The nation's top consumer financial watchdog on Thursday issued tough nationwide regulations on payday loans and other short-term loans, aiming to prevent lenders from taking advantage of cash-strapped Americans. The long-awaited rules from the Consumer Financial Protection Bureau would require lenders in most cases to assess whether a consumer can repay the loan. "The CFPB's new rule puts a stop to the payday debt traps that have plagued communities across the country," said Richard Cordray, the bureau's director. "Too often, borrowers who need quick cash end up trapped in loans they can't afford. The rule's common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail."
Japan's troubled regional banks are plunging into riskier corners of the credit markets, in a struggle to survive ultra-low interest rates and an industry shakeout. As debt yields tumble globally, the lenders are also facing weak business at home, where a shrinking population is hitting the outlying areas hardest. That's prompting authorities to push for consolidation. Desperate to avoid that fate, the banks are shedding their traditional conservatism, fueling questions about their ability to manage riskier holdings including foreign assets. The latest case came last week.
The difficulties facing online lenders are another example of the dysfunction and disorganization that have slowed down the flow of loans to small businesses, even as President Trump has insisted that the program is going well, with only a few small glitches. Financial technology companies like PayPal and Square, and smaller companies that focus on small-business lending, like Kabbage and OnDeck, have specialized in giving loans to the businesses that are the focus of the government program -- those with fewer than 500 employees -- and doing it more quickly than banks. Many of the lenders have expressed frustration that they have been shut out when they feel they could be the most useful. "Every five minutes I've been refreshing the Treasury page like a maniac," said Sam Taussig, the head of global policy at Kabbage, one of the largest online lenders for small businesses. "The businesses that we serve on Main Street, they only have about 10 to 12 days of cash on hand, and we are well past that in many places."
It was an ideal time for online lenders to arrive in Silicon Valley. After the financial crisis of 2008, banks who were the first choice as lenders for everyday people took a little bit of time to comprehend the way in which customers wanted to access credit and they were not ready to take any kind of risks. They failed to focus on the needs and demands of customers and instead they concentrated on capital constraints and other regulations that were proving to be a challenge for them. All these reasons contributed to the emergence of online lenders in the market. Getting a lot of customers appears to be a comparatively easy task.
If mortgage lenders could figure out when their existing customers were thinking about moving, they could offer to help them find their next home -- and prequalify them for a loan. That's the thinking behind two complementary services offered to mortgage lenders by Senso, a Toronto-based fintech analytics startup. Senso Insights employs artificial intelligence to evaluate a lender's existing pool of borrowers to identify those who are actively looking to buy their next home. After calculating each homebuyer's purchasing power, Senso Engage provides them with personalized listings prioritized by neighborhood and affordability, along with access to loan pre-approval. This automated lead-nurturing campaign can help keep borrowers from defecting to another lender.