- Today’s main news: Behind the scenes as Orchard platform struggles, Earnest Prices $175 million Securitization, Peer-to-peer lender Wellesley & Co. pauses origination, RateSetter raises funds as it prepares to list, China Minsheng Investment leads $262m pre-IPO
- Today’s main analysis : LendingClub Files Presentation in Advance of Annual Shareholders Meeting, Parallels to the High Yield Bond Market,
- Today’s thought-provoking articles: Blackrock’s Consumer ABS ETF, Fintech has peaked, claims Morgan Stanley, RBI guidelines on P2P lending platform likely by June-July
- Victory Park Capital sells Funding Circle US and Upstart loans GP:”A refocus on the UK market makes sense. Reduce expenses.”
- Fintech has peaked, claims Morgan Stanley report GP:”Perhaps it was over opimistic and now it is realistic?”
- Behind the scenes at Orchard Platform, a Struggle to Innovate GP:”Sillicon Valley is aware of a problem called : having too much capital prevents innovation. “
- LendingClub Files Presentation in Advance of Annual Shareholders Meeting GP:”Interesting mostly about the details on what happened in 2016.”
- Law firm-issued collections letters continue to pose high risks GP:”Take away: don’t lie or you will pay for it, end of story.”
- Earnest Prices $175 million Securitization of Refinanced Student Loans; Achieves AA (High) Rating by DBRS GP:”Glad to hear Earnest is received a good reception in the capital markets.”
- Elastic line of credit surpasses $200 million in outstanding loans GP:”A milestone, I think it will be more impressive if it reaches in the billions.”
- Interest Rates on Connext™ Private Student Loans Decrease as Federal Student Loan Rates are Set to Rise,
- Blackrock’s Consumer ABS ETF and Parallels to the High Yield Bond Market GP:”Interesting comparison. I believe in learning from other markets.”
- MPOWER Financing Secures Add-on Investment from 1776 Ventures GP:”A small $500k amount, but better then nothing.”
- SoFi and JetBlue Help Customers Managing Student Loans Earn Reward Travel GP:”SoFi is becoming a real brand and it is a great example of partnership and credibility in the corporate world for SoFi.”
- Peer-to-peer lender Wellesley & Co. publishes financial results and loan book, CFO resigns GP:”To me it seems Wellesley is struggling with operations. Never a good sign.”
- Peer-to-peer lender RateSetter raises £13m, Woodford and Artemis lead GP:”Why such a small amount?”
- RateSetter raises funds as it prepares to list GP:”I hope 13m GBP is enough.”
- UK fintech shrugs off Brexit, trumps Germany GP:”Before Brexit UK was in the EU and was dominating the financial markets. Before it was in the EU it was also dominating the financial markets. Hundreds of years ago it was already dominating the financial markets. So keep calm and carry on.”
- India’s Wadhawan Group takes stake in Zopa GP:”An interesting move. Perhaps Wadhawan will be interested in investing in the local p2p markets now.”
- Seedrs has joined Funding Circle and iwoca in partnering with Natwest
- China Minsheng Investment leads $262m pre-IPO in P2P lending firm GP:”A new IPO. Interesting. “
- XIAOMI has started a $1bn Loan Refinancing
- P2P Company Tuandai Raised $270m in a new round of financing
- Banco BNI Europa boosts European SMEs with €10M investment in Portuguese peer-to-peer platform RAIZE GP:”That is a lot of money for a young EU p2p lender. Glad to see that other countries are also doing well besides the UK, US, China…”
- Local start-up Lendit raises 10 billion won GP:”Most international investors will mix Lendit the event with Lendit the Korean P2P lender. Unfortunate choice of names.”
- RBI guidelines on P2P lending platform likely by June-July GP:”This probably means Nov-Dec 2017 in fact if not later.”
- “Constructive Synergy”: Indian P2P Lender Faircent Introduces New Student Loan
- Singapore’s biggest marketplace lender hits S$40 million originations GP:”A lot of potential if they can extend besides Singapore while using Singapore as a base. “
- United States
- Victory Park Capital sells Funding Circle US and Upstart loans, (Peer2Peer), Rated: AAA
- Fintech has peaked, claims Morgan Stanley report, (Alt Fi News), Rated:AAA
- Behind the Scenes at Orchard Platform, a Struggle to Innovatete, (NY Times), Rated: AAA
- LendingClub Files Presentation in Advance of Annual Shareholders Meeting, (Crowdfund Insider), Rated: A
- Law firm-issued collections letters continue to pose high risks, (Pepper Hamilton), Rated: AAA
- Earnest Prices $ 175 million Securitization of Refinanced Student Loans; Achieves AA (High) Rating by DBRS, (Market Wired), Rated: A
- Elastic line of credit surpasses $ 200 million in outstanding loans, (Email), Rated: A
- Interest Rates on Connext™ Private Student Loans Decrease as Federal Student Loan Rates are Set to Rise, (Email), Rated: A
- Blackrock’s Consumer ABS ETF and Parallels to the High Yield Bond Market, (PeerIQ Email), Rated: AAA
- MPOWER Financing Secures Add-on Investment from 1776 Ventures, (Email), Rated: A
- SoFi and JetBlue Help Customers Managing Student Loans Earn Reward Travel, (PR News Wire), Rated: B
- United Kingdom
- Peer-to-peer lender Wellesley & Co. publishes financial results and loan book, CFO resigns, ( Alt Fi), Rated: AAA
- Peer-to-peer lender RateSetter raises £13m, Woodford and Artemis lead, (Alt Fi News), Rated: AAA
- RateSetter raises funds as it prepares to list, ( Financial Times), Rated:AAA
- UK fintech shrugs off Brexit, trumps Germany, (Alt Fi News), Rated: A
- India’s Wadhawan Group takes stake in Zopa, (P2P Finance News), Rated: A
- Seedrs has joined Funding Circle and iwoca in partnering with Natwest, (Business Daily), Rated: B
- China Minsheng Investment leads $ 262m pre-IPO in P2P lending firm, (Deal Street Asia), Rated: A
- XIAOMI has started a $1bn Loan Refinancing, (Xing Ping She), Rated: A
- P2P Company Tuandai Raised $270m in a new round of financing, (Xing Ping She), Rated: A
- European Union
- Banco BNI Europa boosts European SMEs with €10M investment in Portuguese peer-to-peer platform RAIZE, ( Email), Rated: AAA
- Local start-up Lendit raises 10 billion won, ( Korea JoongAng Daily), Rated: A
- ‘Green loan’ marketplace receives $ 20m, (Investor Daily), Rated: A
- RBI guidelines on P2P lending platform likely by June-July, ( Live Mint), Rated: AAA
- “Constructive Synergy”: Indian P2P Lender Faircent Introduces New Student Loan, ( Crowdfund Insider), Rated: A
- Singapore’s biggest marketplace lender hits S$ 40 million originations, ( Alt Fi News), Rated: A
Victory Park Capital sells Funding Circle US and Upstart loans, (Peer2Peer), Rated: AAA
The London-listed investment trust said that the loans sold represented 3.65 per cent and 1.48 per cent respectively of the company’s net asset value (NAV) as of 31 March. The firm said it will retain its non-performing Funding Circle US and Upstart loans, which represented 0.68 per cent and 0.21 per cent respectively of NAV as of 31 March 2017.
VPC announced in November 2016 that it was winding down its P2P lending portfolio, after losses triggered substantial writedowns.
Taking into account the loan sales, the company’s balance sheet investments accounted for 63 per cent of the NAV as of 31 March 2017, as compared to 17 per cent for the marketplace loans.
“The company expects to re-invest substantially all of the sale proceeds into balance sheet investments, as well as other strategic uses,” it said in a stock exchange announcement on Friday.
Fintech has peaked, claims Morgan Stanley report, (Alt Fi News), Rated:AAA
In a pessimistic new report, researchers from Morgan Stanley have concluded that while fintech companies style themselves as disruptors they will do more to strengthen than undermine incumbents in the long term.
“Only five disruptors have survived as standalone entities out of over 450 fintech firms launched during the dotcom era,” the report said.
Fintech has been most promising in areas lacking infrastructure and where established players have been weakest. This was particularly true of blockchain and robo-advice.
However, these trends are reversing as major financial institutions have started building their own robo-advisors and acquiring blockchain startups.
“Independent start-ups in the robo-advisor space will struggle to be profitable given the high cost of acquisition and intensifying competition.
“We think however that established financial advisors, banks, insurers, etc. will keep automating parts of their value chain…to improve the infrastructure for established incumbents.”
“Marketplace lenders are poised to grow at a… moderate pace leveraging traditional institutions as primary sources of capital; in essence serving as a more efficient customer acquisition and servicing channel for traditional lenders.
“We remain bullish on the potential for marketplace lenders to take share, as they benefit from regulatory arbitrage and changing consumer behavior.”
Behind the Scenes at Orchard Platform, a Struggle to Innovatete, (NY Times), Rated: AAA
“We’re launching a full marketplace from scratch,” Mr. Burton said a few months later, at Orchard’s Flatiron district office, and we “hope everyone shows up.” But they didn’t.
More than a year after Mr. Burton revealed his big plans, Orchard has completed just a scattering of transactions. Over that time, it burned through more than $5 million in legal fees and other expenses.
Next month, hoping to add momentum, Orchard plans to unveil a scaled-back version of the platform, eight months later than first planned.
But regardless of the company’s fate, its struggles thus far reveal just how hard it can be for a new entrant — even one with successful founders, a promising service and big-name investors — to break into a highly regulated industry.
Seeking financial expertise, Orchard recruited a few Wall Street veterans from Merrill Lynch and Bear Stearns. In late spring of last year, Mr. Burton had more than a dozen roadshow meetings with executives from the largest loan platforms, including Lending Club, Prosper Marketplace and Social Finance.
He hoped to charge them monthly fees of $2,500 to $5,000 to participate. Orchard also offered them the ability to be its “data partners,” so Orchard could standardize their data for trading purposes — which Mr. Burton called “the big heavy lift.”
Orchard also enlisted the help of Meredith Cross, a lawyer at WilmerHale and the former head of corporate finance at the Securities and Exchange Commission, as it met with Wall Street regulators.
But in July, S.E.C. officials told Orchard that they would consider loans being traded as securities, potentially imposing a tougher level of oversight. That made some lenders nervous about participating. Some lenders were also concerned about exposing investors they had cultivated to loans from competitors.
“We do not have a current need for a trading platform,” said Ryan Rosett, a chief executive of Credibly, which offers small-business loans. “Our capital markets team has the ability to sell our loans directly to a pool of institutional investors.”
Orchard was also fighting a separate headwind. The broader market for online loans was being buffeted by higher consumer loan defaults and investor fears. Some online lenders cut staff members, and others shut down as loan growth dried up.
As Orchard X struggled to get going, he said, legal documents for trades had “ballooned to 150 pages from a 20-page contract,” leaving him exasperated. “I’m a tech guy!” he said.
As it moves forward, Orchard has played down the regulatory issue, proceeding without an explicit formal S.E.C. ruling on whether the loans are securities. It is a potentially risky move, but one the company believes will work in part because it has dropped its goal of legal standardization, cutting the need for lending platforms to agree on regulation issues. The S.E.C. declined to comment.
In January, Orchard X arranged its first sale of about $30 million in loans from an ailing platform, a small-business lender called CAN Capital. The auction took a lengthy four weeks to complete. But Orchard X did receive a fee of 0.5 percent of the sale price.
Looking back, Mr. Burton said on April 4, Orchard should not have tried to persuade lenders to join the trading platform all at once. Having raised $30 million in 2015, Orchard plans to announce next month that it has raised an additional $20 million or more and to formally roll out its revised Orchard X transaction platform.
LendingClub Files Presentation in Advance of Annual Shareholders Meeting, (Crowdfund Insider), Rated: A
LendingClub (NYSE:LC) has filed a new form with the SEC (DEF 14A) in advance of the annual shareholders meeting which is scheduled to take place on June 6, 2017. The addition to the Annual Meeting Proxy Statement, a standard filing, includes a presentation on the company asking shareholders to support Director nominees, executive compensation and ratification of the auditor.
Perhaps the most interesting aspect of the filing is the synopsis of the events in 2016 that led to the departure of founding CEO Renaud Laplanche and the ensuing aftershocks that pummeled the online lender.
Law firm-issued collections letters continue to pose high risks, (Pepper Hamilton), Rated: AAA
The CFPB has pursued lawsuits, as well as formal enforcement actions, concerning misrepresentations of attorney involvement in debt collection-related communications.
On April 17, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in Ohio district court against the Weltman, Weinburg & Reis law firm (WWR), alleging violations of the Fair Debt Collections Practices Act (FDCPA) stemming from the firm’s issuance of debt collection demand letters. The CFPB’s allegations against WWR closely resemble the FDCPA allegations that were considered by the D.C. Circuit Court of Appeals in Jones v. Dufek, 830 F.3d 523 (D.C. Cir. 2016). Dufek also concerned a debt collection letter that was sent by an attorney acting as a debt collector and not as legal counsel. On March 20, 2017, the U.S. Supreme Court denied the Dufek plaintiff’s petition for a writ of certiorari to review the Court of Appeals’ decision in favor of the defendant attorney/collector. Notwithstanding Dufek, however, debt collectors and first-party creditors are well-advised to be extremely diligent when using law firms as debt collectors.
In actuality, the CFPB’s complaint alleges that “no attorney had assessed any consumer-specific information . . . [a]nd no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a [collections] call, or that the account was a candidate for litigation.” Thus, according to the CFPB, the subject letters contained numerous misrepresentations that violated both the FDCPA and the prohibitions of the Consumer Financial Protection Act against unfair, deceptive or abusive acts or practices.
The specific deficiencies cited in the CFPB’s complaint against WWR include the fact that subject letters were printed on law firm letterhead, which prominently included the phrase “ATTORNEYS AT LAW” (in bold type and in all caps) and included the law firm’s name in the signature line.
In determining whether the Dufek letter violated the FDCPA as a false, deceptive or misleading representation, the Court of Appeals noted, as a threshold matter, that “if an attorney is acting only as a debt collector and has not formed a legal opinion about the case, he or she cannot send a letter [stating or implying] otherwise” without misleading the recipient/debtor..
Misrepresentations regarding attorney involvement in collections letters and other communications continue to be a “hot button” issue with the CFPB. The collections letters targeted in the CFPB’s lawsuit against WWR are distinguishable from the letter at issue in Dufek in that the Dufek letter included a disclaimer regarding the attorney’s review of the underlying account. Yet, the CFPB’s complaint against WWR can be read as implying that the use of attorney letterhead and the inclusion of the law firm’s name in the signature line were per se improper.
Earnest Prices $ 175 million Securitization of Refinanced Student Loans; Achieves AA (High) Rating by DBRS, (Market Wired), Rated: A
SAN FRANCISCO, CA–(Marketwired – May 24, 2017) – Earnest today announced the close of the $175 million Earnest 2017-A transaction backed by refinanced student loans. The offering received an AA (high) rating on the senior notes by DBRS which is now only one notch below the highest attainable rating of AAA. The transaction was three-times oversubscribed and traded at the tight end of market guidance.
Earnest has now completed five securitizations of refinanced student loans since February 2016 for a total value of over $877 million. In 15 months, the company has increased its rating on the senior notes from A to AA (high), a progression that often takes several years. This speaks to the quality of the underlying collateral and the advancement Earnest has made as a programmatic issuer in the capital markets.
“This marks another strong securitization for Earnest, providing us the opportunity to welcome new investors and continue building our capital markets program. We’re thrilled at the appetite and investor confidence in our offerings,” said Louis Beryl, CEO and co-founder of Earnest.
Elastic line of credit surpasses $ 200 million in outstanding loans, (Email), Rated: A
More than $680 million funded and 155,000 customers served since 2013 validates need for expanded access to credit in the U.S.
FORT WORTH, TX – May 31, 2017 – Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the Elastic product has surpassed $200 million in total principal outstandings, with more than 120,000 open accounts.
Elastic, a bank-issued line of credit offered by Republic Bank & Trust Company (“Republic Bank”), has loaned over $680 million dollars to more than 155,000 customers, since its launch in 2013. The $200 million in total principal outstandings includes the 10% of outstandings Republic Bank retains. Elastic passed the $100 million in outstandings mark in May 2016.
Elevate (NYSE: ELVT) has originated $4 billion in non-prime credit to more than 1.6 million consumers to date. Its responsible, tech-enabled online credit solutions provide immediate relief to customers today and help them build a brighter financial future. The company is committed to rewarding borrowers’ good financial behavior with features like interest rates that can go down over time, free financial training and free credit monitoring. Elevate’s suite of groundbreaking credit products includes RISE, Elastic and Sunny. For more information, please visit .
Interest Rates on Connext™ Private Student Loans Decrease as Federal Student Loan Rates are Set to Rise, (Email), Rated: A
ReliaMax®, the complete private student lending solutions provider, today announced that the banks and alternative lenders participating in the Connext® Private Student Loan program will lower the interest rates on those loans. EffectiveJune 1, 2017, the lowest rates for variable- and fixed-interest rate Connext® loans for undergraduate and graduate programs will be reduced to 2.87 percent APR* and 5.40 percent APR*, respectively, and the borrower will not be charged an origination fee.
Federal student loan interest rates on new loans are scheduled to increase on July 1 for the 2017-2018 school year. These interest rates are adjusted each year based on the annual Treasury Department auction plus a set percentage amount added for each type of loan program. According to