USA, Financial Start-ups Form “Coalition for New Credit Models”

The Coalition for New Credit Models, formed by non-profit, for-profit, and social enterprises, using new technologies, products and business models to provide credit and information to consumers and small and midsized businesses, announced its formal launch today as its representatives visited Washington D.C..
According to the Coalition, these models serve as innovative alternatives to existing banking and financial institutions and are backed by venture and social capital to stimulate the economy, shore up financial markets, and enhance local communities. They have a special focus on bringing transparency, fairness, durability, and accountability to consumers and to our credit markets.
In particular, proposing new models and innovative alternatives to existing banking and financial institutions, the Coalition asks Congress and the Administration to create a business environment for its members to better provide their innovative products and serve their customers.
Commenting on the new initiative, James Gutierrez, Chief Executive Officer of Progreso Financiero, one of member of the Coalition, said: “Over 100 million Americans are underbanked and in dire need of options and innovation from new companies that are focused on the basics of sound lending and good, fair consumer policies.
“Without new innovators providing better options, millions of Americans will be left out, far away from the American Dream and stuck with predatory choices, simply because they lack a credit score and established credit history.
“We believe government can do more to provide greater access and financial inclusion to all consumers, especially the underbanked, and help cultivate new models that do so on responsible terms”.
With this in mind, the Coalition asks the Congress and the Administration:
– to adopt legislation classifying person-to-person lending as a consumer banking service, not a securities offering;
– create a liquidity fund to provide capital for companies making small consumer loans to underbanked individuals;
– establish a federal backstop for small and mid-sized businesses to provide access to working capital through electronic marketplaces;
– enable the emergence of a robust U.S.-based private company stock market to provide the exit path necessary to attract investment capital back to this country, bolstering domestic small businesses, innovation and job growth and
– create a Start Up Liaison at Treasury Department or within banking regulators to guide and fast-track the development of new financial products by start-up companies and organizations seeking to innovate the way consumers and businesses raise and access capital.
Coalition Members include:
– Credit Karma (San Francisco, CA), a website that provides consumers free access to their credit score, with a range of tools and information resources to help them monitor and manage the credit aspect of their financial health. Credit Karma’s goal is to help consumers easily digest the contents of their credit report and understand what makes up their credit score. Credit Karma works with a range of partners, including mortgage lenders, credit card providers, banks, and wireless providers.
– Loanio, Inc. (Nanuet, NY), an Internet-based peer-to-peer lending platform where individuals can request personal loans that are funded by other individual or corporate investors. Interest rates on loans are set by auction, where lenders/investors bid on loan requests that they find attractive. Loanio’s goal is to provide access to a significantly underserved borrower market and stronger security for its lenders/investors. Loanio, Inc. suspended its business activities in November 2008 and is currently registering its securities with the SEC.
– ProFounder (Palo Alto, CA), a platform where entrepreneurs raise seed funding from their social network and affiliates through a legally compliant and dynamic process; and individuals invest small amounts of money in companies in exchange for ownership.
– Progreso Financiero (Mountain View, CA), the provider of consumer friendly loans to underbanked Hispanic families in America. Progreso has developed a proprietary credit score based on over 25,000 initial loans, and in turn, can lend money at fair rates and lower losses to families who lack FICO scores and traditional banking relationships. With over 100 employees and $26m in venture capital, Progreso is rapidly expanding throughout the Southwest, and aims to serve over 1 million underbanked families with credit, debit, savings and other mainstream products by 2012.
– Prosper (San Francisco, CA), a peer-to-peer lending marketplace. Since its launch in February 2006, over $180m in loans have been facilitated. Prosper is an auction-based platform, where borrowers set the maximum rate they’re willing to pay, and individual and institution investors bid at or below the rate set by the borrower. In October 2008, Prosper halted its marketplace and entered a quiet period as part of the process of registering with the SEC. Nine months later, in July 2009, Prosper’s registration statement with the SEC was declared effective.
– The Receivables Exchange (New Orleans, LA), a real-time, online competitive marketplace for accounts receivable that gives small and medium-sized businesses the ability to generate cash flow quickly and as competitively as possible. The Receivables Exchange allows businesses to sell their receivables to a global network of institutional investors and access working capital in as little as 24 hours.
– SecondMarket (New York, NY), a centralized marketplace for illiquid assets, including auction-rate securities, bankruptcy claims, collateralized debt obligations, limited partnership interests, private company stock, residential and commercial mortgage-backed securities, warrants/restricted securities in public companies, and whole loans. SecondMarket’s online trading platform has more than 4,000 participants, including global financial institutions, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors that collectively manage over $1 trillion in assets available for investment.

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