Subprime lending is back, but this time new characters are entering the fray.

One such company is online lender ZestFinance, which received $150 million last week. It will use that money to lend to subprime borrowers, a group considered untouchable by banks because of their higher risk of default.

The Hollywood financial tech firm said it has developed a machine-learning software program that assesses the risk of lending to individuals based on a number of seemingly quirky traits. Previously, Zest had sold that software to financial institutions, but now it aims to use the program to manage the risk around originating loans to near-prime borrowers, the top slice of the subprime category.

Zest’s software uses nontraditional, often nonfinancial factors to judge credit worthiness.

“One of the things we look at is the way you fill out an application,” said Zest Chief Executive Douglas Merrill. “If you are typing your name in on an application in all upper cases you are slightly higher risk than someone who types in all lower case or upper and lower case.”

Merrill said they don’t know exactly why that is true, but the company’s software has established a correlation between the two. In order to determine credit ratings, the company sifts through more than 70,000 variables, including how long applicants have had their current phone number, social network connections and Web-browsing habits. Traditional factors such as credit scores and credit history are also considered, including data from before the 2008 market crash.

The company launched its subprime Basix loan product this summer in 15 states. Early performance convinced New York investment management firm Fortress Investment Group to boost the effort with the extra funding last week.

Zest loans are often used for consumer needs such as credit card consolidation or large-ticket medical items, said Merrill. Its Basix program offers an unsecured installment loan for a three-year term at fixed annual percentage rates between 26 percent and 36 percent. Monthly payment amounts and APR are fixed over a loan’s lifetime. Loans range from $3,000 to $5,000.

Tech lenders

Zest is part of an emerging financial sector that believes it can nimbly avoid the risks of subprime lending through savvy data crunching.

Last month, two other data-driven lenders raised significant funding: Social Finance Inc. of San Francisco raked in $1 billion, while Chicago’s Avant, which has a research and development office in Playa Vista, took in $325 million.

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