The Common Denominator

Jean-Baptiste Alphonse Kerr famously wrote “plus ça change, plus c'est la même chose" — the more things change, the more they stay the same.  This statement is applicable in many situations but in our world if you attend any consumer finance conference you can count on at least one or frequently more of the general sessions primarily dedicated to discussing FinTech, Marketplace Lending, Online lending or whatever moniker you may want to describe the emerging trend of extending credit without having a brick and mortar physical presence.

Regardless of the medium or vehicle for the transference of data, there is one essential property to every credit transaction that never changes, “the numbers.”  The numbers are the essential property that forms credit disclosures and serves as the fundamental ingredients of the contractual obligation between a lender and borrower.  The “calculations” are the common denominator inherent in every single credit transaction across all types of lending and all credit markets.

The incredibly complex and esoteric nature of the consumer credit math that produces the disclosure numbers is often an enigma to the participants of FinTech lending.  FinTech principle players generally have strong IT backgrounds and access to investors willing to provide funding but, more often not, lack the consumer finance calculation background and experience.  The common mantra for consumer lending calculations is that they are “just math”.  However, that “math” is the crucial element for whether those ever present disclosure numbers will be deemed in or out of compliance by auditors and examiners.

The regulatory landscape for FinTech at the moment is anything but clear when you consider the results of litigation putting the “Bank Partnership Model” in jeopardy due to the Madden v. Midland ruling. 

Until the valid when made doctrine is either expressly upheld or rejected, the regulatory framework for FinTech sits in limbo to a great extent and the only completely safe model appears to be that of becoming a licensed lender in the individual states in which business is transacted.  With an internet based lending model, that most likely means a license in all 50 states.

Regardless of the lending model framework, FinTech or traditional Brick and Mortar segment of the market, Carleton's core experience, and expertise, is in supplying the compliant credit math component no matter how complex or simplistic the requirement.  In today's industry with the cacophony of ever increasing regulatory requirements, why take on the burden of creating and maintaining The Common Denominator... The Math...