pain point in financial services customer acquisition by seamlessly bridging financial institutions and channel partners via its industry-leading API and embeddable solutions.
With the addition of Haven Term and Haven Simple, Even has further expanded its extensive network of premium life insurance offerings, strengthening its position as the industrys largest multi-carrier, all-digital life insurance marketplace. Haven Life, which offers Haven Term and Haven Simple, and is backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual), is known for its customer-centric approach and for its commitment to making life insurance more affordable and accessible. Haven Lifes term life insurance offerings will be available on Even properties and via its wholly owned subsidiary LeapLife.
"In these uncertain times, the majority of U.S. adults want the financial security of high-quality life insurance, but are often dissuaded by the complex application process and need to complete an in-person medical exam", said Phill Rosen, Founder and CEO of Even Financial. "Haven Life's groundbreaking, all-digital application experience brings tremendous accessibility and peace-of-mind to consumers. We're thrilled to welcome them to the Even platform."
The launch of Haven Term and Haven Simple on the Even platform enables consumers to get matched with medically underwritten term life insurance policies that they can apply for and, if approved, purchase instantly online. While most Haven Term applicants will need to take a medical exam, Haven Simple applicants do not. Haven Life's offerings expand the variety of life insurance options already available to consumers through Even's API.
"Haven Life is committed to meeting life insurance customers wherever they are — and often, it's where they are managing the rest of their financial life," said Wade Seward, Head of Distribution Strategy at Haven Life. "On the heels of introducing even more affordable pricing for the Haven Term product, our partnership with Even Financial allows us to marry that affordability with greater accessibility to offer comprehensive financial protection to shared clients with ease and efficiency.
Even entered the life insurance industry in 2020 through its acquisition of LeapLife, a leading insurtech and licenced life insurance agency. Since that acquisition, Even has worked with its large network of channel partners to make the process of getting personalized life insurance fast, easy, and accessible for consumers. In addition to Haven Term and Haven Simple, products offered by leading insurance companies including Lincoln Financial Group, Pacific Life, and Mutual of Omaha are available through LeapLife, Even's life insurance platform. Companies such as TransUnion and Lantern by SoFi rely on Even's embedded finance marketplaces to power 100% digital personalized life insurance policy quotes for their customers, with live agent support.
Even has continued its rapid growth trajectory in 2021 by reaching over $3 billion in consumer credit issued through its API and expanding its platform to over 800 partners. Earlier this year, Even was named one of "America's Best Startup Employers: by Forbes" for 2021 and placed in the Top 50 of the 2020 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world.
About Even Financial
Founded in 2014, Even Financial is a B2B fintech company that is transforming the way financial institutions find and connect with consumers. As the leading search, comparison, and recommendation engine for financial services, Even seamlessly bridges financial institutions (such as SoFi) and channel partners (such as TransUnion) via its simple yet robust API and embeddable solutions. Even turns any consumer touchpoint into a comprehensive financial services marketplace with full compliance and security at scale. The company is backed by leading financial services firms and VCs, including American Express Ventures, Canaan Partners, Citi Ventures, Fidelity's F-Prime Capital, Greatpoint Ventures, Goldman Sachs, LendingClub, and MassMutual Ventures. Learn more at www.evenfinancial.com.
About Haven Life Insurance Agency
Haven Life Insurance Agency, LLC (Haven Life) is re-thinking how people financially protect the ones they love. Haven Life is committed to delivering exceptional products, delightful purchasing experiences, and meaningful moments of service to the modern life insurance customer. Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY), and California (DTC-CA), and other states, it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.
Policy and rider form numbers and features may vary by state and may not be available in all states. Haven Term is available through Haven Life Insurance Agency, LLC (Haven Life), whose agency license number in California is OK71922 and in Arkansas, 100139527. Both Haven Life and C.M. Life are wholly owned subsidiaries of MassMutual.
Please note that issuing the policy or paying its benefits depends on the applicant's insurability, based on their answers to the health questions in the application, and their truthfulness.
MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of June 1, 2021 and is subject to change. MassMutual has received different ratings from other rating agencies.
Media Contact
media@evenfinancial.com