One City Built to Last

y enid burns
HELPING SMALL
LENDERS IN TIMES
OF INCREASING
REGULATION
The economic downturn experienced at the close of the
last decade was a transformative time for the financial
industry's lending segment. Increased regulations –
meant to help consumers – actually made small loans
more expensive and more difficult to obtain. One company,
Infusit, hopes to remedy that by supplying customer
support services to small and medium-size lenders,
so they can continue to provide small loans and
lines of credit.
Since the debacle of 2008 and
2009, as regulation from the
state and federal levels increased,
many larger banks simply
stopped providing smaller loans
and lines of credit to customers. While
seemingly opening the door for smaller
lenders to provide these services,
new regulations imposed by state and
federal government made lending to
consumers increasingly difficult, hurting
both lenders and consumers.
“Most of the evolution happening
in the industry since the recession has
really, I think, affected the average
consumer more negatively than positively,”
said Randall Wasserman, president
of the financial customer service
firm Infusit. “You would think that
increased regulation would be a good
thing, and it can be in the long run, but
what happens in the short term is that
the pendulum swings too far the other
way. And, what we saw happen, is
that instead of increasing credit, banks
decreased the availability of credit – or
cut it off altogether.”
Over-Regulation Leads to Under-Funding
Regulation has all but brought the
small loan business to a standstill, especially
in states with tougher regulations,
such as California, New York,
Connecticut and Florida, where state
regulatory laws discourage companies
from lending money. In New York,
Connecticut and Florida, the state
dropped the interest rates lenders can
charge, making offering small loans
less profitable. In California, Wasserman
offers an example of how new
regulations for lenders determine the
maximum fees on loans. For instance,
a loan of under $2,500 cannot accrue
fees over a certain amount, such as 12
percent of the loan. As a result, lenders
simply stopped loaning in that category,
leaving credit-strapped consumers
high and dry. Consequently, many
customers were forced to look in other
states to get financial help, actually
paying higher fees in the process.
“So, in trying to help the consumer,
some states over-regulated and forced
consumers to look elsewhere,” Wasserman
told The Suit Magazine, in
an interview. “That drives customers
to neighboring states, … where they
end up paying much, much more for
small loans and lines of credit than
they would have if it wasn't such an
over-regulated environment.”
Supporting Small Loans
Wasserman's firm, Infusit, provides
customer service, call center support,
software, and other services for small
to medium-sized lenders. This, in turn,
helps reduce operational costs for
those lenders, allowing them access to
more capital that they can use for loans
to consumers.
“I would like to see more credit and
lower costs of capital made available
to small lenders to drive down some
of the borrowing rates, which will help
them to grow,” Wasserman said. “This
will enable them, in turn, to provide
THE SUIT MAGAZINE - NOV 2014