Fintech

CFPB Files Lawsuit Against Fintech for Deceptive Practices

Published

8 months ago

20 May, 2024

CFPB Files Lawsuit Against Fintech for Deceptive Practices

On May 17, the CFPB filed a cause against a California-based fintech that operates a national website and mobile application-based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. The Bureau claims that while the company aims to offer 0% APR loans, its use of obscure templates ensures that nearly every borrower pays a fee, in the form of a “tip” or “donation.”

The Bureau alleges that the company violated the Consumer Financial Protection Act’s prohibition against unfair, deceptive, and abusive conduct, as well as the Fair Credit Reporting Act. Specifically, the CFPB alleges:

Misleading statements about the cost of borrowing: While its advertisements and loan information market interest-free loans, virtually all borrowers pay “tips” to the lending investors, “donations” to the company, or both. According to the Bureau, these fees result in a high total cost of credit, sometimes exceeding 300%.
Dark patterns used to deceive consumers. The company presents three default options to consumers for “donation” or “tip” and requires consumers to select one before proceeding with the lending process. But it does not inform consumers that a “donation” is voluntary and hides the “No Donation” option from the consumer.
Making false threats and collecting money consumers don’t owe: According to the Bureau, because these loans were made without a required state license or in excess of state usury limits in the state where the borrower resides, they are void and uncollectible. Additionally, the company has threatened consumers that it will provide negative information to credit reporting companies when it never has.
Using a “social credit” score created without collateral: The company has developed its own credit scoring method for potential borrowers and accordingly acts as a credit reporting company. But it has not taken adequate steps to ensure that the data the company collects on consumers is accurate.

Putting it into practice: Although there are a number of interesting issues here (e.g. dark models, social credit score), the Bureau’s action against a fintech requesting “tips” should be of some concern to fintechs. Like we discussed previously, the CFPB has been slow to offer guidance to earned-wage access providers. Many of these providers have a business model in which consumers provide voluntary “tips” as a sign of appreciation for the provider’s service. The Bureau appears to have come out strongly against a rollover model. While it can be argued that the distinction here is that the tips were allegedly not voluntary and consumers were deceived by deceptive shadowy schemes, the Bureau went to great lengths to demonstrate that tips increased the total cost of credit for consumers . To the extent it begins to characterize tips as “financial charges,” could we see the Bureau apply TILA to earned wage access products? We will continue to monitor this space for further developments.

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Fintech

Lloyds and Nationwide invest in Scottish fintech AI Aveni

Published

6 months ago

29 July, 2024

FinCrypto Staff

Lloyds and Nationwide invest in Scottish AI fintech Aveni

Lloyds Banking Group and Nationwide have joined an £11m Series A funding round in Scottish artificial intelligence fintech Aveni.

The investment is led by Puma Private Equity with additional participation from Par Equity.

Aveni creates AI products specifically designed to streamline workflows in the financial services industry by analyzing documents and meetings across a range of operational functions, with a focus on financial advisory services and consumer compliance.

The cash injection will help fund the development of a new product, FinLLM, a large-scale language model created specifically for the financial sector in partnership with Lloyds and Nationwide.

Joseph Twigg, CEO of Aveni, explains: “The financial services industry doesn’t need AI models that can quote Shakespeare, it needs AI models that offer transparency, trust and, most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, vetted by financial services experts for specific financial services use cases.

“FinLLM’s goal is to set a new standard for the controlled, responsible and ethical adoption of generative AI, outperforming all other generic models in our selected financial services use cases.”

Robin Scher, head of fintech investment at Lloyds Banking Group, says the development programme offers a “massive opportunity” for the financial services industry by streamlining operations and improving customer experience.

“We look forward to supporting Aveni’s growth as we invest in their vision of developing FinLLM together with partners. Our collaboration aims to establish Aveni as a forerunner in AI adoption in the industry, while maintaining a focus on responsible use and customer centricity,” he said.

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Fintech

Fairexpay: Risk consultancy White Matter Advisory acquires 90% stake in fintech Fairexpay

Published

6 months ago

29 July, 2024

FinCrypto Staff

Treasury Risk Consulting Firm White Matter Alert On Monday he announced the acquisition of a 90% stake in the fintech startup Fair payment for an undisclosed amount. The acquisition will help White Matter Advisory expand its portfolio in the area of cross-border remittance and fundraising services, a statement said. White Matter Advisory, which operates under the name SaveDesk (White Matter Advisory India Pvt Ltd), is engaged in the treasury risk advisory business. It oversees funds under management (FUM) totaling $8 billion, offering advisory services to a wide range of clients.

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White Matter Advisory, based in Bangalore, helps companies navigate the complexities of treasury and risk management.

Fairexpay, authorised by the Reserve Bank of India (RBI) under Cohort 2 of the Liberalised Remittance Scheme (LRS) Regulatory Sandbox, boasts features such as best-in-class exchange rates, 24-hour processing times and full security compliance.

“With this acquisition, White Matter Advisory will leverage Fairexpay’s advanced technology platform and regulatory approvals to enhance its services to its clients,” the release reads.

The integration of Fairexpay’s capabilities should provide White Matter Advisory with a competitive advantage in the cross-border remittance and fundraising market, he added.

The release also states that by integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

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Fintech

Rakuten Delays FinTech Business Reorganization to 2025

Published

6 months ago

29 July, 2024

FinCrypto Staff

Rakuten (Japan:4755) has released an update.

Rakuten Group, Inc. and Rakuten Bank, Ltd. announced a delay in the reorganization of Rakuten’s FinTech Business, moving the target date from October 2024 to January 2025. The delay is to allow for a more comprehensive review, taking into account regulatory, shareholder interests and the group’s optimal structure for growth. There are no anticipated changes to Rakuten Bank’s reorganization objectives, structure or listing status outside of the revised timeline.

For more insights on JP:4755 stock, check out TipRanks Stock Analysis Page.

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Fintech

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

Published

6 months ago

29 July, 2024

FinCrypto Staff

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

You are reading Entrepreneur India, an international franchise of Entrepreneur Media.

White Matter Advisory, which operates under the name SaveDesk in India, has announced that it is acquiring a 90% stake in fintech startup Fairexpay for an undisclosed amount.

This strategic move aims to strengthen White Matter Advisory’s portfolio in cross-border remittance and fundraising services.

By integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

White Matter Advisory, known for its treasury risk advisory services, manages funds under management (FUM) totaling USD 8 billion.

Founded by Bhaskar Saravana, Saurabh Jain, Kranthi Reddy and Piuesh Daga, White Matter Advisory helps companies effectively manage the complexities of treasury and risk management.

The SaveDesk platform offering includes a SaaS-based FX market data platform with real-time feeds for over 100 currencies, bank cost optimization services, customized treasury risk management solutions, and compliance guidance for the Foreign Exchange Management Act (FEMA) and other trade regulations.

Fairexpay is a global aggregation platform offering competitive currency exchange rates from numerous exchange partners worldwide. Catering to both private and corporate customers, Fairexpay provides seamless money transfer solutions for education, travel and immigration, as well as simplifying cross-border payments via API and white-label solutions for businesses. Key features include competitive currency exchange rates, 24-hour processing times, extensive currency coverage of over 30 currencies in more than 200 countries, and secure, RBI-compliant transactions.

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