Lending Launches and Financial Fiascos Leading the News This Week

Posted By: Elizabeth Rowe | October 18, 2016 | 0 Comments

Morgan Stanley Makes $100-Million Move on Fintech Startup Affirm Inc.

October 13, 2016, The Wall Street Journal

The big Wall Street banks have gotten back in the business of financing online lending. Fintech startup Affirm Inc., founded by PayPay’s Max Levchin, says it has tripled its volume in the past year to hundreds of millions worth of loans. Morgan Stanley is providing a $100M line of credit to Affirm, which provides financing to online retailers. Affirm’s loan product targets millennials making large online purchases (think: vacations). Its customers have credit cards but either don’t want to tie up their entire line of credit or don’t want to carry a balance on their cards. Affirm offers its financing at interest rates ranging from 10% to 30% with repayment windows of 6, 9 or 12 months. The lender reports that its loan volume tripled in 2015.

Goldman Sachs Begins Offering Consumer Loans

October 13, 2016, Credit Union Journal

Goldman Sachs has launched a new retail consumer credit platform named (always honor the founders) “Marcus by Goldman Sachs.” Apparently, Goldman felt the need to join every single new consumer lending player by offering fixed-rate, unsecured personal loans for terms of between 2 and 6 years, with a customizable payment due date. Like its competitors, Goldman is positioning its loans as an alternative to credit card debt. Part of Goldman’s new Main Street strategy, Marcus seems to be a free-standing product that is not integrated with the bank’s new GS Bank (it bought the deposits of GE Capital). And just FYI, GS Bank doesn’t offer bill pay or remote deposit capture or checks or debit cards.

At Wells Fargo, Complaints About Fraudulent Accounts Since 2005

October 11, 2016, The New York Times (and others)

As early as 2005, front line staff at Wells Fargo tried to alert the company to the illegal and unethical behavior they saw all around them as their colleagues forged signatures, opened sham accounts and sent out unsolicited credit and debit cards trying to hit their sales quotas. Those alerts came to the bank’s “internal ethics hotline, its human resources department, and individual managers and supervisors.” Staff took to sending letters directly to the CEO but according to the bank, in the hundreds of heads-ups received, no actionable pattern was ever identified until 2013. In a separated-at-birth switch, Wells has replaced CEO John Stumpf with his look-alike Tim Sloan. And it’s not just looks; Sloan is also Stumpf’s hand-picked and carefully groomed successor. Goldman Sachs has noted that it does not believe that “the leadership transition signals a change in strategy for the bank, as Mr. Sloan is a longstanding member of the leadership team.” And per the WSJ, the bank’s actions “cost it a $185 million penalty, some $20 billion in market value and Mr. Stumpf’s job, and triggered a Justice Department investigation.”

RBS’ Small Business Scandal: What You Need To Know

October 11, 2016, PYMNTS and The Guardian

Please don’t think the U.S. has a lock on scandal. Royal Bank of Scotland (RBS) is in huge trouble with its U.K. regulators for the actions taken by the bank’s Global Restructuring Group (GRG) during the global recession. In 2008, after being told the bank had only enough cash to stay open for another two or three hours, the U.K. government bailed out RBS with a $56B loan which led the bank to develop and implement a program called “Dash for Cash.” The bank forced 16,000 of its small business borrowers into its GRG and then bombarded them with fees and interest rate hikes. Many of these borrowers were driven into bankruptcy. And the stories are startling. Here’s just one: An architect took out a $1.6M business loan from RBS in 2008. He was required to purchase an interest rate hedging product and the interest rate on that product increased dramatically post-crisis. In 2009, RBS told the architect that his business was in loan-to-value breach. Nine days later, the bank took control of his business accounts and “began to cancel direct debit deposits, including cancelled payments for professional indemnity insurance, a legal requirement for a practicing architect.” The bank even told the architect’s city council that he had died which is why they cancelled his business tax payments.

Navy Federal to pay $23 million to misled customers; cute dog ads don’t compensate 

October 12, 2016, Washington Post

The CFPB has fined Navy Federal $5.5M and ordered it to pay its victims $23M for “shady debt collection activities.” The agency noted that the credit union made intimidating threats to members who fell behind on payments, telling borrowers they would garnish wages or report past-due loans to the member’s superior officers. The credit union also “disabled electronic access for about 700,000 accounts after customers fell behind on credit payments.” That means that members had no way to even see their account balances. The CFPB noted that no executive or staff member has been held responsible.

U.S. Bank Taps into Consumer Mobile Habits to Boost Security

October 14, 2016, PaymentsSource

There are consumers who will not allow location tracking by any retailer (ads, ads, ads) or their own financial institution while there are others who will opt-in to a financial institution’s geolocation service, if sufficient value is communicated. U.S. Bank is telling its Visa card carrying customers that by opting in to an integrated mobile app-geolocation service, the bank can match the location of a card transaction with the location of the customer’s phone. And by overlaying those two pieces of data, customers (and the bank) will be at less risk of fraud and customers will experience fewer transaction declines when they’re on the road.

American 1 Says Its Ban on Wendy’s Card Transactions Will Continue ‘Until Further Notice’

October 12, 2016, Digital Transactions

For an unspecified period of time, Michigan’s American 1 says it will decline all of its members’ debit and credit transactions at Wendy’s. The credit union has said that even though Wendy’s says the problem has been eliminated and even though the credit union has reissued new cards to all its members who’ve eaten at Wendy’s, members are still finding fraudulent activity on their accounts. So far, they have reissued four times the cards that it reissued after the Home Depot breach and its caution seems quite understandable since after Home Depot and after its insurance policy paid out, the credit union still had to absorb 89% of the cost of its members’ losses.

Elizabeth Rowe

Elizabeth Rowe

Elizabeth tracks the shifting payments landscape for both PSCU and its member owners. Focusing on the interstice of the economy, competition, consumers, technology, payment products and channels and regulatory guidance, Elizabeth gleans the key challenges and opportunities facing our industry, our strategic plans and our success fulfilling our mandate of serving the American consumer.
Elizabeth Rowe




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