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Bank Notes: PeerIQ, CoreFirst Bank, Payday Lending

Adam Rust's picture

Posted September 16, 2015

Start-up paving the way for securitization of small-dollar credit: Peer-to-peer lending may soon be able to avail itself of more liquidity. Recently, New York startup PeerIQ announced that it had received investments from two private equity firms. PeerIQ wants to come up with metrics to help investors assess peer-to-peer loans. If they did, then investors could use that data to find opportunities for investments. PeerIQ believes that one result could be a market of P2P derivative products. The new investments were made by Fenway Summer and Victory Park Capital.  Victory Park has made other investments in a variety of non-bank online lenders, including AvantCredit, Kabbage, and Borro. 

This is an interesting time for someone to take a bet on peer-to-peer lending, as the CFPB currently has a request for comments out on how the new market is impacting consumers. The CFPB's exploration of the field leaves an enormous uncertainty about the future growth of P2P. Simultaneously, well-known P2P platform Prosper is still distributing checks to former note holders as a result of $10 million class-action settlement. 

CoreFirst Bank Providing Commercial Loans to Online Tribal Payday Lender: CoreFirst Bank & Trust has filed to join a suit against a consortium of related online payday lenders. 

On August 5th, CoreFirst Bank & Trust petitioned to join with NorthRock LLC and NetFinance in seeking the involuntary bankruptcy of LTS Management Services. LTS is an umbrella corporation for a group of online payday lending firms. Del Kimball and Sam Furseth are listed as principal owners of the company. 

CoreFirst has filed for joint administration to avoid duplications in the court system.  

NorthRock and NetFinance are aiming to collect on judgments of more than $55 million due from LTS, its partners, and Kimball and Furseth. CoreFirst is seeking to recover on judgments of $500,000 against both Kimball and Furseth. 

When Operation Choke Point stopped the businesses held under LTS were thwarted from being able to process payments, LTS could no longer pay back its debts.  It followed that Kimball and Furseth soon had troubles meeting their obligations. 

While some have chosen to be critical of the efforts of the Justice Department, the aim of Operation Choke Point is laudable. Through Choke Point, the DOJ has pursued cases again illegal businesses that have been using the payments system to commit fraud against American citizens.