Credit Hub

Credit Hub is a platform that allows you to open various types of credit accounts for individuals or businesses via an API call.

Our mission is to ensure that everyone has access to high quality financial services. So it doesn't matter if your customers are underbanked, recently immigrated, small/medium/large business owners. With Credit Hub, you can onboard customers from all walks of life.

Account Types

The different accounts we offer have different characteristics, regulatory restrictions, among other distinctions. This variety allows us to offer the best solution for each use case. Please refer to the tables below for an idea of the distinctions between our accounts.

Account Type

Account Code

Description

Open

OPEN

Open Credit Accounts have flexible credit limits which are tied to the funds the user is holding in their deposit account. This account type is ideal for building a neo banking platform on a credit BIN for higher interchange or for charge cards.

Revolving

REVOLVING

The credit limit is determined at the time the credit account is created and is backed by funds in the user’s reserve account for secured credit cards, or not, in case of unsecured credit cards.

One-Time

ONE-TIME

This Credit account is meant for one time use only. Ideal for POS financing or cash advance products.

Cash Advance

REPAY-US

This account is meant for payroll-based cash advances. Ideal for overdraft protection type products built on top of Deposit Hub or external bank accounts.

Key Use Cases

Credit Hub can be used for pretty much any application that requires an embedded credit account. But we have seen our customers building the following use cases most frequently with this offering:

Use Case

Description

Buy‎‎ Now Pay Later

Issue one time loans to your customers to enable online or in-person shopping. Either disburse the loan via a card issued by you or in an external account via ACH or Push to Card.

Spend Card

Enable customers to enjoy flexible credit limits based on the cash at hand, spend on a credit BIN for cashback rewards, or build credit.

Credit Builder

Issue one-time or revolving loans to enable your customers to build credit.

Credit Card

Issue a secured or unsecured revolving loan and a card to unlock a traditional credit card experience for your customers.

Minimum KYC Requirements

Please note, KYC requirements will differ between individuals and business users, and might further vary depending on the use case and the nature of the user. Here are minimum KYC requirements by account type and user type:

Account Type

Individuals

Businesses

OPEN

Name, Date of Birth, Address, Email, Phone, and SSN.

On Business:

Business Name, Address, Entity Formation Date, Entity Type (LLC, Corp, etc), Entity Scope (Industry), Email, Phone Number of the Business, and TIN.

On Beneficial Owners:

Name, Date of Birth, Address, Email, Phone, and SSN.

REVOLVING

Name, Date of Birth, Address, Email, Phone, and SSN.

On Business:

Business Name, Address, Entity Formation Date, Entity Type (LLC, Corp, etc), Entity Scope (Industry), Email, Phone Number of the Business, and TIN.

On Beneficial Owners:

Name, Date of Birth, Address, Email, Phone, and SSN.

ONE-TIME

Name, Date of Birth, Address, Email, Phone, and SSN.

On Business:

Business Name, Address, Entity Formation Date, Entity Type (LLC, Corp, etc), Entity Scope (Industry), Email, Phone Number of the Business, and TIN.

On Beneficial Owners:

Name, Date of Birth, Address, Email, Phone, and SSN.

REPAY-US

Name, Date of Birth, Address, Email, Phone, and SSN.

On Business:

Business Name, Address, Entity Formation Date, Entity Type (LLC, Corp, etc), Entity Scope (Industry), Email, Phone Number of the Business, and TIN.

On Beneficial Owners:

Name, Date of Birth, Address, Email, Phone, and SSN.

Please note that the above requirements assume that ID Score (which includes real-time SSN verification) is being used for Individuals and Beneficial Owners. If not, US Government Photo ID (GOVT_ID,GOVT_ID_BACK) will also be required for all users and beneficial owners.

Credit Terms

Synapse's lending entity Synapse Credit LLC will be the lender for the loans. This means it will be underwriting all the lines and serving the loans to the end users or businesses.

To reduce the risk of losses for our lending entity, either the end user will be required to put 1:1 collateral in a reserve account (in case of secured loan products) or you (the platform) will be required to do so while acting as a guarantor of the loans. So in instances where loans default, the reserves will be tapped for covering the losses.

Credit Reporting

You may also choose to enable credit reporting with us. Currently if enabled, all credit accounts of your customers will be reported to Equifax (more coming soon) by the 3rd of each month for the previous month. Since Synapse's lending entity Synapse Credit LLC is the lender of record, the credit report will show both Synapse Credit LLC and your name on the credit file.

Credit Decisioning

As a part of any good responsible credit model, a robust credit decisioning policy is a core part of the program. When building credit policies, please consider the following decisioning constructs:

Prerequisites

You can filter which of your users has the option to apply for a loan based on various decisioning criteria, we refer to these as prerequisites. Common examples are that the user has been in the platform ecosystem for over six months or that they are part of the platform's premium service.

Although you can propose prerequisites, they will all have to be communicated in detail and be approved by us as the lender of record. Furthermore, if you wish to make a change to your prerequisites, the change will have to be first explained in detail and approved by Synapse for the same reasons.

Please note, filtering the user before solicitation is considered a prerequisite. If you are deciding to decline a loan after the loan application flow has begun, that requires booking an adverse action. Please see Custom Loan Rejections for more details.

Base Decisioning

At a basic level a loan can be rejected based on the following criteria:

  • The user does not have SEND-AND-RECEIVE permissions (which occurs when not all relevant KYC has been submitted or verified) or if the user is a match in one of our sanctions lists. Go to Users page to learn more.

  • Lending is not currently available for the user's CIP tag or user type.

  • The requested amount is above the defined maximum per user loan size of your platform.

  • The loan will put you over the limits of the amount (in dollar value) of loans you are allowed to issue.

We handle basic decisioning on our end.

Custom Rejections

Outside of Prerequisites and Basic Decisioning, some use cases will also require the option to reject a loan after the application process has started. For example, you may receive the user's income level and decide that it is too low. Because this information might be captured after the loan application process started, it cannot reasonably be considered a prerequisite.

For any loans that you reject, you will be required to book an adverse action in our system so that we have a record of this action. Please see Booking an Adverse Action for more details.

Disparate Impact

As a part of the Fair Lending Act, we are responsible for ensuring that all applicants are being impacted (not just treated) equally and not being discriminated against. As a part of that commitment, we will also be doing regular audits in our system to check for any direct or indirect discriminatory decisioning.

Interest Logistics

You can supply the APR on a loan at the time of creating a credit account for the end user. At loan creation, you will have the option to set the APR from 0% up to your maximum APR. The maximum rate that can be charged on a loan varies by state.

Interest Charges

Since you are not the lender of record, you cannot directly benefit from the interest charged on the loan. For that reason, interest payments go from the user's credit account to Synapse Credit LLC's account.

How Interest Accrues for One-Time Loans

Interest will be calculated and defined at the moment of the user’s loan approval and will accrue and compound daily against the outstanding balance based on the APR set for the loan node.

How Interest Accrues for Revolving and Open Loans

Like standard credit cards, revolving lines do not charge interest if the total statement balance is paid on or before the statement payment due date (e.g. before the end of the month following the statement cycle). The statement cycle starts on the first day of the month and ends on the last day of the month.

The statement balance is the balance at the end of the statement cycle (i.e. the balance on the last day of the month). Interest will start to accrue for the statement balance at the beginning of the next statement cycle (i.e. the next day, which will be the first day of the month). Interest will not be charged if the statement balance is paid on the statement payment due date, but the user will owe any accrued interest for any balance remaining after the statement payment due date.

The next statement balance will include any withdrawals and payments made in that month, as well as any unpaid balance from previous months plus the unpaid accrued interest for that month. Once the statement cycle ends, the new statement balance is defined and this amount will be owed. This means that if the new statement balance is paid in full by the statement payment due date, no interest will be owed.

For example, if at the close of a statement cycle, the outstanding balance is -$500.

  • This means that if the statement is delivered on the 7th of the next month, the user would be responsible for paying the -$500 statement balance in full by the end of the month to avoid paying interest charges on that balance.

  • Please keep in mind that interest will start to accrue on the -$500 statement balance immediately. If payment is made after the grace period (i.e. at or past the end of the month), the user will have to pay all of the accrued interest for the statement balance from the beginning of the current month.

  • If the user makes a partial payment before the statement payment due date (i.e. before month-end), the payment will count towards the statement balance due and the user will be responsible for paying the interest accrued on the remaining amount.

Interest for Cash Advances

Our Advance product allows you to issue interest-free, fee-free, short-term one-time advances to users. Our current implementation only allows for 0% APR advances with no fees per provided advance due to regulatory constraints on payroll cash advances.

Alternative to Charging Interest

An alternative to charging interest is charging SaaS fees to end users when you bundle a few services together. For example, you may offer a basic Neobank without credit accounts, but bundle in financial advice and credit accounts for a small monthly fee.

Delinquency and Account Closures

If a user is delinquent on one or more loan payments, interest will continue to accrue and compound daily.

Interest will continue to accrue until the loan reaches the cap amount set for the loan. Once interest charges reach the cap amount, interest will stop accruing. Currently, if a credit account has had no positive payments for 90 days or more, we consider the credit account to be in delinquent status.

Termination Logistics

If a user is delinquent in making their loan payments, as described above, a transaction will be created from your reserve account to the user's credit account to zero out the balance. At that point, the node will be set to INACTIVE with ACCOUNT_CLOSED as the allowed code. To learn more about which values are allowed, go to Possible Allowed Status Codes.

Notice to Users

Once a credit account is terminated, you would find a termination letter (also known as "Loan Termination Adverse Action Notice") in the response (within the info.agreements object in the response with type TERMINATION_LETTER). You are required to share it with the user via email as this is considered an Adverse Action. To learn more about potential agreement types, go to Possible Agreement Types.

Getting Started with Credit Hub

To spin up a Credit Hub for a user, here are the steps you can follow:

The first step is to create a user account and supply all of their KYC. Once the user account has been created, grab the refresh_token from the response which will be needed to issue an OAuth key for the user.

The next step will be to start performing actions on behalf of the user. To do that, you need to grab an OAuth token for the user.

To do that, usually, you make a View User API call and grab the refresh_token from the user profile or get the refresh token from the create user call (like above).

To avoid 2FA, please use the fingerprint value that you used while creating the user account. Once the OAuth key is issued, grab oauth_key which will be needed to launch credit hub.

You have an ACH-US node linked to the user profile. This means that the user can repay balances on their credit account via an external bank account or if funds are available on the credit account, the user will be able to cash out into the external bank account.

Linking an external ACH account is a good way to have a disbursement and repayment account ready before a loan is issued. You can also enable your users to link an interchange account or even just use Deposit Hub for the same purpose.

Launch Credit Hub

Before Creation

Before launching a Credit Hub, please ensure one of the following has happened:

  1. If you wish to provide unsecured loans, please make sure your loan reserve account is funded for the portfolio that you wish to issue. Go to Credit Terms to learn more.

  2. Or, if the product is secured, please ensure that the customer's loan reserve account (LOAN-RESERVE-US) has been created. If you are issuing an open loan, then you can just issue an open loan without any funds in the customer's loan reserve account since open loans have dynamic limits and are a function of the funds available in the reserve account. But if you are issuing a revolving loan, please ensure that the customer loan reserve account has been funded before issuing a loan.

Creation Flow

The next step is to have the customer preview the credit account agreement to the user, once they agree, create the credit account (One-Time, Revolving, Open or Cash Advance).

That's it. You've successfully created a credit account for your user.

Enable Some Features

Now let's enable some features on this credit account. Please note, these features are available for all credit accounts except Cash Advances.

Now the user's credit account will also have an account and routing number associated with it. This can now be used for direct deposit (payroll, Paypal, Venmo, etc.) or direct debit (billpay, Venmo, Paypal, etc.).

Now the user's credit account will also have a card number associated with it. The card can be instantly activated for spending online or through the mobile wallet of choice. The card can also be shipped so that the user has a physical card at hand for use. You can also use our virtual terminal to emulate some transactions.

Now your user has a fully functioning Credit Hub! We would also recommend trying the following:

This will enable your platform to always stay up to date when changes/updates to the users, nodes, transactions or subnet objects occur.