advertise in various dealerships and on carrier websites. Our partners include T-Mobile, Sprint and TracFone.

With SmartBiz, we started migrating toward a line-of-credit product in which people could borrow money for a longer period of time, and therefore we could have a more economically supportable business. We also started talking to banks about their small-business lending practices and we realized that there was room to improve.

Imagine a loan for $20,000. Even if I knew I wasnt going to lose money on the loan, it still wouldnt be profitable for me if it costs $2,000 to review the application. So we help small businesses apply for [Small Business Adminis-tration] -guaranteed loans and assist the banks with the underwriting process, all through our automated technology. Some of the lenders we work with are Celtic Bank, Golden Pacific National Bank and First Home Bank.

DJ: Are you Better Finances first general counsel and did they approach you?

Peretz: I am. The company did not have any in-house legal before. I joined in April of 2013 after some time with the CFPB. One of the instructions from Congress under the Dodd-Frank law, which among other things created the CFPB, was to foster innovation. So in addition to my day job at the bureau, because I have experience with startups and an interest in innovation, I started helping with a side project there called Project Catalyst. If I was on vacation in an area with fintech companies, for instance, I would sometimes sit down and chat with the founders, try to learn what they are doing and try to gain some insight for the bureau, but also get feedback on what these companies thought about the CFPB. Thats when I met Ryan Gilbert, the CEO here, who later asked me to join Better Finance.

DJ: Have you grown Better Finances legal team?

Peretz: Every few months I aspire to bring on more attorneys, but we always seem to be running to get to the next milestone, so Ive basically had to hold down the fort myself with two distinct businesses.

DJ: What legal challenges did you face after joining the company?

Peretz: In financial services, every feature and function of a product has to be legally compliant in terms of both the way the product is defined, as well as how the service around the product is being delivered. Are we engaged

SAN FRANCISCO Twenty years ago Neil M. Peretz, the general counsel of financial technology startup Better Finance Inc., was launching a startup of his own. In subsequent years he went on to ad-vise a handful of early stage companies and eventually brought that body of knowledge to Project Catalyst, an effort by the Consumer Finance Protection Bureau to foster innovation in the wake of the financial crisis.

Aside from a keen interest in technology and innovation, Peretzs resume winds through business, government and legal jobs. He first worked as an investment banker and then went to work in China for the Department of Com-merce. After his startup stint, Peretz graduated from the UCLA School of Law in 2006, and worked for the DOJ for a few years before he joined the CFPB when it was formed in 2011.

Peretz jumped back into startups in 2013 when he joined BillFloat Inc., a short-term online lender that morphed into Better Finance last year. The startup has two business models. The first, SmartPay, offers a rent-to-own smart-phone program for customers with prepaid mobile plans. The second, SmartBiz, facilitates small business loans between lending institu-tions and borrowers.

As the sole in-house counsel at an emerging financial services company, Peretz manages the legal and regulatory wrinkles that come with strict governmental oversight, whether from the Securities and Exchange Commis-sion, the Department of the Treasury, the CFPB, or any one of many state agencies.

Today, Better Finance has roughly 70 employees, has completed four rounds of fi-nancing worth close to $40 million and Peretz said he projects an increase in revenue this year above the $50 million generated in 2014.

Daily Journal staff writer Banks Albach re-cently sat down with Peretz at Better Finances San Francisco headquarters to discuss the company and the legal challenges of working in the Better Finances industry. Heres an edited transcript of their conversation:

Daily Journal: Better Finance has two business products, SmartPay and Smart-Biz. Can you describe the business models for each?

Peretz: The challenge with BillFloat was making money. Through the process, however, we learned that many of our customers out-standing bills were with cell phone carriers. Thats what prompted SmartPay. We learned that the prepaid market for cell phones is huge, about 25 percent of the cell phone industry and worth billions every year. None of those customers get a deal on a phone, so if they cant afford a smartphone, well buy it for the customer and lease it to them. We are using our own capital to buy the phones in bulk and we

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in the proper disclosures up front? Are we handling our debt collection the right way if people havent paid us? Are we using credit reports the right way and are we handling bill payment the right way? There are all sorts of rules related to electronic funds transfers, for example, and many people who havent stud-ied the issue dont realize that you must allow people to revoke permission to electronically access their accounts if they want. There were also a lot of relationships that had been estab-lished by the company with third parties that certainly needed much review, in part because we are sharing data. I think its only been in more recent years, with retailer breaches and such, that this has risen to the current public scrutiny level. But it was already a significant concern in financial services.

DJ: What are your ongoing legal chal-lenges?

Peretz: As we grow bigger and we team up with bigger partners they certainly have higher standards. Ill give you an example. We just signed a relationship with SmartBiz and Sams Club, the warehouse arm of Walmart, the largest retailer in the world. Sams Club is very concerned about privacy and data security as they rightfully should be. Well be helping Sams Club customers get guaranteed loans and were very excited about it, but you can imagine the type of scrutiny that we receive with respect to data security, privacy, use of information, et cetera, when youre dealing with a company that is really at the top of retail world.

DJ: When do you seek outside counsel and what firms do you turn to?

Peretz: Immigration is one area. We have folks here on H-1B visa status and we need to make sure that they are comfortable with their immigration status. So weve worked with Malcolm Goeschl and his firm Goeschl Law Corp. We currently use Ted Wang at Fenwick as our outside corporate counsel for financings, for example, and questions relating to corpo-rate governance. We had to set up a wholly owned subsidiary for SmartPay, so we use Dan Wheeler at Bryan Cave for financial services. Because Bryan Cave is St. Louis-based, we actually found some folks with expertise that

Banking on ChangeAfter working at a brand new government agency, Neil M. Peretz landed at a fintech startup.

tended to be more cost-effective. I theorize that the average billing rate in St. Louis is probably lower than San Francisco, for the same caliber of person. For IP, we just started working with Bill Ahmann, a partner at Sheppard Mullin. Fortunately for us Ill keep knocking on a lot of wood I have not had tremendous employment issues. But I have spoken a bit on that topic with Amy Hirsh at Arena Hoffmann. We also work with Robert Cook at Hudson Cook on consumer finance issues.

DJ: Do you think theres a growing trend in fintech to hire former regulators?

Peretz: Its quite rare. Its not just that were coming out of a regulatory body, were also litigators and generally there are not as many paths to becoming a GC as a litigator. Theres also, I think, a general distrust of the government. Theres a libertarian theme in Silicon Valley, generally. So when you say Im here from the government, that doesnt necessarily inspire some entrepreneurs and venture capitalist to get excited about spending more time with you.

But I think there is a growing realization in some people who are building fintech com-panies that having someone with regulatory experience in-house is a good thing, because butting heads with regulators and not working within the existing legal framework can get companies into trouble early on. Its what I might call enlightened self-interest. Its also possible that theres a greater interest in hiring folks from the CFPB rather than other regula-tory agencies because it was a new creation. It was the closest youll ever get to a startup in the government.

DJ: What are your thoughts on the state and future of fintech?

Peretz: I think were still in the very early stages. The amount of volume being done by LendingClub, which is significant, is tiny compared to the volume that banks do. If I were a bank, I wouldnt be exactly quaking yet, fearing that fintech is going take over my field.

On the other hand, there are tremendous lessons to be learned. Its obvious that some fintech companies have found ways to better serve the customer than the existing lending institutions.

THURSDAY, JUNE 4, 2015

Neil M. PeretzGeneral CounselBetter Finance Inc.San FranciscoSize of legal department: 1 attorney

Banks Albach / Daily Journal