Comment by aketchum | Hacker News Reader

Comment by aketchum | Hacker News Reader

Very interesting - I run the software team for a lending company so this is an area I am very familiar with. How extensive is the coverage of your compliance? Do you handle any dollar size loan in every state? Or do you limit to the easy loan types (only allow loans of $3001 or more in GA to avoid GILA, no loans in NC because no physical presence etc)? As a customer of Pier, how does this allow me to get around the licensing laws? The originator of the loan has to be licensed to give the loan so is Pier the licenser? Does Pier have APR caps separate from those in the states themselves or will you allow full utilization of fees to hit those 300-400% APR in states like AL and UT? Do you support all the interest calculations (rule of 78, 365/365, 365/360, Pre computed interest, refundable maintenance fees)

I know first hand that this industry is a GRIND and most existing tech solutions are bloated and inefficient legacy systems so I think there is definitely space to disrupt the industry. Best of luck!

Licensing is one of our modules. like other modules, our customers have a choice (think picking from a salad bar) of what they want based on their use case. for licensing, you can BYO, leverage Pier's licenses, or we can help you apply for licenses too.

Operating as a licensed lender would allow you to have higher APR thresholds. For example in IL, unlicensed caps at 9% (which is not always economical), while licensed allows you to lend at 36%

so if it is one of your modules, does that mean that I can say "hey Pier, get me a lending license in NC" and they you handle everything and come back after however long and say "here is your NC lending license"? how do you handle states that require in state offices?

If you handle getting the licenses for the company that is super valuable

yup totally! we can do most of the heavy lifting there to get you the licenses. we automate a lot of this w templates & also given our prior experiences getting these licenses and building relationships w regulators, so we know how to be fast/efficient here.

for in-state offices, there are 3rd party agencies to work with to set those up. also recently, some states like NV have passed laws to remove this bottleneck.

not sure if I misunderstood this but do customers use Pier's license as a stand in for their own license? Because that wouldn't work right

It could work depending on how they structure the receivables (SPV, 72 hour agreement to buy) from the loan facility.

I am also curious on the official answer though!

I second all the questions here, having worked in consumer lending alongside Risk teams as well. The big questions alongside these that come to my mind are:

1. Who has the lending licenses? Given the website footer disclaimer says Pier isn't the lender. I would guess it's either a banking partnership or a license arrangement carried over from Stilt/JG Wentworth?

2. How does Pier think of itself in relation to someone like LoanPro (who from my industry conversations has had a lot of positive momentum as the best origination software) and the other origination/servicing platforms? I gather the idea is a bundled "origination + decision + servicing" platform.

LoanPro doesn't do the decision engine piece itself, but from what I gathered it was partially due to the precisely the complexity and compliance risks parent commenter noted.

Definitely best of luck to the team, as the space can always use better software than what I've seen at older institutions.

1) see response above

2) a lot of existing solutions such as loanpro are good at supporting "vanilla" credit products, but tend to struggle with "chocolate & sprinkles on top" like configurations. we've talked to so many companies who told us that after they purchased these existing solutions, but had to spend another 3-6mths+ of engineer resources to configure it to their use case, and even that is still quite brittle with more manual involvements.

these configurations impact the entire loan cycle from origination, APR calcs, state rules and many more. for example, repayment cycles pegged to salary schedules, irregular 1st payment date, balloon payments, min payment for lines of credit, etc.

we handle anything from $0 to $50k+. our API bakes in all the nitty gritty of diff APRs, amounts, fees, interest calc methods based on state & fed regulations. For example, KS has cumulative APR calc method with 36% for <=$860, 21% for >$860, while TX is 30% for <$500, 25% for $500-1000, 18% for over $1k.

How does that work from an API perspective? Do I just "try" to create a loan and if not compliant with the location it returns back some kind of error. Or do I request some kind of margin value and you calculate how to get that in a given jurisdiction. Or some other flow?

Thanks for the great questions!

Our credit application API will return an error if you try to approve a set of offer terms for a user that violates their state's limits.

We also have a couple utility endpoints that help with coverage and compliance checks: 1) a coverage endpoint that returns the basic limits for each state and 2) an endpoint that allows you to verify if a set of offer terms are compliant for a given state.

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