Former banking regulator Sheila Bair is joining the board of the online lender Avant.
Avant, based in Chicago, specializes in digital lending to subprime consumers. The firm offers installment loans that range from $1,000 to $35,000 and carry annual percentage rates of between 9% and 36%.
Bair has a long-standing interest in small-dollar consumer lending. During her five-year tenure as chair of the Federal Deposit Insurance Corp., the agency ran an experiment aimed at encouraging banks to make small but affordable loans to consumers. That project fell short of expectations, as 31 banks made a total of just 34,000 loans.
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In an interview Thursday, Bair said she believes that online lenders can bring down costs in consumer lending – and make better underwriting decisions – by leaning more heavily on technology.
"We don't have to just rely on FICO scores," she said.
After leaving the FDIC in 2011, Bair chaired a nongovernmental group that monitored the implementation of post-crisis reforms aimed at curbing systemic risk. She also served on the board of the Spanish bank Santander.
Last year Bair was named president of Washington College in Chestertown, Md., a position she still holds.
Bair said she decided to join Avant's board after meeting with the firm's chief executive, Al Goldstein, and talking to other employees.
"I like their business model. I like the fact that they're trying to serve this middle-class segment," she said. "I think they're trying to serve it in a responsible way."
Since late 2012, the privately held Avant has issued $2.8 billion in unsecured U.S. personal loans. On March 21, the firm announced an expansion into auto lending, which should help it better compete in the subprime consumer lending market against firms like Evansville, Ind.-based OneMain Holdings.
Bair said Thursday that Avant operates in compliance with the FDIC's guidelines on affordable small-dollar loans. Those guidelines, which date to 2007, encourage lenders to offer loans with APRs no greater than 36%. They also suggest the use of automation to enable faster, less expensive service.
When asked about the potential downside of data-driven underwriting, Bair said lenders need to take steps to guard against discrimination.
"There should not be factors that have discriminatory impact," she said.
Before joining the FDIC, Bair was a professor of financial regulatory policy at the University of Massachusetts Amherst. She also served as assistant secretary for financial institutions at the Treasury Department and as senior vice president for government relations of the New York Stock Exchange.
"Sheila's proven track record and expertise in the financial services and regulatory spaces will be invaluable to the Avant team," Goldstein said in a news release announcing Bair's appointment. "We are excited to bring Sheila on board as we prepare for the next phase of Avant's strategic growth."
Also serving on Avant's board are James Robinson 3rd, a co-founder of the venture capital firm RRE Ventures, and Siddharth "Bobby" Mehta, former CEO of the credit bureau TransUnion.
