Scratch rolls out loan servicing platform that aligns lenders', borrowers' interests

Financial technology company Scratch has launched its loan servicing platform that aims to align the financial interests of lenders and borrowers.

“Business models based on borrower mistakes or misfortune are no longer sustainable,” said Sameh Elamawy, co-founder and CEO of Scratch. Elamawy was recently appointed to the Consumer Financial Protection Bureau’s Consumer Advisory Board.

Through a simple web application, Scratch’s platform allows borrowers to understand, manage, and pay back their loans while providing lenders real-time portfolio insights. The platform also automates the back-office functions of loan management to channel more resources to provide borrowers guidance.

Scratch said it designed the platform to simulate and unwind any loan transaction, to easily adapt to support lenders’ new products and services, and to make seamless the processes of transferring loan and account data.

Unlike traditional loan servicers, Scratch charges lenders the same amount for all delinquent loans in a portfolio it services, regardless of how long the borrower’s payment has been overdue. In addition, Scratch assesses delinquent borrowers’ ability to repay their loans and only charges late fees to those able to make payments. And those late fees, rather than going to Scratch’s bottom line, are used to keep borrowers on track through education and coaching.

The Scratch loan servicing platform is now available in the US. Pricing is volume-based: either a set of fees per loan per month or a percent of outstanding loan amounts per month.

“This is why we started Scratch,” Elamawy said. “We knew it couldn’t be just some app tacked onto the existing infrastructure or ecosystem. Real change would have to be more foundational. Rather than trying to build a better loan servicer, we set out to replace the loan servicer altogether with a platform for debt that empowers borrowers and brings them closer to their lenders.”