Loan Companies Research Articles

The background of regulating non-bank loan institutions in Poland

<p>Non-bank loan institutions in Poland often face a bad reputation or a lack of trust, are compared to "parabanks" and frequently recognised as companies operating at the borders of the law. Despite their membership in the financial sector, until recently, public supervision had little control over loan companies and had little knowledge about the scale of their operations. The greater restrictiveness of the new regulations caused a slowdown in the development of loan companies. Changes such as the introduction of bank levy and the amendment to the Consumer Credit Act of 2016 had a significant impact on the financial results and the structure of products offered by loan companies. Along with the new regulations, however, there is doubt regarding whether these changes, which are intended to organise the market for non-bank loans, will actually lead to an exodus of loan institutions from the market and to significant limitation and financial exclusion on the part of Polish consumers.</p>

The Amazing, Elastic, Ever-Expanding Exportation Doctrine and Its Effect on Predatory Lending Regulation

Recent dramatic growth in predatory lending practices has reinvigorated calls for more effective regulation of consumer credit, primarily at the state level. This paper argues that a banking law principle known as the Exportation Doctrine has rendered individual state laws largely ineffectual in curbing predatory lending. However, this paper concludes that the expanded Exportation Doctrine, with a little bit of tweaking, could be shaped into a potent legal tool for regulating predatory lending, more effective than individual state legislation currently under consideration. The Exportation Doctrine has evolved from a discrete statutory privilege enacted during the Civil War to promote the national bank system, to an expansive legal doctrine allowing almost any type of corporate entity to establish a nationwide consumer lending program unrestrained by individual state consumer credit laws. This evolution was the result of a confluence of forces, including: individual depository institutions challenging various banking regulations; banking regulatory agencies accommodating their constituencies; power plays among the federal banking agencies, as well as among the state and the federal banking agencies; occasional Congressional actions in discrete, often seemingly unrelated areas of banking law; and courts almost uniformly deferring to the judgments of the federal banking agencies in issues related to the regulation of financial institutions. The Doctrine originated in a federal banking law permitting national to charge at the rate allowed under the laws of the state where the bank is located (12 U.S.C. Section 85). This paper traces the historical expansion of the Exportation Doctrine along three distinct dimensions. First, the geographic reach of the Doctrine was expanded, to transform the location of a bank from a meaningful restrictive concept to matter of choice. Second, the substantive scope of the Doctrine was expanded, as the term interest was interpreted to include not just numerical rates, but all credit terms material to the determination of the rate. Third, the orbit of the beneficiaries of the Doctrine was expanded, initially to include state and savings and loan associations, and, more recently, to include corporate entities acquiring nonbank banks (such as credit card banks, unitary thrifts, or industrial loan companies) or entering into contractual arrangements with to offer products such as cobranded credit cards, refund anticipation loans, and payday loans. After describing the evolution of the Doctrine, this paper analyzes whether the various dimensions of the expansion are justified under basic principles of banking law. The paper concludes that the expansion of the geographic reach and substantive scope of the Doctrine is compatible with banking law doctrine and probably not susceptible to legal challenge. However, the expansion of the orbit of the beneficiaries of the Doctrine is incompatible with the separation of banking and commerce, and thus susceptible to legal challenge. Nevertheless, after examining the recent actions of the federal banking regulators in curbing predatory lending practices conducted by depositary institutions, this paper concludes that a robust Exportation Doctrine might be the most effective legal mechanism that exists for curbing predatory lending practices.

Profitability vs. Credit Score Models—A New Approach to Short Term Credit in the UK

The profitability lending model was initially discussed by Eisenbeis [1] who suggested that it might be possible to build a lending model that prevailed the traditional scorecard models. In this paper, we study a unique dataset from a personal loan company based in the United Kingdom, which offered overdraft-style short-term loans to individuals with low and high credit scores during the last few years. Our results conclude that credit score does not significantly impact profitability in the overdraft market. Moreover, we argue that, assuming a good understanding of low credit score individuals, a business model that grants loans to these “new” customers is as sustainable and commercially viable as lending to higher credit profile applicants.

我国小额贷款公司的发展困境与转型升级方式研究——从广州金融街发展看小额贷款公司转型升级之路

我国小额贷款公司的发展困境与转型升级方式研究——从广州金融街发展看小额贷款公司转型升级之路

Metaphor, morality and legitimacy: A critical discourse analysis of the media framing of the payday loan industry

This study examines the metaphors used in the British press to characterize the payday loan industry in order to develop our understanding of organizational delegitimation. Drawing on critical discourse analysis and theories of moral panic, we show how the metaphors used in the press framed the industry as a ‘moral problem’. The study identified four root metaphors that were used to undertake moral problematization: predators and parasites, orientation, warfare and pathology. We show how these metaphors played a key role in the construction of a moral panic through two framing functions: first by constructing images of the damage and danger caused by the firms and second by attributing agency in such a way that moral responsibility was assigned to the organizations. We also extend the discussion of our findings to explore the ideological dimensions of the moral panic. We develop a critical analysis that points to the potential scapegoating role of the discourse, which served as a convenient moral crusade for the government and other neo-liberal supporters to pursue, while detracting attention away from the underlying socio-economic context, including austerity policies, the decline in real wages and the deregulation of the finance sector. From this critical perspective, payday loan companies can be seen as a ‘folk devil’ through which society’s fears about finance capitalism are articulated, creating disproportionate exaggeration and alarm, while the system as a whole can remain intact.

Stress as a Mediator of Work-Family Conflict and Turnover Intention in Selected Savings and Loans Companies in Ghana

This study examined occupational stress as a mediator of work-family conflict and turnover intention in selected Savings and Loans Companies (SLCs) in Ghana. Descriptive cross-sectional research design was adopted for the study. One hundred and twenty-six (126) respondents from three firms were selected using simple random sampling and purposive sampling techniques. A structured and self-administered questionnaire was the main data collection instrument. Data was analysed with the help of SPSS whilst the hypotheses were tested through correlation and multiple regression analysis. The study found a significant positive relation among work-to-family conflict, family-to-work conflict and occupational stress. Also, occupational stress had a positive effect on turnover intention. However, work-to-family conflict rather than family-to-work conflict significantly predicted turnover intention. Finally, the relation between work-family conflict and turnover intention was fully mediated by occupational stress. It was recommended among others those work-family interventions such as flexitime, compressed workweek and job sharing should be implemented by management in the Savings and Loans Companies (SLCs) to help lessen the burden that comes with employee turnover.

Reassessment and Monitoring of Loan Applications with Machine Learning

ABSTRACT Credit scoring and monitoring are the two important dimensions of the decision-making process for the loan institutions. In the first part of this study, we investigate the role of machine learning for applicant reassessment and propose a complementary screening step to an existing scoring system. We use a real data set from one of the prominent loan companies in Turkey. The information provided by the applicants form the variables in our analysis. The company’s experts have already labeled the clients as bad and good according to their ongoing payments. Using this labeled data set, we execute several methods to classify the bad applicants as well as the significant variables in this classification. As the data set consists of applicants who have passed the initial scoring system, most of the clients are marked as good. To deal with this imbalanced nature of the problem, we employ a set of different approaches to improve the performance of predicting the applicants who are likely to default. In the second part of this study, we aim to predict the payment behavior of clients based on their static (demographic and financial) and dynamic (payment) information. Furthermore, we analyze the effect of the length of the payment history and the staying power of the proposed prediction models.

Legal impacts from the bankruptcy of subsidiary company to holding company as the corporate guarantor

The existence of competition in business fields demands entrepreneurs to develop strategies to make their company able to compete with other company. One of the ways is by establishing company group in the form of holding company and subsidiary company. In the development of the business, a company will need funding as their capital. This capital will be obtained from internal or external parties resulting debts or account receivable to the creditor. It creates a risk of bad debts in the future. Therefore, creditor will commonly require a guarantee, called as corporate guarantee. In this case, holding company can become a corporate guarantor. Nevertheless, it is still going to create problem to the legal impact of holding company as the guarantor in case if the subsidiaries experience bankruptcy.This research aims to explore and analyze the legal impact from subsidiary company’s bankruptcy to holding company as the corporate guarantor. This research used socio-legal approach. That is to say, this research reviews norms of law by doing literature research to get the secondary data and fields study to obtain the primary data regarding the legal impact of the bankruptcy of subsidiary company to holding company as the guarantor. The methods of collecting the data were by literature studies and interview. The interview was done to the informants, like judge and experts of corporate law and guarantee. The technique of data validity used triangulation of sources or methods. The used theory and concept was for the analysis of loan agreement, bankruptcy, corporate guarantee, and group company.

A New Look at the Performance of Industrial Loan Companies and Their Contribution to the US Banking System

In this paper, we examine the differences between commercially-owned ILCs and those owned by financial firms, and offer a current assessment of ILC performance, paying particular attention to commercially-owned ILCs, and their contribution to the US banking system. The rules governing their oversight, especially relative to bank regulation, occupy a significant part of this evaluation as we consider why the ILC ownership concept causes a stir when they’re subject to the same FDIC regulation as any other banking institution. Most important, we look at the capitalization and performance of ILCs over the past few decades relative to the banking industry more generally. And because all ILCs are state-chartered, we specifically compare their size and performance to other state-chartered banks.

Financial institution ties and survival of small commercial poultry farms (SCPFs) in Ghana

PurposeThe purpose of this study was to understand the usefulness of financial institution class ties in small commercial poultry farms’ (SCPFs’) survival in Ghana.Design/methodology/approachThe study uses data from a network survey with associated attribute data on poultry small- and medium-sized enterprises. The data were collected in two waves between January 2014 and March 2015. Survival is estimated using a lagged probit model.FindingsIt was found that the survival rate of SCPFs is influenced by ties to universal banks and cooperative credit unions that have a positive effect while those with ties to savings and loans companies have a reduced survival probability.Originality/valueThe findings of the study make a significant contribution to the agricultural enterprise financing literature showing the relevance of the different financial institution types in the continued survival of agricultural SCPFs.

Profitability Determinants of Savings and Loans Companies in Ghana: Evidence on Bank Specific and Macroeconomic Determinants

The paper analyzes how bank specific and macroeconomic variables affect the profitability of savings and loans (S&L) companies in Ghana. The bank specific (internal) determinants data was collected from the financial statements of the S&L companies from 2011 to 2016 whereas the macroeconomic (external) determinants were sourced from the central bank of Ghana. The bank specific variables chosen for the study were capital adequacy ratio, non-performing loan ratio, loans and advances to deposit ratio and size of bank. The macroeconomic variables included were annual GDP growth rate and CPI-inflation rate. Data were analyzed using SPSS software and multiple regression model was used to find out the relationship between profitability and the internal and external determinants. Capital Adequacy, Non-performing Loans, Bank size, Inflation and GDP growth rate all negatively influenced profitability of savings and loans companies in Ghana. The only variable found to positively influence S&Ls profitability was Loans and Advances. Researchers have made different findings with regard to profitability determinants of banks which makes the findings inconclusive. We therefore recommend further research on profitability determinants banks especially, in the Savings and Loans sub banking sector.

ESTIMATION OF BANKRUPTCY PROBABILITIES BY USING FUZZY LOGIC AND MERTON MODEL: AN APPLICATION ON USA COMPANIES

In this study, we have worked on developing a brand-new index called Fuzzy-bankruptcy index. The aim of this index is to find out the default probability of any company X, independent from the sector it belongs. Fuzzy logic is used to state the financial ratiointerruption change related with time and inside different sectors, the new index is created to eliminate the number of the relativity of financial ratios. The four input variables inside the five main input variables used for the fuzzy process, are chosen from both factor analysis and clustering and the last input variable calculated from Merton Model. As we analyze in the past cases of the default history of companies, one could explore different reasons such as managerial arrogance, fraud and managerial mistakes, that are responsible for the very poor endings of prestigious companies like Enron, K-Mart. Because of these kind of situations, we try to design a model which one could be able to get a better view of a company’s financial position, and it couldbe prevent credit loan companies from investing in the wrong company and possibly from losing all investments using our Fuzzy-bankruptcy index.

Personal Loan Companies in Poland: Does Empirical Evidence Justify Regulatory Transition?

We surveyed representative sample of 1,004 adult Poles to check the extent to which they distinguish among the entities operating in the market for personal loans in Poland, how they perceive loans and lending entities, and what is their knowledge on lending/borrowing issues. Particularly, we were interested in getting the insight into the fragment of the market that is operated by personal loan companies, with special emphasis on the profile of the average (statistical) borrower. Our examination was motivated by the controversies surrounding the law amendment started in Poland in 2015 in order to regulate the fraction of the consumer credit market represented by personal loan companies. By utilizing logistic and multivariate linear regression models with variables obtained from our survey, we tested whether the legal reform was well-informed and well-addressed. We found that Polish households have serious problems with distinguishing various entities that provide loans to private individuals and that such problems manifest even greater problem of material shortcomings in Poles' debt literacy. We also evidenced low public trust to lending entities, particularly to loan companies. In the light of the findings the law amendment is well-grounded, however it should be supported by actions aimed at enhancing households' financial literacy.

History, Culture and the Rise of Informal Finance in China

This paper examines the long-term effect of historical financial institutions on the development of informal finance in contemporary China. By using data on 137 counties in north China, our analysis finds that the density of local financial institutions (qianzhuang and diandang) in the late Qing period (circa 1911) has a positive effect on the number and total assets of Small Loan Companies, a dominant institution of informal finance today. This finding is robust to the inclusion of a variety of confounding variables and instrumenting historical financial institutions using the frequency of crop failures in the Qing period. We also find that the persistent effect of historical financial institutions can be explained by Confucian culture, which instills integrity, lineage solidarity and acquaintance networks.

A study on legal improvement on Online P2P financial loan

Along with the recent growth of Fintech industry and low interest rate basis, one of the alternative investment technique for expecting higher investment profit, P2P loan using P2P financial system is greatly increasing. P2P loan can be referred to as a type of Crowdfunding that the law of Crowdfunding (adopted to revised Capital Market Act) enacted on January 25th 2016 only allows investment type Crowdfunding so that it can be used as a tool of raising fund for startup and venture companies. Also, it is true that Korean government could not make any legislative foundation related to P2P loan. At this moment, those online platform companies mediating P2P loan are not included as financial companies, expected to cause various legal arguments. Financial Services Commission has released a guideline in February of this year saying that limit of P2P loan is 10 million Korean Won per arbitrating company and 5 million Korean Won per borrower. However, what is more important is to make a law supporting this institutional system. If legislation on P2P loan is implemented without care, it may disturb growth of the field but it may result in the damage of investors if not clearly defined by law. As this is the case, first, “revision of execution regulations for loan business” should take place as soon as possible to intensify inspection of loan companies by registering them to Financial Services Commission. Second, saving customer fund separately in the their organization. Third, making law on protecting investors such as regulating exaggerative advertisement. Fourth, to have transparent and fair public announcement system, standardized agreement and guideline describing clear understanding on autonomous public information publication of P2P loan online platform business and information on the borrower.

Personalized Dynamic Pricing with Machine Learning

We consider a seller who can dynamically adjust the price of a product at the individual customer level, by utilizing information about customers’ characteristics encoded as a d-dimensional feature vector. We assume a personalized demand model, parameters of which depend on s out of the d features. The seller initially does not know the relationship between the customer features and the product demand, but learns this through sales observations over a selling horizon of T periods. We prove that the seller’s expected regret, i.e., the revenue loss against a clairvoyant who knows the underlying demand relationship, is at least of order s √T under any admissible policy. We then design a near-optimal pricing policy for a “semi-clairvoyant” seller (who knows which s of the d features are in the demand model) that achieves an expected regret of order s √Tlog T. We extend this policy to a more realistic setting where the seller does not know the true demand predictors, and show that this policy has an expected regret of order s √T(log d＋logT), which is also near-optimal. Finally, we test our theory on simulated data and on a data set from an online auto loan company in the United States. On both data sets, our experimentation-based pricing policy is superior to intuitive and/or widely-practiced customized pricing methods such as myopic pricing and segment-then- optimize policies. Furthermore, our policy improves upon the loan company’s historical pricing decisions by 47% in expected revenue over a six-month period.

Assessment of the Balance Degree of Loan Companies Banking Policy

1. Introduction 1.1 Introduction to the Problem Modern Russian banking system is characterized by insufficient resource base of loan companies, predominance of short-term liabilities, persistence of high risk for funds placing, growth of bad debts and as a result, aggravation of financial results of loan companies. The appearance of the above-mentioned imbalances is explained by the behavior of commercial banks with unbalanced banking policy. Loan companies neglect the need to develop the bank portfolio, balanced on its main parameters: the volume of attracted and placed resources, terms, financial resources cost. As a result, banks face with liquidity shortages and reduce their financial stability that in crisis conditions leads to bankruptcies and revocation of the license. As a result, there is a need to make balanced banking policy based on a thorough, careful and continuous quantitative and qualitative structural and dynamic analysis of active and passive operations, early detection of interbank dislocations, analysis of their causes and their elimination in the future. 1.2 Exploration of the Importance of the Problem The ways of assessing the activity of loan companies used in the banking practice showed the imperfection of the analysis methods of the balance of the banking policy. Currently, in the banking practice there is no unite approach to assessing the balance of banking policy of loan companies. They are independently developing methodological basis for assessing the balance and contingency of active and passive operations. This internal development of banks affects mainly credit activities, is based on an intuitive level, and doesn't have sufficient methodological support. So the research to develop methodological tools for its practical use in integrated assessment of the degree of the banks policies balance is relevant. It will help to aim the loan companies at the early detection and solution of problems appeared in their work. 1.3 Review of the Literature Analysis of the survey results conducted by leading Russian and foreign scientists on banking activities indicates the presence of interest in the issue that we studying. Problems of formation of banking policy and assessment of its risks are studied in the works of Lavrushin (2014), Zhukov (2012). At the same time, as noted by Greuning & Bratanovic (2009), changing environment in which banks operate, offers plenty of opportunities for them, but at the same time has complex and diverse risks, challenging traditional approaches to bank management. The following authors whose works address the issues of sustainability and balance in loan companies are worth noting: Evans et al. (2000), Carson & Ingves (2003), Lai (2002), Villar (2006), Fetisov (2003). Alongside with this, the study of publications on the above mentioned topic of scientific research has shown that in the scientist's works there is no adequate coverage of the issues related to the development of methodological tools for a comprehensive assessment of the balance of the banking policy. The solution to this problem will allow the loan companies to conduct constant monitoring in order to identify the degree of balance of the banking policy by its main parameters (volume, term, profitability). 1.4 Hypotheses and their Influence on the Research Considering insufficient attention to this problem, the main target of the study is development of a comprehensive methodology for assessing the balance of banking policy, allowing risk management to timely detect the presence of structural imbalances in the resource activity of the loan company and adequately respond to emerging imbalances. This target can be achieved by solution of the following logically related tasks: * grounding the methodology for assessing the degree of balance of the banking policy; * the definition of criteria to assess the degree of balance of the banking policy; * testing the developed techniques on the loan companies: JSC-IB KS BANK, Interregional Industrial and Construction Bank, PJSC AKTIV BANK (the Republic of Mordovia); * identification of the major imbalances in resource policy of the studied banks; * summarizing the study. …

Improving Bank’s Customer Service on the Basis of Quality Management Tools

In the current market conditions, when the difference between the characteristics of services is becoming less noticeable, for saving their leading positions and improving competitiveness the loan companies should pay more attention to the relationship with different customer groups. The problem of obtaining service requirements from the customers, the necessary information about the quality of work with services and bank departments, the need for conducting the surveys and studies, analysis of comments and suggestions are especially relevant for the Russian regional banks. This article focuses on the application of quality management tools for improving the process of bank’s customer service. The article presents results of the study conducted by the authors in 2011 and 2015 and aimed to confirm the hypothesis that the use of the tools of quality management in banking activities of customer service improves the competitiveness of the bank, due to better satisfaction of customers’ requirements. The application of QFD and SERVQUAL methodologies is emphasized, the methods of questionnaire and expert survey were used in the process of the study, the satisfaction of different customers’ categories was assessed. The object of the study was regional banks of Russia, located in the Republic of Mordovia. The study resulted in practical recommendations for improving the process of customer service in the regional Russian banks, as well as the proposal of the scheme of process management for customer service at the bank on the basis of various quality management tools.

Developing a Data Science Approach to Detecting Income Fraud for the Peer to Peer Loan Industry

Personal loans can be obtained by borrowers from very different types of lending institution. The most common are a traditional loan institutions, payday lenders, or a Peer to Peer (P2P) lending brokers. P2P lending companies do not loan the money directly. They link the borrower to a lender and provide the lender with the borrower’s income which is not usually verified. The P2P lenders collects fees based on the transaction and financially benefits from a higher number of introductions of borrowers and lenders. P2P lending is becoming more popular among borrowers because the pay highest interest rates are much lower than payday lenders and loans require less verification of income and assets than traditional loan institutions. A higher reported income with P2P lenders can result in a larger loan for the borrower and thus more profit and fees generated for the P2P lender. If the loan defaults due to an overstated or fraudulently reported income by the borrow, the P2P lender does not suffer, it is the lender that was matched to the borrower by the P2P lender that will incur the financial loss. This paper focuses on proposing a data science approach to detecting loan applicants that provide fraudulent income data to P2P lenders. The data obtained for this study contained 887,379 observations and 74 variables of loan applicants from the P2P loan company, Lending Club. The initial observations of this data showed that unverified loans make up 23% of the defaulted loans while verified and source verified loans made up about 77%. Described within this paper is how the data set for analysis was obtained and prepared for analysis, the initial findings, the proposed data science approach to fully analyzing this data, and the significance of the lending industry, both traditional and P2P, with a method of detecting fraudulent income reported on loan applications. Models generated from this analysis could be incorporated by lenders into their applications along with research in this area should improve the P2P lending industry by increasing the detection of fraudulent income reported on loan applications.

Financial exclusion and financial capabilities in Canada

Purpose The financially excluded are often denied basic financial services from mainstream banking institutions, leading them to high-cost fringe finance institutions (FFIs) such as payday loan companies and pawnshops. While strategies to address financial exclusion often include financial capabilities education, there does not appear to be evidence suggesting such education is an appropriate solution. The purpose of this study is to explore the relationship between financial capability and financial exclusion with survey data collected from the Canadian city of Kamloops located in the southern interior of British Columbia. Design/methodology/approach This exploratory research addresses the objective with survey data collected on the banking habits and financial capability levels of fringe finance users in a Canadian city. Findings The results imply that fringe finance users do not have lower levels of financial capability than those who do not use fringe finance, when education and income are controlled. Research limitations/implications Limitations include the relatively small survey sample of 105 people in one urban center in Canada. Originality/value While financial literacy is acknowledged to be an important life skill for all members of society, there is no conclusive evidence suggesting it is a solution to financial exclusion. This is the first research to examine the relationship between financial exclusion and fringe finance use in Canada by collecting data on fringe finance users with face-to-face interviews.