USA loans

[Guest]

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[Eli]

I've received an email response from Gerard at Kiva Customer Service that almost addresses the USA loan issue in question.

My email asked about the license being suspended from the borrower in the USA, and how the MFI missed it, that the suspended license was what caused the 'F' rating by the BBB.  My last line indicated that missing the business operating without a license was to me "a horrible reflecting on the vetting by the MFIs in the USA on Kiva'.

Other than thanking me for the email, it followed with: "I think it's a leap to say that this means  **USA MFI name removed by me**  has a horrible vetting process."  Nope, I said it was a 'horrible reflection'.  I would think that Kiva lenders would want to know that the business they are providing a loan to has met the legal requirements in the state in which they operate their business.  I would think that that is something that should be the responsibility of the MFI to verify.

The level of interest in the business operating without a license was met with the response:  "Though that particular business might have a poor BBB rating, that doesn't say anything about their ability to repay or the state of their finances, which is what our Field Partners vet for."  Repayment wasn't an issue, it was operating without a license, which was not addressed.

And that was the entire response.  So as a customer do you think I was satisfied with the reply?


Just now as I was typing this, I received the second response from the MFI about my concerns with the missing operational license.  Please let me share it with you:

"Do you work for the BBB or another **word removed by me to indicate business** competitor?  Would you be interested in sharing your name and contact information, as we have done?

There is nothing irresponsible in recognizing that not everything on the internet is correct, accurate, or even in context.

Is there some way I can help you, or were you just commenting on how seriously one should take the BBB?"


To me, this doesn't show too much for their concern for their providing a loan to a business without a required state license, or for showing much interest in investigating it any further.  So I'm gobsmacked a second time.

Now let me share with you what I have learned, with very little effort.   I've kept mum on this on purpose in hopes that the MFI or Kiva would have the interest or desire to dig up this information on their own.  A simple phone call to the BBB informed me that the 'F' rating was solely due to the business having a suspended required state operational license.  They were unable to tell me why it was suspended, but told me to call the state contractors license board for further details and provided me the phone number.  The state licensing board immediately informed me that the operational license was suspended in August due to them not providing Worker's Comp which is required by state law, and puts both clients and employees at risk.  They also informed me how I could review the details for this business on their website which was even easier than the phone call.  While I spoke to them they checked their database and as of closing time on October 13, there was no record of any submission that would reinstate their license.  So they are without the legally required insurance for their employees, and without a legally required state operational license.

So with my small amount of 'due diligence' I got to the bottom of it right away.  This borrower said he went for a loan through this MFI/Kiva because he had a bad credit rating, lets just hope that none of his employees get injured because one would think that, too, would alter his ability to repay his loan.

[Jan & John]

I just by chance did a search on a US loan, and came across their Better Business Bureau rating.  The business rating was an F, which means you can't get anything lower.  The write up by the BBB on the business was:

"We strongly question the company’s reliability for reasons such as that they have failed to respond to complaints, their advertising is grossly misleading, they are not in compliance with the law’s licensing or registration requirements, their complaints contain especially serious allegations, or the company’s industry is known for its fraudulent business practices."

Not too comforting how they are being screened.

I've just read this whole section of the thread...
Eli, is there some reason why you won't share with us specific information about the borrower or the MFI in question?
It's difficult to understand without having all the facts.

thanks, jan

[Eli]

I've just read this whole section of the thread...
Eli, is there some reason why you won't share with us specific information about the borrower or the MFI in question?
It's difficult to understand without having all the facts.

thanks, jan

Jan, check your PM inbox.

[cpbailey]

I would argue that if they aren't paying for workers' compensation, then an injury could lead to their not being able to repay the loan.  In Auburn, CA, if an unlicensed contractor (over $500 in labor and materials which is NOTHING) does so in the fire disaster area, it is a FELONY.  They are cracking down in that area.  Hard to repay loans if you go to jail.  What do they make, $.50 an hour?  Although it does come with room and board and medical care.    

Here is a link which covers some of the legal issues for CA.  http://www.rocklintoday.com/news/templates/community_news.asp?articleid=8215&zoneid=4

I think Eli is being wise.  It might be avoiding a legal issues about slandering reputation or some such crud.  Expensive to fight even if everything said is accurate.

Colette

[JoanW]

It may be an "occupational hazard" - but in my experience, those who are not overly concerned with the details of being licensed or in compliance with the state & local laws, typically care as much about their ability to pay their bills. In my experience, it has also reflected on the professionalism that was brought to the task at hand. 

Don't get me wrong - the individuals were generally really nice people. I have just spent too much time & money fixing what unlicensed contractors "fixed" because they were a nice guy and I was trying to give someone a break.

I agree with Colette - Eli is right to protect himself from potential legal headaches - even if everything posted is true.

[michael]

It is unfortunate that this individual is not complying with insurance and licensing laws.  I wouldn't want to loan money to such a business.  But that is problematic.

What is more disturbing is that apparently the MFI 1) didn't check this and 2) doesn't seem to understand why it's important (or perhaps does not understand Eli's actual questions?   hmmmm)

As for Gerard's response, I do not understand how an illegally operating business is not on its face considered an unacceptable credit risk, MFI vetting (or not vetting well) notwithstanding.  The response, if cited correctly, was at best not thought out completely.  Again, I suspect Kiva has not considered that it goes beyond the BBB rating itself and instead rests on the reason for the BBB rating -- the business is simply not allowed to do any work or make any money in the state.  Hence, it cannot hope to make repayment.

Thanks for pointing this one out, Eli.

[JoanW]

OFF TOPIC - Michael I love your signature lines.

[wthepoo]

Indeed, thank you, Eli for raising this - I agree that the business should probably not be named here.

Just one thing: As far as I can tell (and I assume we are talking about the same business), it does not exactly look like the entrepreneur does not care about workers' comp but more like he cannot afford it - he had workers' compensation insurance but it was canceled on him twice in the past (my guess: for failing to pay the premium) - last in early September 2009 which led to the suspension of the license. It may well be that he needed the loan to pay the premium and thus re-activate the license (though then I wonder why he apparently didn't - unless it's all in the process of being sorted out with the insurance company) - which isn't exactly better as it casts a dark shadow on the business's financial situation (and isn't reflected in the write-up), and makes this a question of financial vetting, as well.

I agree that suspension of the license should be taken very seriously by the MFI and by Kiva - especially the MFI's answers IMHO show an alarming degree of indifference.

Best wishes,
Wolfgang.

[Eli]

Indeed, thank you, Eli for raising this - I agree that the business should probably not be named here.

Just one thing: As far as I can tell (and I assume we are talking about the same business), it does not exactly look like the entrepreneur does not care about workers' comp but more like he cannot afford it - he had workers' compensation insurance but it was canceled on him twice in the past (my guess: for failing to pay the premium) - last in early September 2009 which led to the suspension of the license. It may well be that he needed the loan to pay the premium and thus re-activate the license (though then I wonder why he apparently didn't - unless it's all in the process of being sorted out with the insurance company) - which isn't exactly better as it casts a dark shadow on the business's financial situation (and isn't reflected in the write-up), and makes this a question of financial vetting, as well.

I agree that suspension of the license should be taken very seriously by the MFI and by Kiva - especially the MFI's answers IMHO show an alarming degree of indifference.

Best wishes,
Wolfgang.

Wolfgang, the loan was disbursed last month, if cash was the issue for him to get his license reinstated you would think that he would have had the paperwork ready to submit the moment that loan arrived, so he could be legal and above board to operate his business.  As I stated before, there is a long waiting period for any data to enter the Contractors State License Board and they have a system set up that immediately registers their paperwork as being 'received' when it arrives while it is awaiting processing.  There was no paperwork in the 'pile' awaiting data entry as of the end of the work day on the 13th of October.

I think both responses show an alarming degree of indifference and 'turning a blind-eye' of Kiva and the MFI supporting a business that is operating without a license or without Worker's Comp, both being required by law.

[Eli]

I've heard again from Gerard concerning this loan to a contracting company that is operating without a license and operating without Worker's Comp, both of which are illegal in the state in which he operates, and in the state in which the MFI resides.  My question to him after his initial response was "So is this as much of a response that this issue is going to get?  No further research of the issue from Kiva?"  And his answer is:

"We can't possibly vet every single loan on Kiva. There are just too many. That's one of the reasons we have Field Partners. Some Field Partners have riskier portfolios than others, from a borrower risk standpoint, which is something we try to reflect in the star rating."

It has nothing at all to do with vetting, not one bit.  It has everything to do with checking into a business that is operating without a license and workman's comp both required by law in their state, and doing something about it after it is reported to Kiva.

To me this is a giant issue, that a huge loan was given to someone that is operating in such a manner.  I can't get the MFI to have any interest or concern in the matter, nor can I get Kiva interested nor concerned in the manner.  So do any of us want to provide loans to a company that is operating without a contractors license, nor without insurance to cover themselves?  To repeat again, this is illegal in their state to be without one or the other!!!  This boggles my mind that this is okay with Kiva and the MFI. 

What more can one do?