Senate Banking Chairman Sherrod Brown Calls for FDIC Investigation of Tellus
The chairman of the Senate Banking Committee called for an investigation into fintech firm Tellus on Tuesday. The California-based startup provides real estate loans using funds deposited by customers through its mobile app.
The firm has used TikTok and other social media to advertise savings accounts that “earn more than 13 times the average savings account while keeping your money out of the markets.”
In a letter to the Federal Deposit Insurance Corp. on Tuesday, Sen. Sherrod Brown (D., Ohio) called on the agency to “undertake a thorough review of Tellus’ business practices and risk management procedures and, if necessary, take appropriate action to protect consumer interests.”
He cited reporting by Barron’s last month that “raises several red flags about the company’s business practices and potential risks to customers.”
Tellus is among a breed of tech-banking mash-ups that have raised millions from Silicon Valley venture capital firms. The fintech companies go largely unregulated by authorities who are faced with applying analogue rules to digital disruption.
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Heavyweight Andreessen Horowitz led a $16 million funding round for Tellus last year.
Spokesmen for Tellus and Andreessen Horowitz did not respond to messages from Barron’s seeking comment on Brown’s letter. The FDIC declined to respond to questions from Barron’s.
Brown sent a separate letter to Tellus’ chief technology officer Jeromee Johnson on Tuesday, asking for information about Tellus’ business model, risk assessments and marketing practices.
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Johnson did not respond to a message from Barron’s.
Barron’s reporting last month showed that Cupertino-based Tellus App has not been direct with customers about the loans it makes using the deposits in its non-bank savings accounts. These accounts offer interest rates of 5% or more.
Tellus says on its website and in its posts on TikTok, Instagram and other social media that it provides mortgages to landlords with income-producing properties or to homeowners who are changing houses who need short-term “bridging” loans.
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But the start-up has financed riskier types of loans, including to property speculators and distressed property owners, Barron’s found.
Tellus operates without a bank charter, which means depositors are at risk of losing their money if these loans default.
Tellus previously said it had banking relationships with financial giants JPMorgan Chase and Wells Fargo
.
Tellus subsequently removed references to these matters from its website Barron’s asked the banks about these links. Both JPMorgan and Wells Fargo disclaimed any partnership with Tellus.
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In his letter to FDIC Chairman Martin Gruenberg, Brown urged the agency to investigate Tellus and its operations as “the federal agency charged with protecting the integrity of the banking system and ensuring the safety of depositor funds.”
“The FDIC has a critical role to play in protecting consumers from financial fraud and abuse,” he wrote.
Write to Jacob Adelman at [email protected]
