Employee Loan Solutions - TrueConnect
The founders of Employee Loan Solutions, LLC (ELS) met and worked together at Intuit, Inc. and led a product innovation team to evaluate and develop new business initiatives for the company.One such project involved a thorough analysis of the market for alternative credit. The Founders of ELS were troubled by what they learned:millions of working-class Americans, most with good paying jobs, were trapped in a vicious cycle of debt caused by a reliance on payday and car title loans.In most cases, they had some personal financial emergency in their recent past that had severely damaged their credit – or they had not established any credit history at all.Consequently, they did not qualify for the kinds of traditional credit options that most people take for granted – bank loans, credit union loans, credit cards, etc.
After leaving Intuit, they decided to do something about it.Their goal was creating new and better credit opportunities for those who have few options available for emergency or unexpected financial needs.
The innovation exercise concentrated on:
- Sourcing credit from safe, regulated financial institutions – banks and credit unions.
- Creating technology to innovate and automate their existing loan making processes.
- Creating a channel that reduced costs to the lender
The result of this exercise was the development of TrueConnect, a voluntary employee benefit program offered at no cost and no financial risk to employers, but that would enable employees to access safe, affordable credit from a regulated financial institution without need for a credit score.All of these innovations would result in a better, safer, more affordable alternative for borrowers.
The Founders filed for and were awarded a patent for their innovative program of providing access to loans through employers, which could be repaid through automated payroll deductions. ELS owns the patent awarded by the US Patent and Trademark office in 2008, Patent number 7,386,507.
After being awarded a patent for this innovative solution to a difficult problem, ELS spent over a year with Federal bank regulatory agencies that had been working to identify viable, scalable, banking alternatives to payday lending in the small dollar credit space. The Federal Deposit Insurance Corporation (FDIC) led a three-year pilot program, supported by the US Department of Treasury, the Federal Reserve and the Office of the Comptroller of the Currency. Together they invited banks, credit unions, and innovators like ELS to participate and share their ideas on how to best serve the needs of consumers in need of small, short-term credit. ELS made several presentations to these regulatory agencies on the employer-based loan model envisioned in TrueConnect, and got very favorable feedback on the model. Our loan sizes and program terms were shaped by information learned from these Federal agencies and the other pilot program participants, specifically around how to best meet the credit needs of the people most in need of this kind of help.
While participating in the FDIC’s Small Dollar Loan pilot program, ELS also worked with a wide range of subject matter experts in the area of consumer finance, consumer protection and consumer advocacy.ELS conducted focus groups over 18 months with leading consumer advocacy organizations to develop the specific terms and conditions of the TrueConnect loan program, particularly on issues like: how many options to present to consumers, how many loans should borrowers be able to take, should loans be refinanced, how long should the repayment terms be, etc.The specific terms and conditions of the TrueConnect program were not arbitrary or based on what was in the best interest of the lender, but were developed with fastidious and extensive collaboration with Federal regulatory agencies and leading experts in consumer protection and advocacy.
ELS then sought a national lending partner to provide the employee emergency loans through the TrueConnect platform.Rather than become a finance company and issue its own loans, ELS chose to partner with regulated financial institutions.Part of the goal of TrueConnect is to help bring employees who today are excluded from the “traditional” credit markets back into the regulated banking world of banks and credit unions.ELS also wanted partners that shared the overall mission of serving the needs of underserved and under banked populations.