Washington, D.C. – October 20, 2009 – Amid historic regulatory reforms being considered by the new administration and lawmakers on Capitol Hill, the Coalition for New Credit Models announced its formal launch today as its representatives descended upon Washington. The Coalition is made up of non-profit, for-profit, and social enterprises using new technologies, products and business models to provide credit and information to millions of consumers and small and midsized businesses. 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.
Chris Larsen, Chief Executive Officer and Co-founder of Prosper, America’s largest peer-to-peer lending marketplace, said, “This country has been in an energy crisis for years and we are now in a financial crisis. America’s economic future depends on new and alternative credit models being embraced in the same way green technologies are being nurtured by policy leaders to help solve the energy crisis. We are at risk of being suffocated by rigid regulations that threaten rather than embrace new technologies and models.”
The current regulatory environment has stifled many entrepreneurs in this nascent industry, and it is clearly time for new policies and fresh thinking from lawmakers and regulators. At a time when the credit crisis and recession have adversely affected consumers, families, small and mid-market businesses, Coalition members have created alternatives and innovations that will make the country less dependent on any single point of failure, or institutions that are too big or too interconnected to fail.
James Gutierrez, Chief Executive Officer of Progreso Financiero, said, "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 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."
Nicolas Perkin, President of The Receivables Exchange, said, “Now more than ever, America’s businesses should have unfettered access to alternative and reliable sources of capital to meet their business financing needs. As the economy regains momentum and technology continues to accelerate the pace at which business is conducted around the world, only innovation and an uncompromised focus on transparency and responsible financing models will drive sustainable growth and prevent businesses from being reliant on a single source of funding, and thereby exposed to unnecessary risk.”
The Coalition for New Credit Models recommends that Congress and the administration:
1. Adopt legislation classifying person-to-person lending as a consumer banking service, not a securities offering.
2. Create a liquidity fund to provide capital for companies making small consumer loans to underbanked individuals.
3. Establish a federal backstop for small and mid-sized businesses to provide access to working capital through electronic marketplaces.
4. 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.
5. 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.
Background on Coalition Members:
SecondMarket (New York, NY) is the largest 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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