Consumer Bank Partnerships In Jeopardy in Maryland

In late June, the Maryland Court of Appeals, Maryland’s highest court, affirmed in  Maryland Commissioner of Financial Regulation v. CashCall, Inc. that a non-bank partner cannot promote loans originated by a bank unless the nonbank partner is licensed as a credit services business and the loans comply with substantive Maryland law. Court of Appeals, No. 80, September Term 2015 (June 23, 2016), affirming Court of Special Appeals, No. 1477, September Term 2013 (October 27, 2015).  The decision hampers the ability of nonbank partners to market loans on behalf of a bank in Maryland unless they acquire a credit services business license. Continue reading “Consumer Bank Partnerships In Jeopardy in Maryland”


New York Bill Calls For Study of Online Small Business Loans

In what likely signals the first step in an ongoing campaign to regulate small business lending in the Empire State, New York Assembly Bill 10440, introduced May 27, 2016, would requires the Superintendent of Department of Financial Services to study and issue a report on online small business lending products and platforms that originate from lenders licensed by New York state or advertised to small businesses within the state. The study mandate would capture all online lenders advertising to New York merchants, whether they originate the loans through a bank partnership or directly as an unlicensed lender relying on the law of another state.

The study must address – at a minimum – the following:

(a) whether online lenders are offering credit at reasonable and transparent  interest rates and charging reasonable and transparent fees and  payment terms;

(b) whether lenders  offer  inclusive  and  non-discriminatory  credit access and observe fair lending practices;

(c) what type of underwriting is conducted before issuing credit;

(d)  whether lenders report loan repayment information to major credit bureaus and consult the borrower’s credit data when underwriting a loan;

(e) whether lenders are offering small businesses the opportunity  for further financial and business planning and the opportunity to establish a more traditional, long-term banking access to credit; and

(f)  a  review  of  any other products or practices the superintendent deems relevant to small business access to capital.

The study must be completed by January 1, 2018.

The New York legislature adjourns June 16, so it seems unlikely that the bill would be approved this session.

New York-2015-A10440-Introduced

Court Upholds Class Action Waiver in MCA Lawsuit

The U.S. District Court for the Eastern District of Pennsylvania recently denied a motion to certify a class of Korean and other Asian businesses that alleged that the merchant cash advance transactions into which they entered with GOT Capital LLC violated the Racketeer Influenced and Corrupt Organizations Act. The plaintiff merchants, who originally filed a complaint asserting violations of virtually every consumer credit law, argued that GOT Capital specifically targeted them because of their status as Korean-American and Asian-American businesses in Pennsylvania, New York, New Jersey, Texas, California and the United Kingdom. GOT Capital opposed the motion for class certification by pointing out that the merchant cash advance agreement contained the following class action waiver clause: Continue reading “Court Upholds Class Action Waiver in MCA Lawsuit”