Comment by tomhoward | Hacker News Reader

Comment by tomhoward | Hacker News Reader

Parent Full thread

Dang doesn't represent YC's accelerator/investments arm (i.e., he's an employee engaged to run HN, not a YC partner who makes investment decisions or official YC announcements).

But here's an article from 2016 about what LendUp was trying to do back then: https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn...

I don't know much about LendUp at all, but I do remember the surprise - and feeling it myself - when it was announced that YC was funding a payday lending company. Then I remember the thinking behind it being explained (perhaps on HN, perhaps elsewhere) and seeing that the founders seemed to be making a sincere effort to offer something that was at least just less-terrible than the existing payday lending options around (many of which involve dealing with crime gangs), which made me think "OK, I guess it's worth a try". I presume YC thought the same thing when they invested almost ten years ago.

If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before, I still don't think it's reprehensible that YC thought it was worth backing founders that seemed to be making a sincere effort to try.

I don't think it's true that the only alternative is loan sharks. It's mostly "traditional" payday lenders, many of which are owned by the big banks (through a couple layers of obfuscation to cover up the stench).

I edited my comment to tone down the implication that it's only loan sharks.

That said, the "traditional" payday lenders all turn out to be quite predatory, don't they? (I understand that's what the original founding premise of LendUp was intended to address, even if they couldn't make it work.)

But aside from that, will the traditional payday lenders lend to everyone and anyone, no matter their circumstances? If not, what are the options for people who they won't deal with?

Sure, I would agree with that characterization. But apparently LendUp was even more predatory, to the point that regulators shut it down. So in retrospect, I think we need to take the claim that they wanted to create a kinder, gentler kind of lending with a grain of salt.

The claim we’re addressing in this subthread is that in 2012 YC knowingly invested in a company that intended to be predatory towards military personnel, such that it would end up being shut down by regulators, implying that YC was both deeply unethical and deeply stupid. Are we really to believe that YC was being as unethical and stupid as this claim requires us to?

"Knowing," "intended [at the time]", "would end up being shut down by regulators" are all your embellishments. The claim is "YC funded a payday lender that targeted active duty military service members." As far as I can tell, that is true, regardless of how pure anyone's intentions were at the time. The defense on offer is that the founders left the company between funding and now, but it is not very compelling given the timelines.

The last part of that comment is quite obtuse. Can you state simply and clearly, what, if anything, YC did that was unethical?

"Unethical" again another embellishment. Perhaps this was simply a case of poor judgment, which isn't unethical to have.

OK then. You weren't the root commenter, but it's pretty clear the root comment and the reply to dang were attempting to pin an accusation of unethical conduct on YC. But never mind.

There of course is another possibility: the founding team in 2011 was proposing a concept that seemed ethical and an improvement over payday lending options that existed at the time, but over time the company's idea or execution changed for some reason, in which case, there was neither poor ethics nor poor judgement on YC's part.

Occam's razor would require us to accept this explanation unless there was substantive evidence for another scenario.

I don’t see the Occam’s razor requires us to accept that over someone simply misrepresenting what their plans were.

By definition, Occam's razor requires us to believe that founders sincerely intended to do what they said they planned to do, unless there is evidence to the contrary.

Yes, but they won't literally break your legs over an unpaid debt anymore. These aren't run by crime syndicates AFAIK.

>If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before

This is a disingenuous response because this space is highly competitive and most of the big names in it have not gone out of business due to flagrantly breaking the law. Just because LendUp broke the law and went out of business does not mean there are no sustainable, legal entities operating in it.

You could have added your perspective without describing my response as "disingenuous", i.e., dishonest.

I said very clearly I have no specific knowledge on LendUp. I also know little about the space (apart from that it's a nightmare). The only specific insight I have here is on YC's history and ethical track record.

That said, can you educate me and other readers by linking to examples of companies that are doing well in this space (specifically, offering a better lending option than payday loans in the U.S.)?

Ok, we first have to start with acknowledging there are two different things under discussion:

* Sustainable, legal lending businesses operating in the payday loan space * Better lending options than payday loans

I am not an expert in either of these [though I have worked with numerous people who are experts in these] so will not make blanket statements (which is why your statement was disingenuous, rather than saying look I don't know anything about this you instead chose to make an authoritative statement indicating sustainable business was not possible in this industry which is untrue) about them, rather only indicate some of the information available:

In the first group you have companies like: * Enova [CashNet USA] - Had CFPB enforcement * Avant - Also from a YC founder, had FTC enforcement action * OneMain - Caps interest at 36%, actually has a carve-out in California lending law

These companies have been operating sustainably for years and looks like business is booming for them. Note how despite receiving enforcement action they were not shut down nor called "cheaters" by the CFPB like LendUp was? This is indicative that one can commit predatory actions in this industry and still be sustainable.

Now for the second group of better lending options than PayDay loans, that's a very wide field but let's assume we want to specifically discuss people who would otherwise be going for a PayDay loan. I'm going to link here to NerdWallet which actually has great overview of options: https://www.nerdwallet.com/article/loans/personal-loans/alte... Specifically, I would call out local credit unions as being a "good" option that is often overlooked despite providing a ton of loan capital in the U.S.

There are also a number of non-profits working to try to help people fall into the Pay Day loan space, in which I would specifically call out SaverLife https://about.saverlife.org/

Arguing whether or not PayDay loans are good (ethical) or not is subjective, as others have noted a high-interest loan can often be better than no loan, but what I would personally argue is that continued and improved government support for credit union payday lending (e.g. https://www.ncua.gov/support-services/access/advancing-commu... ) as well as more available physical lending options (e.g. Go to the Post Office for a loan) are very much worth exploring and supporting.

You've written a whole lot of words that bypass my point and double down on the accusation that I was dishonest.

You've only cited companies/orgs that are operating legally, not ones that are demonstrated to be highly ethical and substantially better for borrowers to deal with than the payday lending companies that existed when LendUp was conceived around 10 years ago.

Clearly, LendUp was talking about trying to build something much better for borrowers than what existed then, and that's what was compelling to YC (as I said in an earlier comment, I vaguely remember discussions about this being had at the time, and thinking it would be interesting to see how their plans would play out).

Exactly what went wrong along the way, I don't know, and I haven't seen any comments here explaining it - only indignant comments leaping to the conclusion that everyone involved must have had malicious intentions from the start but not offering any evidence for this.

This is why your comments are disingenuous. Both the comments here and the article itself discuss what went wrong legally with LendUp. You are willfully ignoring those.

If you want to weigh in with your "hot take" you should at least read the article, rather than coming in claiming LendUp did nothing wrong and then when presented with evidence fall back on well "I don't know" and "know little about the space".

This is exactly why your comment is disingenuous, because you specifically stated "turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before" as a defense of LendUp's actions, when as I have pointed out to you, there are plenty of sustainable businesses operating in this sector. If you want to quibble around "sustainable" vs. "good" then at the very least you should acknowledge there are companies that are operating legally vs. ones shut down (e.g. LendUp) after committing multiple violations.

I mean seriously, are you just going to ignore this statement:

“LendUp was backed by some of the biggest names in venture capital,” said CFPB director Rohit Chopra. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.”

The Director of the CFPB doesn't just come out and call everyone liars and cheaters.

This is very much worth harping on, because you are perpetuating and defending the idea that YC can do no wrong, instead of accepting that it is possible it made a mistake in funding and supporting these founders.

This attack is full of inventions. “Wilfully ignoring” the legal issues, and didn’t read the article. False. “Claiming LendUp did nothing wrong”. Seriously, where? “Perpetuating and defending the idea that YC can do no wrong”. Again, where, aside from pointing out that nobody has been able to provide any evidence that YC did wrong in this case?

The claim I’m disputing is that the original founders, when founding the company ten years ago, set out with malicious intentions to defraud people, and that YC and other investors knew and supported this.

(Others have later claimed that this wasn’t the allegation, and it was rather that YC made a mistake to invest in this company, in which case, fine, I have no major quarrel with that - most of YC’s investments turn out to be mistakes, that’s how their model works.)

But for those who insist that the original founders’ intentions from the start were nefarious and that YC was aware and complicit, this needs to be pushed back on, hard, as there’s no evidence for it and it makes no sense as you can’t build a successful business that way.

That the founders had high-minded ambitions that later turned out to be unachievable is the simplest explanation. Legal issues several years later, or examples of different companies doing different things to what the founders set out to do are not proof of malice on the part of the founders or YC, or of my dishonesty, and further wordy and aggressive replies from you won’t change that.

Seriously, the legal process has worked and the company has been shut down. Put away the pitchforks and torches.

Reply on news.ycombinator.com