The US economy added 148k jobs in December and the unemployment rate held steady at 4.1%. The jobs number was below economists’ estimates of 190k, but average hourly earnings rose 2.5%, a strong increase, and a metric that market participants are watching as a precursor to higher inflation. The economy has added 2.06 Mn jobs in 2017, and is fast approaching the Fed’s mandate of full employment.

In the minutes of the December meeting released this week, most Fed officials reiterated support for gradually raising interest rates in 2018, and have indicated their preference for 3 rate hikes in 2018. Market participants continue to monitor the flattening yield curve as it squeezes the spread lenders earn on longer-dated loans, but the Fed maintained that the yield curve was not especially flat compared to historical levels.

In regulatory news, Indiana is planning legislation that would cap the interest rate on personal loans at 36%, down from the current cap of 391% on payday loans. If passed, this legislation would affect the payday lending industry and some experts have expressed concerns that this may crimp credit availability to the neediest individuals. The US government is also considering updating the credit scoringmethodology used in evaluating mortgage applications, to use competitors to FICO score like VantageScore, with the hope that the new scores would expand mortgage credit access to borrowers.

Sam Hodges, US MD of FundingCircle, in his OpEd on the IRS Data Verification Modernization Act of 2017 talked about how an API would enable lenders to get borrowers’ tax transcripts that have been authorized, automatically to make better credit decisions. Today this process is manual and cumbersome, and the API would make it seamless and real-time. Nat Hoopes at the Marketplace Lending Association points out that the 9th Circuit court has ruled that state laws banning surcharges for credit card usage are unconstitutional, and will allow retailers to impose surcharges on credit card payments.

In FinTech funding news, GreenSky LLC, a lending platform that enables home improvement lenders and health-care providers to lend to their customers, raised $200 Mn from PIMCO valuing it at $4.5 Bn, the most valuable Fintech lender.MoneyLion, a digital finance platform led by CEO Diwaker Choubey, announced that it has secured a $42 million Series B funding, led by Edison Partners.

Apollo Global Management and Värde Partners have agreed to acquire a 40.5% stake in OneMain Financial, the non-prime lender spun off by Citigroup after the financial crisis, from Fortress Investment Group. This deal provides an exit for Fortress, which perhaps was looking to shed some assets tied to its own acquisition by SoftBank. You can read more about our analyses on OneMain here and here.


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Industry Update:

  • US blocks Moneygram sale to China (BBC, 1/3/17) The US has blocked the $1.2bn sale of money transfer firm Moneygram to China’s Ant Financial, the digital payments arm of Alibaba.

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