Back Cross River Intelligence Archives

“True Lender” Rule Reversal; Plaid’s Valuation Skyrockets to $15 Bn

By Tito Donis

March 29, 2021


Wishing our readers a happy Passover!

This week, we look at the possible reversal of OCC’s “true lender” rule, Plaid’s $15 Bn valuation, and Robinhood’s confidential S-1 filing.

New here? Subscribe now to get our newsletter each Sunday.

Unemployment at its Lowest Since last March; Larry Summers Warns of “Fiscal-Monetary Collision”

Filings for unemployment benefits fell to 684,000 last week from 781,000 a week earlier.  This is the lowest since mid-March last year, indicating that recovery is coming sooner than many economists expected.

Former Treasury Secretary Larry Summers believes that the U.S. is suffering from the least responsible macroeconomic policy in the last 40 years. The Covid recovery will stoke demand pressure, while loose monetary policy by the Fed and the $1.9 Tn pandemic plan will cause what he calls a “dramatic fiscal-monetary collision.” 

Senate Democrats Initiate Reversal of OCC 'True Lender' Rule

Senate Democrats, who have been critical of the OCC’s “true lender rule” arguing that it leaves Americans vulnerable to predatory lenders, have announced plans to overturn it.

The OCC’s rule clarifies that a national bank is considered a “true lender” if, at the time of a loan’s origination, it is named as the lender in a loan agreement or if the bank funds the loan. That means the national bank is responsible for ensuring the loan complies with consumer protection laws, but it also means that state interest rate caps do not apply.

At PeerIQ, we are supportive of the OCC ruling as we believe it enables fintechs to innovate and expand financial inclusion to underbanked households. True lender banks are subject to and are responsible for the regulatory compliance of their fintech partners.

Are You Looking to Increase Your Exposure to Consumer Lending?

PeerIQ bridges the gap between lenders and capital markets. We help originators efficiently reach new investors. We also help investors and warehouse lenders with data aggregation, portfolio analytics, scalable reporting, credit facility management, client portal, and valuation services.

Learn more or request a free trial.

Upstart Launches Referral Network

Upstart has announced the release of their new platform, Upstart Referral Network, which is an AI-driven system that matches borrowers with banks and credit unions.

Qualified applicants will receive offers that best fit their needs as long as they meet the requirement of Upstart’s bank partner’s credit policies. Borrowers will then transition into a bank-branded experience to complete the process.

Upstart is deploying a capital efficient mechanism to originate loans to bank partners without tying up Upstart’s balance sheet. This represents true innovation and also competition for LendingTree and Credit Karma.

Upstart has had two major announcements within the last four months as a public company. They have had a phenomenal story thus far and we are excited to see what’s next in store. The stock has climbed 23% (last trading at $138.14) since this latest announcement.

Plaid’s $15 Bn Valuation

After the scrapped Visa merger, Plaid, led by CEO Zach Perret, is looking to raise $600 MM in a funding round led by Altimeter Capital that could value the company between $10 Bn to $15 Bn. Altimeter is a hedge fund turned VC firm that has stakes in some of Silicon Valley’s top firms.

The steep rise in Plaid’s valuation since the $5.3 Bn Visa deal was first announced back in January 2020 is indicative of how high fintech valuations have come.  In the last few months, Stripe scored a blockbuster $95 Bn valuation and Chime scored an impressive $30 Bn (see our coverage here)

Robinhood Files for S-1, Plans to “Democratize” IPOs

Digital trading platform Robinhood has filed its S-1 confidentially with the SEC, the document will become public once the SEC approves the deal.

Robinhood has seen phenomenal growth in new accounts. Its ability to do commission free trading along with crypto features has made it immensely popular with the younger generation.

The company generates the bulk of its revenue via payment for order flow, which is essentially the compensation a broker receives for routing trades to a high-frequency trading firm for execution.  This is generally known to be an opaque process which may not be in the best interest of the investors.

Robinhood plans to build a platform to allow users to directly buy shares alongside Wall Street funds in IPOs. It also plans to carve out a chunk of its shares on offer for its own users, which could potentially boost its valuation.


In the News:

Lighter Fare