Collaborating Authors

CashCall loses long court battle with feds over how high it can set its loan rates

Los Angeles Times

CashCall Inc. made loans for years at illegally high interest rates, a judge ruled last week, dealing a blow to the Orange County company and raising questions about the validity of loans from other online lenders. In a ruling handed down Aug. 31, a Los Angeles federal judge sided with the Consumer Financial Protection Bureau in a long-running case against CashCall, finding that loans made from 2009 to 2013 violated the laws of 16 states. The case against CashCall, filed in 2013 by the federal regulator, raised fundamental questions about modern finance: Who is really making a loan and what rules do lenders have to follow? CashCall, headquartered in Orange, argued that the loans were not subject to laws that cap interest rates in some states because they were issued by Western Sky Financial, a partner company based on the Cheyenne River Sioux Tribe's reservation in South Dakota. Tribal lenders are not subject to state usury laws.

TrackStar Launches AI Software to Make Lending More Accurate

#artificialintelligence, a company led by credit industry veterans that specializes in predictive credit technology, today announced the launch of a new proprietary, predictive API designed to help lending institutions determine consumer lending potential. By utilizing this first-of-its-kind API, lenders are able to make better decisions about qualifying current and prior loan applicants. The result is lower acquisition costs and churn, all while reducing lender's reliance on outside partnerships for leads. TrackStar's API is designed for enterprise level banking institutions and lenders to help them optimize the customer acquisition and retention process. TrackStar's predictive AI layer determines which negative credit items could be removed from a customer's credit history, allowing lenders to extend offers to customers who might normally get declined or not even considered as qualifying loan applicants.

Subprime auto giant's loans souring at fastest clip since 2008

The Japan Times

A growing percentage of Santander Consumer USA Holdings Inc.'s subprime auto loans are turning out to be clunkers soon after the cars are driven off the lot. Some loans made last year are souring at the fastest rate since 2008, with more consumers than usual defaulting within the first few months of borrowing, according to analysts at Moody's Investors Service. Many of those loans were packaged into bonds. Santander Consumer is one of the largest subprime auto lenders in the market. The rapid failure of some of its loans implies that a growing number of borrowers may be getting loans based on fraudulent application information, a problem the company has had before, and that weaker consumers are increasingly struggling.

3 Ways To Get Milked on a Used-Car Lot

Mother Jones

Car dealers, especially used-car dealers, are notorious for playing unpleasant little games with their customers. So are lenders, especially subprime lenders. Combine the used-car dealers with subprime lenders and throw in a patchwork regulatory setup--wherein dealers and lenders are regulated by different agencies, making it easy for one to deflect blame onto the other--and you end up with a lot of customers in the lurch. Here are just a few of the tricks--not including the starter kill switch your lender may force you to install--that might come up when you're shopping for a secondhand car. Interest rate markups: Used-car dealers often act as middlemen between the buyer and a financier like Credit Acceptance Corp.

Custom DU: A Web-Based Business User-Driven Automated Underwriting System

AI Magazine

Custom DU is an automated underwriting system that enables mortgage lenders to build their own business rules that facilitate assessing borrower eligibility for different mortgage products. Developed by Fannie Mae, Custom DU has been used since 2004 by several lenders to automate the underwriting of numerous mortgage products. Custom DU uses rule specification language techniques and a web-based, user-friendly interface for implementing business rules that represent business policy. By means of the user interface, lenders can also customize their underwriting findings reports, test the rules that they have defined, and publish changes to business rules on a real-time basis, all without any software modifications. The user interface enforces structure and consistency, enabling business users to focus on their underwriting guidelines when converting their business policy to rules. Once lenders have created their rules, loans are routed to the appropriate rule sets, and customized, but consistent, results are always returned to the lender. Using Custom DU, lenders can create different rule sets for their products and assign them to different channels of the business, allowing for centralized control of underwriting policies and proceduresā€”even if lenders have decentralized operations.