Author Archives: Charles Green

Oil: Part of the Ongoing Adaptive Economy

By Charles H. Green

According to economist Robert Dye, America is in a “transitional economy” with considerable crosscurrents and volatility, which is leading us through an ongoing, rapid evolution, highlighted with the requirement of several complex adaptations by its participants. While he related his outlook to the global economy with many of these disruptive elements, such as technology, labor, housing and financial, I’ll focus on only one of the most dominant elements discussed: oil.

Dye is Senior Vice President and Chief Economist at Comerica Bank, and he spoke before U.S. Oil Production & Consumption, Monthly Dataan audience gathered for the third quarter economic forecast presented by the Robinson College of Business at Georgia State University recently.

Click here for a full-size copy of the nearly image, courtesy of ComericA Bank.

Why would a bank economist know anything about oil? Maybe it’s because this Dallas TX-based economist works for a bank that makes its footprint primarily in five states: Texas, California, Florida, Michigan and Arizona, which represents 31% of the U.S. GDP. And these five states include two of the top four oil producing states (TX #1, CA #4), the top three oil consuming states (TX, CA & FL), and the top auto manufacturing state (MI). Needless to say, they better understand oil.

Dye described the fast changing oil horizon predicated off of recent technological advances (extracting oil from shale), to the geopolitical theater (our old friend, Saudi Arabia). He described the rush of oil production in the U.S. as this new technology emerged as the ‘shale-gale,’ which had most economists predicting the return of a booming manufacturing sector in the U.S., such as we described one such viewpoint last September. That month, the average price of West Texas Intermediate crude oil sold for $92.58/barrel. This week that same oil is selling for less than one-half the price.

Who would have imagined just ten years ago that the ‘shale gale is contributing to the global oil glut? And if the U.S. and other five leading nations enter into an agreement with Iran regarding their nuclear power development, count on another 1 million barrels of oil headed to the market each day.

It’s notable that Saudi Arabia has responded to both the rise in U.S. oil production and falling prices with their spigot wide open. They’re charging hard to maintain global market share at any costs and replace the lost American exports with buyers in new markets. If history provides any guidance, they can manage that just fine, based on the decades they sold oil well south of $50/barrel.

Dye predicts that the days of $90-$100 oil may be over, which may greatly affect how much capital is deployed to exploring new wells in the U.S. While pricing bouncing between $50 to $60/barrel is workable, $40/barrel is different. Banking regulators have already set their sights on lending to this industry, cautioning lenders about the industry’s substandard condition that’s in the near term.

Long term depressed pricing will render U.S. oil producers as essentially the ‘swing market producers,’ meaning that they’ll kick in when shortages arise, but will fade away as production expands elsewhere. Our industry here likely will be required to adapt to switching online/ offline quickly in response to changes in the global supply, with a new goal changing from stabilizing prices to stabilizing revenues.

Oh yea, and all the talk about re-shoring our manufacturing base due to lower energy costs? Those rosy predictions are starting to abate as falling U.S. oil production will dent that potential, and the remainder of opportunity may be sapped up with the rising dollar on global currency markets.

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Take The Pen Out of Your Shirt Pocket (and Put on a Tie)

By Charles H. Green

If you have no idea what the headline of this article means, that’s a good thing, maybe, but chances are, either the first part or last part will splatter against some of your work habits.

I’m going to be optimistic, and assume that most readers of this page do not include many men from the generation of the ‘finance-man,’ those bankers and lenders who wrote paper Dress for Successon billions of dollars of vehicles, equipment, and consumer loans. When I entered the business in the late 70s, they were often stereotyped, bless their hearts, with the short sleeve business shirts, complete with a plastic pocket protector full of ink pens.

That accessory was not in “Dress For Success,” a popular book on classic men (and women’s) apparel, published in the early 80s.

I’m not so optimistic about the latter reference to the headline. Neckties have been falling out of favor for the past couple of decades, and I suspect that scores of young lenders are getting into the business who don’t even know how to tie one. Pity. At the risk of sounding old-fashioned, I still believe that more formal attire has it place in the financial services industry.

And so you already know the message of this week’s posts: appearances matter.

In the course of your business, you manage the financing prospects of dozens of clients who look to you as an expert on the subject of capital. You’re supposed to be a reasoned voice of sound judgment, mature vision and seasoned experience. Sitting in your office in a PGA tournament shirt, with topsiders propped up on your desk does not exactly exude the appearance of someone taking that client very seriously.

A well-dressed executive commands a meeting, particularly when they’re the one being looked upon for advice and finance. Degrading the seriousness of the business at hand because of some sophomoric aversion to a little pressure around your neck says to me, maybe you chose the wrong profession.

And I’m not giving women a pass here, I just don’t want to step out of my expertise. Appropriate, business dress is best for everyone, and demonstrates that you take yourself and the role you play seriously.

Commercial lenders, particularly business developing lenders, are not engineers, used-car sales men, or born before 1940. We are supposed to be conducting a serious business, rather than being dressed for golf at the drop of a hat. A suit and tie, complemented with recently shined, leather shoes signals that you are in a position of authority. And in the eyes of the client, you are.

 

I don’t expect the suggestions contained herein to sit well with everyone, and I’ve certainly been in more than one bank president’s office to view someone who looked as those it was already tee-time. But watch for yourself: better dressed people win more business, best others in negotiations and get promoted more often than the hackers and hipsters shuffling around out there without matching socks.

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Global Growth is Moving Sideways

By Charles H. Green

According to economist Gregory Daco, the global growth outlook over the next five years seems to be moving sideways, “stuck in second gear,” as he put it. With contrasting results predicted for China, the Eurozone, and the other emerging markets, along with the effects of major structural changes occurring in China and Japan, there should be growth ahead, but he predicts it will be at a muted pace.

Daco is Head of U.S. Macroeconomics at the Oxford Economics, and spoke before an China Investment in Fixed Assetsaudience gathered for the third quarter economic forecast presented by the Robinson College of Business at Georgia State University recently. He summarized the cloudy growth forecast in terms of the combination of mixed results from several of the world’s major economies:

China–GDP results in China have been lower than expected, and as such, most economists have lowered forecasts, reckoning to a ‘new normal.’ Much of globe came to expect a continuation of the meteoric growth levels in the 10 to 12 percent range experienced in recent years, but that level has tapered off quickly without explanation. And given China’s tendency to obfuscate their intentions, there is global recognition that the economy is slowing down faster than the official numbers are described by the government.

Complicating matters is the fact that there are political transitions in play, with President Hu Jintao in the midst of purging the vast government of hundreds of senior and mid-level bureaucrats in an effort to root out corruption, all the while struggling with a slowing economy, which is not known as his strongest suit. There are emerging changes in upper mobility of Chinese consumers, who were encouraged to borrow for investments, only to watch the Shanghai composite index drop off precipitously in recent months.

After five years worth of building inventory and in the middle of a huge infrastructure building program, suddenly China’s commodity purchases has dramatically dropped off, leading to falling prices and activity. The question of not whether growth will slow, but how fast and how far?

So how are the other BRIC nations faring, in light of China’s stumble? There again, results are mixed, with two of the three suffering the hangover effects from Chinese gyrations.

Brazil-This emerging economy, darling of the late 2000s, hit the end of their super- growth rather abruptly. When China started buying up commodities in the 2000s, Brazil aimed an outsized portion of their output in response, and today is feeling the pain of those purchases going away. The commodity spikes are over, so production has slowed in response, unemployment has climbed back to high levels and there’s less capital available to support growth for anything else. Brazil is stuck with high debt levels, but their monetary policy is tough to effect any relief with a softening currency. A recession is forecast in 2016.

Russia –Despite a strong economy in recent years driven by the strong global demand for its oil and gas, Russia is not faring so well as oil prices have plummeted and the international economic sanctions over its invasion into Ukraine have begun to take a toll. Russia’s dependence on oil revenues has left it high and dry, as its currency has fallen off badly over the last year.

India-Of the BRIC countries, India is the bright spot at this time. Their emphasis on  education development and investments are admirable for the long term potential for growth. Their more pro-business government is making key investments in transportation and food production, which have both brought prices down and given consumers more income. Prospects for this economy are looking positive.

Japan-Elsewhere, the world’s third largest economy is not projected to fare much better than recent years, but if there is a glimmer of positive news, they’re not projected to be heading into a recession, based on second quarter growth. Japan has an aging population, and although consumer confidence remains “ok,” wage growth has been flat or falling over the last several years, as workers have little bargaining power.

Industrial production growing is growing, but household spending is volatile. A 2014 planned tax hike cooled spending considerably last year, and after it went into effect, buying plunged. Inflation is hovering on deflation.

Europe-The big question for Europe is whether growth there, driven by considerable reductions in oil prices, is sustainable? Leading indicators suggests there is better growth ahead, and momentum is leaning toward solid gains in consumer growth and employment growth. Even consumer confidence is looking upward.

Will this be followed by corporate investments and profits? The Euro’s weakness tends to add inflationary pressure, meaning some consumers may postpone spending, and certainly lower spending on imports. Greece remains a risk, but is currently a much lower risk since the crisis has been deferred to work out down the road.

And where does the U.S. fit into this equation. Although we had a slow start to 2015, there was a stronger than expected 2nd quarter, particular in western states. Growth expectations remain strong for the balance of the year along with employment gains. The only question is when–not whether–the Federal Reserve will begin to normalize interest rates.

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EDF Resource Capital Settles SBA Claims

By Charles H. Green

The U.S. Justice Department announced Friday that EDF Resource Capital Inc. and its CEO, Frank Dinsmore, have agreed to resolve allegations that they violated the False Claims Act and otherwise failed to remit payments owed to the Small Business Administration (SBA) under the 504 loan program.  Under the settlement agreement, EDF and Dinsmore have agreed to make payments and turn over certain assets to the United States for a total settlement of approximately $6 million.

The settlements were the result of a coordinated effort by the Civil Division’s Commercial

Frank Dinsmore -  photo courtesy of Biz Journals

Frank Dinsmore – photo courtesy of Biz Journals

Litigation Branch, the SBA’s Office of General Counsel and the SBA’s Office of Inspector General Los Angeles Field Office’s Counsel Division and Investigations Division. More background on this story is available through a series of articles by BizJournals here, chronicling the fall of the former second largest producer of SBA 504 debentures in the nation.

The SBA in 2012 said it seized EDF Resource Capital because it was owed nearly $15 million — its share of the loss on $99 million in loans the SBA had charged off.

Dinsmore’s attorney blasted the settlement to a reporter for the Sacramento Business Journal as “horribly misleading.” “The government shut this company down, and the government consistently denied the ability for the company to pay its employees,” said Andrew Sackheim, a partner with the Real Estate Law Group LLP in Sacramento. The company had 65 employees when the government shut it down in 2012.

Dinsmore was accused of failing to pay monies over to the SBA as EDF Resource’s share of loan losses occurred that were approved originally under the Premier Certified Lender Program (PCLP), a designation for a Certified Development Company (CDC) similar to the Preferred Lender Program (PLP) under the SBA 7(a) loan guarantee program. Under PCLP, CDCs are delegated authority to approve, close and liquidate 504 debentures in return for meeting certain conditions and accepting liability for a portion of any resulting loan losses.

The government accused Dinsmore of not making payments that were due on loan losses between 2009-2012, maintaining insufficient reserves for potential future losses, and hiding accumulating loan problems that were mounting.

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Consumer Demand + Investment Trumps Market Turbulence

By Charles H. Green

With China’s economy stalled as Europe growth is limping, U.S. GDP growth in coming months ahead will be predicated on the return of healthy domestic consumer demand and more capital investment, despite recent stock market turmoil, says Rajeev Dhawan of the Economic Forecasting Center (EFC) at Georgia State University’s J. Mack Robinson College of Business.

Dhawan’s assertions were delivered in his quarterly “Forecast of the Nation,” released Rajeev DhawanThursday, against the backdrop of China’s currency devaluation in mid-August. Even though initial reactions were negative, he characterizes the devaluation as “positive news for the economy overall,” which will boost domestic profit margins on imported goods.

Between low gas prices and wealth gains from reflated home prices and stock portfolios, post-recession consumers are in the mood to spend, albeit judiciously, on utility items. For the first seven months of the year, vehicle sales averaged 17.0 million units – up 4.5% over the previous year’s strong sales numbers, led by light trucks that drove the increase, rising by 10.7% over the previous year. By contrast, consumers hit the brakes when it came to passenger car purchases, which declined 1.9%.

As for oil, Dhawan anticipates prices will stay below $60/barrel until late 2016 due to a drop in global demand and an increase in drilling efficiency by U.S. producers. “People can safely expect low gas prices to continue for the next year.”

But when will the Federal Reserve determine that the economy is strong enough to hike interest rates and by how much? “The expected rebound in investment spending (forecast to rise 6.2% in the second half of 2015), will be strong enough for the Fed to start normalizing interest rates,” Dhawan said. “The issue is whether it will do so at the September or December meeting.” At present, remarks by key officials strongly telegraph a September move provided the ongoing market correction doesn’t deepen further.

Highlights from EFC’s National Report:

  • After stumbling in the first quarter of 2015, real GDP grew strongly at 2.3% in the second quarter. Growth of 2.2% is expected for the second half of the year, which will lead to an overall annual rate of 2.2%.
  • Business investment growth will hit 3.0% in 2015, rebound to 5.4% in 2016 and 5.2% in 2017. Jobs will follow by a monthly rate of 219,000 in 2015, 226,000 in 2016 and 214,000 in 2017.
  • Housing starts will average 1.105 million units in 2015, rise to 1.202 in 2016 and 1.275 in 2017. Expect auto sales of 17.0 million units in 2015, 16.5 in 2016 and 16.4 in 2017.
  • The 10-year bond rate will rise to 2.7% in 2015 and should rise to 3.3% before the end of 2017.

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What Are You Worth?

By Charles H. Green

If you’re a ‘business developer,’ and you’ve never seen the film Glengary Glen Ross, you owe it to yourself to watch the famous sales meeting conducted by Alex Baldwin. His perverse way of motivating the tired old sales team can be both exillerating and haunting, depending on which side of the rant you fall. “You call yourself a salesman…?”

We’ll never know whether the character played by Baldwin was really as good as the What are you worthRolex® watch he exhibited or purported big money he described earning, but we do know this for sure: he had an enormous self-worth measured in his crisp declarations of confidence, and unmasked disdain for anyone else of lesser stature.

Which leads to the question: what are you worth?

Over my career, I was most disappointed that many of my worthy peers competing in the marketplace rarely squared off with me on over quality service. Or product knowledge. Or structuring the best client solution, or even speed of funding delivery. And it goes without saying that too many folks in our trade are not always willing to do what’s in the client’s best interest, which sometimes means convincing them not to borrow in the first place.

So where did most of my competition come from? Pricing.

Interest rates, loan fees or other costs of borrowing (“we’ll pay your SBA guarantee fee!!”) seemed to be where I ran into the most head-to-head competition, and I admit–proudly–that I folded every time. You want to offer a lower interest rate and cannallablize your commission, and the bank’s profitability? Take the deal.

You see, I don’t work for free, and I wasn’t ever really working cheap. I enjoyed the fruits of my labor, and as sort of an echo of the old Ayn Rand mantra, I’d rather not work, than bust my fanny and not be paid what it was worth.

Sadly, for some people it’s the only way they know how to compete. Sure, they score a few deals, and get a dribble of commissions. But if their company ever starts measuring their personal profitability, they’ll have plenty to worry about.

Bottom line–if you’re going to be in the business development business, get out there and S-E-L-L. Sell your bank, sell your loan terms, sell the price as it should be, and above all, sell yourself. Cutting corners on price serves no one well, including the client, who starts really believing that they’re Prime Rate, when very few really are.

If your prospect can’t afford the deal, move on to another one. If they try to pit your offer against someone else, raise the price. You’ll lose some deals in the short run, but win in the long run. You see, good service, capable deal structuring and closing the deal with urgency still has a value. If you deliver those things, the bums leading with the price will stumble on a lot of deals, which means those deals will come back to you anyway.

Charge ‘em what you’re worth.

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Average Consumer Credit Scores Are Rising

By Charles H. Green

American consumers are managing their obligations better these days, as the NYTimes reports that average scores have reached new highs and delinquent credit payments have dropped. The national average FICO® score is now 695 — the highest it has been in at least a decade, according to the latest analysis from Fair Isaac Corporation, the score’s creator. Nearly 20 percent of consumers now have scores above 800.

While the national FICO® score distribution continues to improve, Fair Isaac reports that FICO-April-2015-Average-FICO-Scorethey see evidence—both in terms of average scores and with delinquency measures—of a leveling off in credit quality. And that leveling could represent either a pause in the continued US financial recovery or possible cracks starting to show at the edges of several years of a relatively low-risk underwriting environment.

The higher scores are led by tangible reductions in delinquent real estate loans, however, there has been little change in the level of delinquent credit cards, and actually an increase in delinquent auto loans.

FICO® scores are determined by using loan and other vital information information reported through the three major credit reporting agencies. The score is widely used by commercial banks and non-bank lenders to assess credit risk in lending that ranges from credit cards, auto loans, and home mortgages to small business loans and equipment leases. The FICO® score, which ranges from 300 to 850, directly affects access to credit for millions of people as well as determining the credit terms offered.

There are plenty of reasons that the average credit score could be rising, not all of which are pointed out by FICO’s rosy news release. Obviously, as lenders worked through the financial crisis/housing bust, the volume of seriously delinquent loans impacted millions of borrowers. But through a combination of eventual repayment,  borrower deleveraging, or write-offs, virtually all lenders still standing have experienced a drop in these delinquent accounts, as average portfolios have improved.

So, the passage of time is also an important factor and older accounts help increase scores. Bad credit performance discourages most lenders to avoid granting credit to certain applicants, but as the years go by, that negative information starts dropping off credit reports. So it’s natural that the impact of all those delinquencies that weighed on credit scores during the recession (2007-2009) are most likely starting to erode.

Other contributors to these statistics may not be such a positive. Since the Great Recession, we’ve seen a rise in the fintech credit marketplace, many of whom offer consumer as well as business credit. Many borrowers have dropped out of the traditional credit market, and no longer get graded by FICO, since the consumer lenders in that channel (payday lenders) usually do not report credit results.

Another impact related to this average score improvement, particularly on the lowest score ranges, may have been the adoption of FICO 9 last year, which was a change in their algorithm where FICO finally deleted medical bills and other non-credit items from their analytics. These factors dragged down scores on many consumers who were unaware of unpaid obligations or were in a legitimate dispute with a creditor.

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Marijuana CU Sues Federal Reserve For Master Account

By Charles H. Green

The Fourth Corner Credit Union in Denver, a financial institution that aims to be the first to serve the expanding marijuana industry in Colorado, applied last November to the Federal Reserve for a “master account,” which would allow it to interact with other financial institutions and open its doors to some of the hundreds of state-licensed marijuana businesses in Colorado.

After toking on their reply, the Federal Reserve District Bank in Kansas City said no.

Although recreational marijuana was legalized in Colorado last year, it’s still illegal at the No Moneyfederal level, and the banking regulatory community has been aggressively discouraging traditional banks from working with any clients known to be in the pot businesses.

For its part, the credit union has the backing of Colorado’s governor, and fired back on the Fed by filing a lawsuit in Denver Federal Court, demanding “equal access” to the financial system.

Most banks have refused to open accounts for the hundreds of marijuana businesses in Colorado and states with similar laws, leaving these businesses to operate in an all-cash economy. And the cash is piling up, bringing with it significant risks. The only alternative for these small-business owners is to improvise as their own bank, with safes, armored cars and other alternatives to banking.

The state of Colorado’s position is that the lack of access to banks is a public safety issue, as well as a deterrent in the state’s effort to collect legitimate taxes. Fourth Corner Credit Union won the state’s backing with a state license in 2014 after demonstrating their consultation with money-laundering experts to build their policies, but that approval was conditional on receiving approval from the Fed before opening for business.

The lawsuit could be an opening for the courts to resolve the ongoing conflict between federal laws against marijuana and the dozens of states that have legalized it in some form, mostly for medical treatment. In the lawsuit, the credit union contends that the Fed’s own rules give it little discretion in deciding who should and should not be able to have a master account, and do not allow it to rely on other agencies, like the credit union administration.

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With Brief Pause, SBA 7(a) Loan Approvals Continue to Soar

By Charles H. Green

After the SBA 7(a) program was suspended for several days in July due to the exhaustion of the program’s authorization level, which peaked at the full $18.75 billion, the 7(a) program was back in business about a week later. And as has been the story all year, the loan approval rate continued climbing faster and higher than ever.

SBA publishes a monthly “Lending Statistics for Major Programs, and as of August 1st, Climbing higherthe results reflected the end of the tenth month of FY 2015. This report provides rolling year-over-year loan approval statistics for the 7(a) and CDC/504 loan programs broken down by the respective categories of policy-targeted penetration. The overall SBA lending program volumes and related 504/CDC program senior debt year-to-date, reaching almost the $24 billion mark with two months remaining in the fiscal year.

The 7(a) program continued its strong showing in FY 2015 with total loan approvals in $20.3 billion, a 32 percent jump over the same period at 7/31/14 ($15.3 billion). In FY 2014, all SBA financing programs started slowly after the federal government’s shutdown, but these results are about 40 percent higher than FY 2013 as well.

The number of approved 7(a) loans were 53,394 through July, 27 percent ahead of the number in YTD FY 2014, and 41 percent ahead the same period in FY 2013. The average loan size through July was $379,839, which  is about $15,000 higher than it was this month last year.

A graphical illustration of all SBA monthly loan approvals is found in Capital Views.

The spiked growth in approved loans for less than $150,000 continued in July, climbing to 28 percent over the same dollars approved in FY 2014 to $1.92 billion, with the average loan size holding steady at $61,353. This year is the second year SBA is waiving guaranty and lender fees on loans less than $150,000.

Meanwhile the total volume of approved CDC/504 loans rose in July to $3.4 billion for the fourth consecutive month of besting the FY 2014 lending level, and finished the month more than 2% ahead of the same period in FY 2014, reflecting continued improvement. That volume is about 19 percent behind the program’s YTD mark in FY 2013 at $4.3 billion.

The total number of approved CDC/504 debentures was 4,767 through July, which is about -.50% behind the number of debentures at this point last year.

The CDC/504 program’s average debenture size held steady this month, growing against previous years, with an average debenture at $729,889, which is almost three percent higher than last year’s average and almost eight percent higher than the average in FY 2013.

Total YTD approved SBA program dollars are $23.7 billion through 58,161 loans. The average loan size overall is $408,530, which is slightly higher than FY 2014 and smaller than the year before, given the growth in smaller loans. See total program approval rates here.

Read more results at SBA.

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Unregulated Financial Intermediaries Barter Application Data

By Charles H. Green

The NYTimes reported that thousands of cash-strapped Americans who filled out online loan applications on sites with names like paymeloans.com instead found their financial details had been used to make unauthorized debits or credit card charges, according to an investigation by federal regulators.

The Federal Trade Commission charged two information resale companies with illegally Apply Onlineselling the payday loan applications of more than 500,000 consumers. The third parties that bought the information subsequently “raided” consumers’ bank accounts for at least $7.1 million, regulators said.

While no such accusations or investigations have yet been announced regarding commercial loan lead aggregators, loan brokers, or online lenders, these cases will probably fuel support for advocates looking to crackdown on all parties to financial services, and tighten the regulatory web among all parties that interface with private information for consumers and business owners.

The Fair Credit Reporting Act already restricts how credit and personal information is shared for enabling credit decisions, but is less precise when such information is sold for marketing purposes. Logically there should be no difference, although some critics point to gaps that exist that allow mass data bartering that is conducted with no oversight among non-regulated financial intermediaries.

Much attention has been drawn to banks that sell off uncollected debts, which are purchased by collection agencies who benefit from the entire contents of the bank’s credit file on the subject debt. In those instances, the purchasing party has a direct interest in getting the consumers’s private information, which is usually needed to collect the debt. And, it would be presumed that the selling bank, subject to a myriad of applicable regulations, would contractually restrict how that information could be used by the buyer.

But what happens to non-regulated enties that are provided this kind of information by prospective borrowers? Online marketplace borrower aggregators such as BoeFly, Lendio.com and Biz2Credit gather thousands of credit files and route them to various client banks. It’s easy to assume that responsible bank clients are careful about the data they receive and what happens to it afterward. But what restrictions are there on these companies from reselling their entire database to other non-regulated entities, even those not in the lending business?

My guess is that these kinds of questions are being explored by the federal government as fintech lenders and their innovations are changing the financial landscape in ways not anticipated only a decade ago. As worrisome for regulators is the lax approach of many consumers, who’ve become accustomed to volunteering their personal information over the internet now for a dozen years to trusted brands such as Amazon and other retailers. Many are probably too trusting and offer up their information to unknown parties, making themselves vulnerable to these kind of crimes.

Lest this all sound like strictly a digital problem, recognize that there are plenty of manual data transfers as well that leave consumers and business owners vulnerable. A few months ago we published a story about unethical loan brokers, and the recommendation by some advocates to place their activity under the umbrella of regulation.

The article described a call for regulation by Brayden McCarthy, Head Policy and Strategy at Fundera. While the most prevalent ethical lapse he cited was price gouging borrowers for extraordinary and undisclosed fees, the handling of client’s private data was another concern that he explained needs to be attended. It’s no secret in the trade that many loan brokers engage in the practice of exchanging data after placing loan accounts, often leading to stacking or double parking among several online lenders.

In July, the Treasury Department opened a ‘request for information’ to explore online lending and the many issues that have arisen as fast as the sector itself. Although there are naysayers quickly reacting to this move, I’m guessing that privacy concerns of consumer data will be among the items at the top of the list.

And, I’m guessing that a robust regulatory response will follow, which will be welcomed by the top performing companies in the field not wanting to be dragged down due to consumer fear of the bad guys lurking around the space.

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