Settlement Validates Cross River Lending Model, Removes Cloud of Uncertainty and Allows Responsible Lenders to Continue to Provide Access to Credit to Consumers in Need
Resolves Issue of "True Lender" and Creates a Regulatory Framework That Can Be Replicated in States Across the Country
Cross River Bank ("Cross River"), a leading innovator and provider of banking services for technology companies, today announced, together with its partners, that they have entered into an agreement with the state of Colorado to settle the litigation over "true lender" and further validate the bank partnership model. Cross River praised Attorney General Phil Weiser for his lead in resolving the "true lender" issue in a manner that creates certainty for all parties while ensuring consumer protection.
"This agreement serves to confirm the validity of the consumer lending model Cross River has been utilizing since inception," said Gilles Gade, Founder, President and CEO of Cross River. "As one of the largest lenders of Paycheck Protection Program loans during the COVID-19 pandemic, Cross River demonstrated that responsible innovation creates safe borrowing opportunities for consumers otherwise left behind."
Although not initially named in the litigation, Cross River intervened on behalf of its partner Marlette Funding. As an FDIC-insured, New Jersey state-chartered bank, Cross River has partnered with technology companies since 2010, originating loans for more than a dozen marketplace lending platforms ("MPLs"). Cross River not only originates loans but owns the end-to-end process and life cycle of each loan. The Colorado resolution respects the supremacy of federal law in regulating bank lending while recognizing state authority to require licensing and reporting. This regulatory framework serves as a model for responsible lending programs to be replicated in states across the U.S.
"This settlement finally clarifies the questions surrounding the state-based issue of ‘true lender’ and validates the responsible bank partnership model Cross River embraced for the past 10 years," said Arlen Gelbard, EVP and General Counsel of Cross River. "State-chartered and regulated by the FDIC, we completely understand our role and responsibility for regulatory compliance and consumer protection, and this groundbreaking resolution solidifies a framework for innovative banks and their partners but is even more important for consumers. It includes consumer protection provisions that mandate rational interest rates and strikes a reasonable balance of oversight by the state without interfering with a bank’s ability to lend across the country."
The agreement also provides a safe-harbor which allows all parties to move forward, resolving "true lender" and Madden ("valid when made") – balancing consumer, state, and industry interests. Colorado Attorney General Phil Weiser has set the stage for other states to follow a framework to distinguish between responsible bank programs which provide valuable benefits to consumers from abusive lending programs that operate outside the scope of regulators.
"We applaud Attorney General Weiser for his vision and approach to protecting Colorado consumers, which will enhance access to affordable credit and enable the state to provide oversight, preventing abusive, high interest lenders from taking advantage of Colorado borrowers," said Phil Goldfeder, SVP of Public Affairs at Cross River. "As a bank born in the aftermath of the 2008 recession, we understand the importance of providing access to financial services to families in need. This settlement Cross River has reached with Attorney General Weiser is a long overdue victory for responsible fintech partnerships which provide access to affordable credit and financial services to consumers across the country."
As part of the terms of the agreement, parties will provide payment to the state of Colorado as well as a contribution to MoneyWi$er, a program that is part of the Colorado Statewide K-12 Personal Financial Literacy Initiative sponsored by the Colorado Office of the Attorney General in partnership with Colorado Jump$tart Coalition, the Colorado Department of Education, and Economic Literacy Colorado.
About Cross River
Cross River Bank is a fast-growing financial services organization that merges the established expertise and traditional services of a bank with the forward-thinking offerings of a technology company. Cross River combines a comprehensive suite of products into a unique banking-as-a-platform solution, encompassing lending, payments and risk management. Cross River partners with leading marketplace lenders and technology companies enabling them to focus on their own growth without hindering innovation, while maintaining a strong focus on compliance. In December 2018, Cross River secured $100 million in a funding round led by KKR. This was on top of the $28 million VC funding round in 2016 from Battery Ventures, Andreessen Horowitz, and Ribbit Capital. Founded in 2008, Cross River is a New Jersey state-chartered FDIC insured bank. For more information, please visit Cross River’s website at www.crossriver.com or on Twitter @crossriverbank.
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