
The Fed's Paycheck Protection Program Gave a Tiny NJ Bank $5.3B - cinquemb
https://wallstreetonparade.com/2020/06/the-feds-paycheck-protection-program-gave-a-tiny-nj-bank-5-3-billion-9-percent-of-all-the-money-its-spent-thus-far/
======
mcherm
The article's complaints seem to be:

(A) This bank has a tiny number of employees. They suggest that the number of
PPP loans is in line with the number of loans the bank makes normally, but
they do it with a lot fewer employees than Wells Fargo.

(B) This bank doesn't use humans to underwrite its loans.

Honestly, while I know nothing about Cross River, this article makes it sound
to me like they are doing it RIGHT. It is a GOOD thing to remove the need for
large number of human underwriters examining each loan (and introducing
various human errors and biases).

Nor does the PPP loan process (the one targeted by this article) require
extensive underwriting processes. The program, as envisioned by Congress,
requires banks to verify that companies are, in fact, genuine small businesses
who are submitting accurate information about things like their number of
employees and the cost of salaries. But Congress specifically decided NOT to
evaluate the creditworthiness of the borrowers (which is the hard part of
underwriting).

Automated processes frequently have flaws and can be outperformed by a human.
I would be completely willing to believe that Cross River's systems are
failing to meet the appropriate standards. But the article doesn't present any
evidence or even a claim that this is the case -- they only gripe that Cross
River is "tiny" (in number of employees) and yet is doing a large amount of
lending.

~~~
cinquemb
(C) "In 2018 the FDIC found that Cross River Bank “engaged in unsafe or
unsound banking practices by failing to ensure an adequate compliance
management system was in place….” The FDIC fined the bank $641,750 and made it
contribute to a $20 million restitution fund to reimburse harmed consumers."
[0]

"Cross River Bank originates C+ Loans, an unsecured debt consolidation loan
product, through FFAM. C+ Loans are offered exclusively to consumers who
contract with Freedom Debt Relief (FDR), a FFAM-affiliated debt settlement
company. C+ Loans were marketed as a way for consumers to quickly resolve
their outstanding debts. Consumers are charged a settlement fee of up to 25
percent of each debt enrolled in FDR's program.

The FDIC determined that Cross River Bank and FFAM violated federal law
prohibiting unfair and deceptive practices, by, among other things:

\- Requiring borrowers to sign loan documents without knowing the essential
terms and conditions of the loan;

\- Failing to inform borrowers that certain major creditors will not negotiate
debts with FDR and including related debt settlement fees into C+ Loans, when
in fact, borrowers had to negotiate such debts themselves;

\- Misrepresenting to consumers that the C+ Loans would result in the
settlement of all their debts within 30 to 45 days or 30 to 90 days, which was
not true for nearly half of the consumers; and

\- Misrepresenting that the consumers' creditworthiness would improve by
obtaining a C+ Loan."[1]

[0][1]
[https://www.fdic.gov/news/news/press/2018/pr18021.html](https://www.fdic.gov/news/news/press/2018/pr18021.html)

------
sem000
These articles attempting to incite conspiracy theories of massive banning
fraud at every corner are getting tiring.

CrossRiver Bank is a FinTech focused bank with a focus on providing and
servicing loans.

As a FinTech, they most likely had the PPP application process in the pipeline
much quicker than traditional banks. Wells Fargo didn’t even get me the
application until the same week when the first round of funding ran out.

