Thursday May 23 2019, Weekly News Digest

young credit card delinquents

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Consumer Loan Program 2019-3 Trust. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2019-3. Funding Circle seeds shareholder input on wind-down plans for investment trust. TransferWise valuation doubles to $3.5B. Today’s main analysis: High income, super prime borrowers take bigger share of […]

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young credit card delinquents

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News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Consumer Loan Program 2019-3 Trust (DBRS Email), Rated: AAA

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes (collectively, the Notes) to be issued by SoFi Consumer Loan Program 2019-3 Trust (SCLP 2019-3):

— $420,000,000 Class A Notes at AAA (sf)
— $31,100,000 Class B Notes at AA (sf)
— $62,500,000 Class C Notes at A (sf)
— $35,600,000 Class D Notes at BBB (sf)

View the full report here.

KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2019-3 (Yahoo! Finance), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Prosper Marketplace Issuance Trust 2019-3 (PMIT 2019-3). This is a $380.99 million consumer loan ABS transaction.

Class Rating Initial Class Principal
A A- (sf) $270,750,000
B BBB- (sf) $51,470,000
C BB- (sf) $39,720,000
D B- (sf) $19,050,000

Millennial DQs on the rise; GreenSky earnings; OCC on a fix for Madden? (PeerIQ), Rated: AAA

US consumer debt rose by 0.9% QoQ in 1Q to $13.7 Tn.

Source: Bloomberg, PeerIQ

Mixed FinTech Earnings

FinTech issuers saw growth in revenues and loans. Pace of loan growth weakened slightly as originations fell at Enova and grew by less than 10% YoY at OnDeck and OneMain. Stock price performance post earnings was mixed. Enova saw its stock price increase by 18% post earnings while OnDeck’s stock price dropped by 16%.

Source: Bloomberg, PeerIQ

High Income and Super Prime Borrowers Taking Bigger Share of Personal Loans on LendingTree Marketplace (Lending Tree), Rated: AAA

Over the past 10 years, the amount of outstanding personal loan debt has increased by 75%.

Key findings

  • The share of personal loan inquiries from those with incomes over $108,000 increased by 77% between the second quarter of 2017 and the first quarter of 2019, while the share of inquiries from people earning over $84,000 increased by 65%.
  • The share of personal loan inquiries from super prime borrowers (740 and higher) increased by 47% between the second quarter of 2017 and the first quarter of 2019, and the increase in prime and super prime borrowers (680 and higher) rose by 36%.
  • The share of personal loans closed by borrowers with incomes over $108,000 on the LendingTree marketplace increased by 38% between the second quarter of 2017 and the first quarter of 2019, and the share of borrowers earning over $84,000 increased by 26%.
  • The share of closed personal loans from super prime borrowers (740 and higher) increased by 37% between the second quarter of 2017 and the first quarter of 2019, and the increase in prime borrowers (680 and higher) rose by 19%.
  • Borrowers with incomes up to $24,000 decreased their share of closed loans by 22%, and those with incomes up to $48,000 decreased their share by 17%.
  • The share of loans closed by borrowers with scores below 560 increased by 28%, but the share of closed loans from borrowers with scores between 560 and 619 dropped by 24%.
  • The share of inquiries from people with incomes up to $24,000 dropped by 27% during the same period, while inquires from those with incomes up to $48,000 dropped by 16%.
  • The share of loan inquiries by borrowers with scores below 560 decreased by 12%, and the share of closed loans from borrowers with scores below 620 decreased by 9.2%.

For example, in the SoFi Consumer Loan Program 2017-3 LLC, securities show that the average gross income of borrowers as of May 2017, was $141,780, with an average FICO score of 731, and an average VantageScore of 682. The most recent offering, reported in February 2019, showed borrowers had an average income of $151,144, an average 753 FICO score, and a 713 VantageScore.

Job Loss and Medical Expenses Leading Causes of Bad Credit (Yahoo! Finance), Rated: AAA

Job loss and medical expenses are the leading factors causing Americans’ credit scores to drop, according to new research by Elevate’s Center for the New Middle Class (CNMC).

According to the new report, 55% of respondents cited job loss or reduction in work hours as the reason why their credit score dipped below 700. Nearly a quarter (24%) cited medical bills as the primary cause. Following these leading factors, a variety of typical, seemingly innocuous expenses follow, including repairing a car (11%), leaving home for the first time (6%), and putting a child through college (5%).

Non-prime consumers are 86% more likely to experience multiple factors that negatively affect their credit score compared to just one. For example, of the 23% who mention a medical reason, about three-quarters (75%) also experienced an income drop, severely complicating their ability to manage and cover medical expenses.

Americans Use Short-Term Loans to Pay Off Debt (Lexington Law), Rated: A

American debt is at an all-time high. How did we manage to dig ourselves into a steep $13 trillion hole? Credit card debt alone accounts for $1 trillion of this debt, with the average balance over $6,000 per capita.

  • 33% of Americans are going into debt to pay off debt
  • Generation X is most likely to incur short-term debt to pay down long-term debt
  • Women who use debt to make other debt payments tend to do so multiple times

Bernardo Martinez of Funding Circle USA (Lend Academy), Rated: A

In this podcast you will learn:

  • The knowledge that Bernardo brought with him from PayPal.
  • What he has learned in his first year on the job at Funding Circle.
  • The range of terms for their small business loans.
  • The types of investors they have on their platform today.
  • How and why 72% of their customers came to Funding Circle first.
  • How their offering compares to what is offered at banks today.
  • Who Bernardo sees as their biggest competitors.
  • How they view the SBA and their loan guarantee program.
  • How the LendingClub partnership came together.
  • Why no other online platform has reached significant scale in term loans for small business.
  • How they expanding their business into Canada.
  • Who they are hiring for their new Denver office.
  • How they are approaching their relationships with regulators in DC these days.
  • How they helped get SB-1235 passed in California.
  • How Funding Circle is monitoring their risk as it pertains to the economic cycle.
  • What is most exciting for Bernardo today at Funding Circle.

How a Silicon Valley startup is trying to rebrand payday loans (Vox), Rated: AAA

Once every few weeks, Myra Haq withdraws $100 or so from Earnin, an app that lets people borrow small sums of money.

The app lets her withdraw up to $100 a day, and never more than what she actually makes in a pay period, and then withdraws the money from her checking account once her direct deposit hits.

Unsurprisingly, payday lenders typically target low-income people — a 2013 Pew report found that 58 percent of people who use payday loans have trouble meeting monthly expenses at least half the time and usually borrow to deal with “persistent cash shortfalls rather than temporary emergencies.”

The average American household with student debt owes almost $48,000, and experts believe that student loan debt has held millennials back from major life milestones like marriage, homeownership, and having children.

How One Company Wants to Reduce or Even Eliminate Your Unpaid Medical Bills (Forbes), Rated: A

Relying on personal savings or insurance may not even be enough to pay off expensive medical bills. As a result, .

Earnin invited some community members to try HealthAid and was able to find savings for about 90% of people.

In one case, Earnin was able to get a patient’s $48,000 bill fully forgiven.

Figure Technologies loan platform secures $ 1B financing facility (CoinGeek), Rated: A

Figure Technologies looks to be profiting from increased interest in the cryptocurrency industry. Specifically, in a press release dated May 9, it was announced that the company had secured a $1 billion line of credit on the Provenance.io blockchain. The agreement also involves two other companies, Jefferies and WSFS Institutional Services, which will provide the line of credit.

LendKey’s Vince Passione on partnering with banks and credit unions and the future of lending as a service (Tearsheet), Rated: A

Vince joins us on the show to talk about his partnership model and the challenges and opportunities of working alongside banks and credit unions, which have deployed more than $2 billion in lending capital on the digital platform.

Small-business fintech launches lending platform for banks (American Banker), Rated: A

Spurred by bank interest, small-business lending platform Biz2Credit has unveiled a software-as-a-service version of its loan management, servicing and risk analytics product.

After HSBC and New York-based Popular Bank contracted with Biz2Credit to use the software, the company decided to launch the platform for all banks to use.

At a cramped desk on the 22nd floor of a downtown Manhattan office building, Gary Roth spotted a looming disaster.

An urban planner with two master’s degrees, Mr. Roth had a new job in 2010 analyzing taxi policy for the New York City government. But almost immediately, he noticed something disturbing: The price of a taxi medallion — the permit that lets a driver own a cab — had soared to nearly $700,000 from $200,000. In order to buy medallions, drivers were taking out loans they could not afford.

Prodigy Finance Aims to Bridge Healthcare Gap with New Loan Offering (University Business), Rated: A

Prodigy Finance today announces it will be supporting international students pursuing Master of Public Health (MPH) and Master of Science in Public Health (MSPH) degrees, Master of Science in Nursing (MSN) degrees, as well as those enrolling in Advanced Standing Dental programs and Select Certificate Dentistry programs in the U.S.

Crypto Lending Startup BlockFi Slashing Interest Rates on Ether Deposits (CoinDesk), Rated: A

Cryptocurrency lending startup BlockFi is almost halving the interest rates it offers on ether (ETH) deposits, while some bitcoin (BTC) rates will increase slightly.

From June 1, customers with 25–100 ETH balances in a BlockFi Interest Account (BIA) will see the interest rate drop from the current 6.2 percent annual percentage yield (APY) to 3.25 percent, the startup announced Tuesday. Those holding over 100 ETH balances will earn just 0.2 percent APY.

Some BTC balances, on the other hand, will see a slight interest rate increase – up to 2.15 percent from the current 2 percent – for deposits of over 25 BTC. Those holding 0.5–25 BTC will continue to earn 6.2 percent APY, BlockFi said.

Find the Right Loan Among 300+ Lending Partners for Credit Card Consolidation and More (CardRates), Rated: A

In a Nutshell: LoanStart helps consumers in search of a loan find a lender that suits their funding needs within just five minutes after submitting a simple, fee-free loan request form. Working securely with more than 300 trusted lending partners, including conveniently located storefront providers, the service makes finding a suitable lender easy. In today’s connected world where loan options abound, LoanStart cuts through the clutter to connect consumers in need of funds with lenders willing to provide financing.

Maxex Closes Series B Funding (FinSMEs), Rated: A

Maxex, LLC, an Atlanta, GA-based residential mortgage loan exchange, closed a Series B funding round of undisclosed amount.

CFPB Sues Debt-Collection Agency Over Deception Allegations (PYMNTS), Rated: A

The Consumer Financial Protection Bureau (CFPB) said Friday (May 17) that it has filed a lawsuit in federal court against a debt-collection agency that, the agency said, violated the Fair Debt Collection Practices Act.

The lawsuit targets Forster & Garbus, LLP, a debt-collection law firm based in New York.

Plaid gives digital banks and fintech a new tool to bypass traditional finance (CNBC), Rated: A

Start-up Plaid, recently valued at $2.7 billion, already connects bank accounts to fintech apps like Venmo, Robinhood, Coinbase and Acorns. It announced “Plaid Direct” on Wednesday, which lets users more easily connect to newer digital banks like Chime.

Capital Markets Veteran Joins PeerStreet to Manage Institutional Sales (BusinessWire), Rated: A

PeerStreet, a marketplace for investing in real estate backed loans, has announced the appointment of Deepa Salastekar as the Vice President of Institutional Sales. Ms. Salastekar joins PeerStreet to expand the company’s relationship base of institutional partners across all investment types available through PeerStreet.

Dharma now supports peer-to-peer lending in USDC to attract mainstream investors to DeFi (The Block Crypto), Rated: B

Defi startup Dharma announced Wednesday that it will start to support peer-to-peer lending of USDC, in a push to engage mainstream investors.

United Kingdom

Funding Circle investment trust asks shareholders to approve wind-down plans (P2P Finance News), Rated: AAA

FUNDING Circle is set to begin a managed wind-down of its dedicated investment trust, the Funding Circle SME Income Fund (FCIF), once it gets the green light from shareholders.

The FTSE 250-listed peer-to-peer business lender said last month that shareholders had backed plans to stop investing in new assets and begin the process of returning capital to investors.

Funding Circle Sets Hard Limit To Incentive Pay For Senior Executives (Morningstar), Rated: A

Funding Circle Holdings PLC clarified its director pay policy Wednesday following “feedback from shareholder advisory bodies”.

The small and medium enterprise loan platform said the amount granted in each year for a three year period under the company’s long-term incentive plan to can now no longer exceed GBP2.0 million and GBP1.1 million for the company’s chief executive and chief financial officer, respectively.

Span A Higher Than Span B for Funding Circle Sme Income Fund Limited (FCIF.L) (Williams Business Review), Rated: B

After a recent indicator scan, we have noted that Span A is currently higher than Span B for shares of Funding Circle Sme Income Fund Limited (FCIF.L). Traders may be paying close attention as this signal may indicate a possible bullish move.

TransferWise doubles its valuation to $ 3.5bn (Fintech Futures), Rated: AAA

UK-based international payments fintech TransferWise has doubled its value to $3.5 billion after raising $292 million in secondary funding, Jane Connolly writes.

Call for ‘credit curfew’ to help late-night borrowers (The Times), Rated: A

Banning borrowers from accessing high-cost credit websites between 11pm and 7am would ease the numbers of people spiralling into debt as activity peaks during these hours, according to researchers at Newcastle University.

Monzo hits 2m customers, adding 1m in eight months (AltFi), Rated: A

Monzo has hit 2 million current account customers in just two years since getting a banking license, and just eight months after it hit 1 million accounts.

It launched its current accounts less than 18 months ago with customers having spent £10.7bn through Monzo so far.

Arbuthnot Specialist Finance reveals offering (Bridging and Commercial), Rated: A

Arbuthnot Latham & Co has officially launched its specialist finance division.

Arbuthnot Specialist Finance will offer short-term residential finance up to 70% of market value (MV), with rates from 0.65% per month.

For this product, it will offer loans between £30,000–£3m-plus.

For commercial properties, it will offer up to 65% of MV, including interest and fees (up to 85% of the 90-day MV, or 95% of the purchase price, whichever is the lower), with rates available from 0.75%.

New peer-to-peer lender targets 7.5% return with education loans (Your Money), Rated: A

Lendwise plans to offer borrowers loans of up to £100,000, with interest rates ranging from 7.5% to 12%. Pricing will be based on a range of factors, which the peer-to-peer lender said go beyond the applicant’s financial profile and credit record. They include the specific postgraduate or professional qualification course they are taking, the length of study and the repayment period.

Finastra’s open cloud platform drives collaboration and innovation in financial services (Fintech Finance), Rated: A

Today ahead of its FusionONE developer conference, co-hosted with Microsoft, Finastra unveiled the latest developments to its FusionFabric.cloudopen platform for innovation.

The 61 new open APIs (and more than 200 Endpoints) span many of Finastra’s solutions, including retail and corporate banking (both enterprise and North American community markets), consumer lending and mortgage, payments and treasury and capital markets. These are now available in the FusionFabric.cloud API catalog for developers to harness in building financial services applications. Some of these powerful APIs are already enabling:

China

A fintech revenue surge helped Tencent smash quarterly expectations (Business Insider), Rated: AAA

Tencent posted record quarterly profits and smashed market expectations in Q1 2019, driven largely by surges in its fintech and cloud revenue, per Reuters.

Fintech and business services is now Tencent’s second largest division, responsible for a quarter of its revenue. This was the first time the tech giant broke out earnings for the unit, which brought in revenue of Rmb21.79bn ($3.2 billion), a 44% year-over-year (YoY) spike. Key in driving this growth is its payments wallet for WeChat, whose 1.11 billion users make it the largest social media platform in China, as well as its insurance services, which include a 20% stake in Aviva Hong Kong, and its cloud computing service.

Tencent’s online advertising grew 25% YoY, compared with 55% YoY in the same period last year, suggesting that China’s slowing economy and continued trade tensions with the US are hitting the firm.

Source: Business Insider Intelligence

DBS Bank Expects a Boost in Chinese P2P Lending Market from the Greater Bay Area (LearnBonds), Rated: A

Greater Bay Area could be the key to reviving the struggling P2P lending market in China, according to DBS Bank.

The Singaporean bank estimates that P2P lending will experience a 17% annual growth rate by 2030.

European Union

Identity technology and Dublin’s draw for fintech firms post-Brexit (Forbes), Rated: AAA

According to 

1 in 10 European banks to vanish by 2023 (AltFi), Rated: A

Bumper banking profits disguise an underlying weakness in traditional banks, as their per customer income has tumbled over the past decade.

That’s the finding of a report by consultants A.T. Kearney, which found data across 92 European banks revealed income per client had fallen 11% since 2008.

Australia/New Zealand

Commerce Commission’s court case against payday lender Ferratum scheduled for next year (Interest), Rated: AAA

A backlog of cases in the Auckland High Court means the next hearing in the Commerce Commission’s legal action against online payday lender Ferratum New Zealand won’t be held until June next year.

Asia

Indonesian fintech association sanctions lending platform that sets high interest rate (KrAsia), Rated: AAA

Two Indonesian lending platforms regulated under the country’s financial services authority (OJK) have been penalized by the ethics council of AFPI, the industry association for fintech lenders in Indonesia.

The organization revealed that one of the companies in question is P2P lender Do-It, which charged an interest fee rate of 1% per day.

Africa

Onefi is Expanding Carbon’s Digital Banking Services to Ghana (Technext), Rated: AAA

Nigerian digital financial platform, Carbon (formerly Paylater) is taking big steps to introduce its revamped financial services into Ghana. The online lender is looking to hire a new country manager for Ghana and this suggests the company is looking to introduce its new services like PayVest into Ghana.

Authors:

George Popescu
Allen Taylor

The post Thursday May 23 2019, Weekly News Digest appeared first on Lending Times.

Friends, Family, Credit Cards or Savings Aren’t Helping Nonprime Americans

Availability of Credit

We’ve always known that the non-prime segment of the American population has not been doing well. Though the unemployment rate is at record low levels, the after-effects of the real estate and financial meltdown in 2008 and normal jobs being exceedingly replaced by gigs have left a lot of these subprimers in a precarious position. […]

Availability of Credit

We’ve always known that the non-prime segment of the American population has not been doing well. Though the unemployment rate is at record low levels, the after-effects of the real estate and financial meltdown in 2008 and normal jobs being exceedingly replaced by gigs have left a lot of these subprimers in a precarious position. A report by Elevate’s Center for the New Middle Class, an online lender that has originated more than $3.7 billion in loans to this category, highlights through hard facts and figures issues being faced by this new middle class. It also busts myths about the various borrowing options available to them.

Source: Elevate’s Center for the new Middle Class

Sub-prime borrowers are those which have a credit score below 700 and basic lending products like low interest personal loans are not accessible to them. The report finds that almost 70% of the nonprime Americans can’t afford emergency expenses of $500 or more with their savings. The report also shows 64% wouldn’t be able to borrow that amount from friends and family and seconds the Federal Reserve Board’s finding in 2016 which revealed that 40% of Americans don’t have $400 in saving to meet any unexpected expenses.

Findings from the Elevate report: Paint a bleak picture
Additionally, the opinion that they can depend on other means of funding like friends and family or credit cards is also debunked by the new research. Almost 72% of Americans won’t be able to put a charge of $500 on their credit cards, this figure jumps to 80% if the amount is $2,000. 71% won’t be able to borrow the $2,000 from their family and friends. Surprisingly, only 1 in 5 Americans has borrowed money from friends or family in the last 12 months. This indicates that either they are not comfortable in asking for the money or maybe the money is just not there in their network.

Source: Elevate’s Center for the new Middle Class

This report provides powerful insight into what is actually going on in the financial lives of the new middle-class American. It also allows policy makers and fintech companies to design policies and products that target the actual pain point for millions of Americans who are not being served by their banks and traditional lenders.

Elevate’s Center for the New Middle Class
Elevate started this center to evaluate the economic behavior and daily challenges faced by this “New Middle Class” of America. This all is done through surveys, research, studies, and a continuous open dialogue with the members of this category. The research and results generated by the center help market players to develop products which are better suited to the needs of the non-prime borrowers.

This is the fifth paper published by the center, which tries to release one paper each month. Usual themes include the challenges faced by the non-prime borrowers and how they find it difficult getting that apartment, job, or utility connection just because of poor credit. Thus, they are stuck in a vicious circle because they can’t get a job without a good credit score and can’t get the credit score without previous credit. Obviously, they won’t get a loan without a job. Last month, the center released a paper on the issues faced by the married non-prime segment.

This particular paper is written to understand how much access this middle class has to the so-called “good options” (i.e. families and friends). These stats are completely opposite to the regular notion that it is easier to borrow money from friends and families, or borrowers should focus on having personal savings for drawing down for emergencies.

With banks already blacklisting the new middle class, and the families and friends option not the panacea we thought it was, it is important to help people get on that credit bandwagon so they can make the entry into the formal credit market. Being able to climb that ladder of credit score success has a domino effect on financial lives.

The New Economy
Almost 51% of non-prime borrowers admitted they have volatile or fluctuating income month to month. For 22% of them, it fluctuates to a level that can create massive issues if an unexpected bill comes due. These trends are exacerbated because of the emergence of the “sharing” and “gig” economy. According to an article on Forbes.com, there are almost 55 million freelancers in America comprising 35% of US workforce. This gives massive flexibility to the new age worker, but it also means that they do not get any perks of employment like job security, health insurance, or vacation pay. Uber, Lyft, and AirBnB are creating opportunities, but they’ve also have led to massive fluctuations in the income of millions of freelancers associated with them.

Conclusion
With more and more people falling under non-prime categories, it has become imperative for financial companies to understand the underlying matrix of this category. Almost 7% of respondents in the Elevate survey use bank overdraft as a form of creative financing, and 59% carry a regular credit card balance. Existing lenders have failed this new middle class, and understanding how this massive community thinks and functions will help new-age lenders develop credit products that will serve this category in a much way better way. Companies who can help them cross the credit hurdle are on their way to capturing a potential trillion dollar market.

Author:

Written by Heena Dhir.

Defining the New Middle Class And Solving Its Credit Problem

nonprime

The financial crisis of 2008 gave birth to a new economic class: Working-yet-productive cash-crunched Americans with sub-prime and non-prime credit scores. These Americans have a credit score of less than 700 and virtually non-existent savings. Their numbers are growing fast. Right now, the category stands at 160 million in the U.S. alone. And because of […]

nonprime

The financial crisis of 2008 gave birth to a new economic class: Working-yet-productive cash-crunched Americans with sub-prime and non-prime credit scores. These Americans have a credit score of less than 700 and virtually non-existent savings. Their numbers are growing fast. Right now, the category stands at 160 million in the U.S. alone. And because of their low credit scores, these productive Americans only have access to expensive credit options or no credit options at all leaving them with limited recourse to tackle their financial needs. All it takes is one small emergency to push a potential borrower from prime to non-prime.

At what level does a bill become a crisis?

Source: Elevate

A small incident like a broken arm, car repair or interstate move can tip the borrower into a crisis mode.

Mean Number of months respondents can go on after a drop in income:

Source: Elevate

This shows that the trigger for default is usually an unexpected emergency. It is very important for lenders to model these emergencies and incorporate them into their credit decision models. Understanding the growing frustrations of this “new class” of people, Elevate specializes in online lending to non-prime borrowers an has originated more than $3 billion in credit. They studied their clients’ data to understand the needs and desires before launching the Center for the New Middle Class.

Why is There a Need for the Center for the New Middle Class?

Under the stewardship of Executive Director Jonathan Walker, Center for the New Middle Class opened in late 2016. Most companies fail to understand the behavior or challenges of these non-prime Americans, he said. The center is a research-focused body developed to engage and educate the industry and the public about the growing needs of individuals who do not have access to traditional credit options. The Center recently released its first report on the effects of the credit challenges of Americans. Rave reviews about its first report have helped bolster the center’s confidence, and now it plans to publish at least 4-5 major studies per year.

The Center is also tackling the misconception that people who are sub-prime don’t understand financial wellness, which is not true. The report tries to help understand that these workers are not in their financial situation due to ignorance or sloppiness. The report finds that it is a culmination of various factors such as medical bills, car repairs, or other emergencies that push consumers into the non-prime category. Knowing how vicious the bad credit circle is, it is almost impossible for consumers to get out of it. Stats say 37% of non-prime Americans can’t progress because they don’t have a credit score, which brings home the point that it is difficult for non-prime customers to get by.

Bad credit is not the sole reason for a poor credit score. Lack of credit and an opportunity to demonstrate creditworthiness is a much bigger obstacle for this new middle class. For instance, in last 12 months, 6% of non-prime Americans were denied a job, 12% of the Americans were denied an apartment, and 45% of non-prime customers were denied credit due to poor credit. Seventy percent of non-prime consumers feel they need a loan to build credit. This is one complicated cause and effect conundum.

The Effect of the New Middle Class

The idea behind using “Elevate” in the center’s name was to give it more credibility as Elevate is a well-known company in the space. To ensure an honest conversation across the lending industry, Elevate uses its own company data to execute the research ensuring reliability and consistency. Reports are stacked with stats so readers can understand the problem granularly.

The idea behind a “new middle class” was to make people understand how evolved the term “middle class” has become. In past decades, “middle class” referred to people who worked in factories and held blue collar or labor jobs, but today there has been a major swing in the workforce. Nurses, health care providers, government employees, and other white-collar workers make up the new middle class. A staggering 45% of this American population is non-prime. Non-prime has been historically considered below FICO 700. That puts the borrower at the mercy of a lender’s expanding its balance sheet.

Chances of conflicting data between the Elevate customer base versus the Center’s target population are extremely slim as the Center targets a much larger and wider population than the present Elevate client base. In the long term, there will be instances where the Center will record data that will not apply to Elevate’s clients. In coming years, this new middle class will grow into a full-blown segment, and that’s why the Center the New Middle Class has invested a lot of time and resources in trying to understand the needs and issues of this new class of Americans.

Why Online Lenders Need Elevate’s Data

Two of the biggest issues that exist in the sub-prime segment are price and quality. People who borrow at the highest rates are the most prone to default. Being able to differentiate between constituents is essential. Companies need to understand how to price products that are ideal for these clients. Only then will they be able to cater to the vast majority of the new middle class.

Data analytics is essential for taking advantage of the new information companies possess about borrowers and their behavior. Even more important is to create a clear road map for helping good borrowers to migrate to a prime score. Unlike payday lenders, Elevate reports the borrowers’ loan performance to major credit bureaus. This has helped more than 2,500 of its customers improve credit scores to the point they are now considered prime. This is a win-win for borrowers and the company.

Authors:

Written by Heena Dhir.