13 ms·

The article's complaints seem to be: (A) This bank has a tiny number of employees. They suggest that the number of PPP loans is in line with the number of loan

by mcherm 6y ago

The article's complaints seem to be: (A) This bank has a tiny number of employees. They suggest that the number of PPP loans is in line with the number of loans the bank makes normally, but they do it with a lot fewer employees than Wells Fargo. (B) This bank doesn't use humans to underwrite its loans. Honestly, while I know nothing about Cross River, this article makes it sound to me like they are doing it RIGHT. It is a GOOD thing to remove the need for large number of human underwriters examining each loan (and introducing various human errors and biases). Nor does the PPP loan process (the one targeted by this article) require extensive underwriting processes. The program, as envisioned by Congress, requires banks to verify that companies are, in fact, genuine small businesses who are submitting accurate information about things like their number of employees and the cost of salaries. But Congress specifically decided NOT to evaluate the creditworthiness of the borrowers (which is the hard part of underwriting). Automated processes frequently have flaws and can be outperformed by a human. I would be completely willing to believe that Cross River's systems are failing to meet the appropriate standards. But the article doesn't present any evidence or even a claim that this is the case -- they only gripe that Cross River is "tiny" (in number of employees) and yet is doing a large amount of lending.

cinquemb 6y ago
(C) "In 2018 the FDIC found that Cross River Bank “engaged in unsafe or unsound banking practices by failing to ensure an adequate compliance management system was in place….” The FDIC fined the bank $641,750 and made it contribute to a $20 million restitution fund to reimburse harmed consumers." [0] "Cross River Bank originates C+ Loans, an unsecured debt consolidation loan product, through FFAM. C+ Loans are offered exclusively to consumers who contract with Freedom Debt Relief (FDR), a FFAM-affiliated debt settlement company. C+ Loans were marketed as a way for consumers to quickly resolve their outstanding debts. Consumers are charged a settlement fee of up to 25 percent of each debt enrolled in FDR's program. The FDIC determined that Cross River Bank and FFAM violated federal law prohibiting unfair and deceptive practices, by, among other things: - Requiring borrowers to sign loan documents without knowing the essential terms and conditions of the loan; - Failing to inform borrowers that certain major creditors will not negotiate debts with FDR and including related debt settlement fees into C+ Loans, when in fact, borrowers had to negotiate such debts themselves; - Misrepresenting to consumers that the C+ Loans would result in the settlement of all their debts within 30 to 45 days or 30 to 90 days, which was not true for nearly half of the consumers; and - Misrepresenting that the consumers' creditworthiness would improve by obtaining a C+ Loan."[1] [0][1] https://www.fdic.gov/news/news/press/2018/pr18021.html https://www.fdic.gov/news/news/press/2018/pr18021.html

by mcherm 6y ago

cinquemb 6y ago

(C) "In 2018 the FDIC found that Cross River Bank “engaged in unsafe or unsound banking practices by failing to ensure an adequate compliance management system was in place….” The FDIC fined the bank $641,750 and made it contribute to a $20 million restitution fund to reimburse harmed consumers." [0] "Cross River Bank originates C+ Loans, an unsecured debt consolidation loan product, through FFAM. C+ Loans are offered exclusively to consumers who contract with Freedom Debt Relief (FDR), a FFAM-affiliated debt settlement company. C+ Loans were marketed as a way for consumers to quickly resolve their outstanding debts. Consumers are charged a settlement fee of up to 25 percent of each debt enrolled in FDR's program. The FDIC determined that Cross River Bank and FFAM violated federal law prohibiting unfair and deceptive practices, by, among other things: - Requiring borrowers to sign loan documents without knowing the essential terms and conditions of the loan; - Failing to inform borrowers that certain major creditors will not negotiate debts with FDR and including related debt settlement fees into C+ Loans, when in fact, borrowers had to negotiate such debts themselves; - Misrepresenting to consumers that the C+ Loans would result in the settlement of all their debts within 30 to 45 days or 30 to 90 days, which was not true for nearly half of the consumers; and - Misrepresenting that the consumers' creditworthiness would improve by obtaining a C+ Loan."[1] [0][1] https://www.fdic.gov/news/news/press/2018/pr18021.html https://www.fdic.gov/news/news/press/2018/pr18021.html