A complaint filed March 23 by the bankruptcy trustee for Lam Cloud Management, LLC in the United States Bankruptcy Court for the District of New Jersey challenges two small business financing models: (i) merchant cash advances (“MCAs”); and (ii) small business loans originated under bank partnerships. While disposition of the complaint will take time, and all that is available for now are bare allegations, the complaint is another recent challenge involving usury and bank partner programs and warrants attention from entities involved in small business financing and lending. Continue Reading NJ Bankruptcy Case Takes Aim at Small Business Financing — Merchant Cash Advances and Bank Partnerships
Nearly five years after announcing it would “expeditiously” implement provisions of the Dodd-Frank Act concerning data collection on small business lending, the Consumer Financial Protection Bureau (CFPB) finally seems to be taking action. Not only is it moving to promulgate the required regulations, but it has placed fair lending to the small business community among its top 10 priorities. Read more about the scope of the CFPB’s authority over the small business and business-purpose lending industry and steps that the industry may take to manage compliance risk in Mayer Brown’s Legal Update, available here.
Some segments of the marketplace lending business model (a subset of the growing FinTech industry sometimes referred to as peer-to-peer lending), might become subject to additional regulation if the federal and state regulatory agencies take to heart the results of a recent Treasury Department report. Continue Reading Treasury Department Issues Marketplace Lending Report, Outlines Possible Regulatory Path
*Mrs. Schoenfeld is not admitted in the District of Columbia. She is practicing under the supervision of firm principals
On April 29, 2016, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued its fourth Fair Lending Report, which reviews the activities of the Office of Fair Lending and Equal Opportunity for the 2015 calendar year. Last year, the CFPB’s fair lending supervisory and public enforcement actions led to $108 million in restitution to consumers and other monetary payments. The Bureau referred eight matters to the Department of Justice (“DOJ”), and DOJ declined to independently investigate two of these matters.
The Report focuses on the following fair lending highlights: Continue Reading The CFPB Issues its 2015 Fair Lending Report
The Illinois Senate Financial Institutions Committee recently approved a measure, Senate Bill 2865, that seeks to license and regulate business-purpose lenders. While the bill may be delayed as the bill’s sponsor, Senator Jacqueline Collins, seeks feedback from affected industries, SB 2865 has the potential to significantly affect both the primary and secondary small business loan market in the state.
SB 2865 states that its purpose is to protect small businesses from abusive lending practices and help those borrowers avoid defaults. Most significantly, it would impose a licensing obligation on lending activities related to closed- or open-end business-purpose loans or merchant cash advances of $250,000 or less, regardless of the interest rate. The bill appears to require licensing for persons engaged in making or taking assignment of those loans, but it also could be read to require licensing of persons arranging, investing in, or acting as the agent of a person making the loans. The bill exempts certain banks, savings banks, and credit unions, and also exempts certain nonprofits and SBA business assistance organizations from the licensing provisions.
In addition to licensing, SB 2865 would, if enacted, impose significant compliance obligations on small business lenders in Illinois Continue Reading Illinois Looks to Join States Licensing Small Business Lenders