Another leading company in the turbulent online lending sphere has replaced its chief executive officer.
CAN Capital, a New York-based small-business lender, said Tuesday that CEO Daniel DeMeo has been placed on a leave of absence. Parris Sanz, the company's chief legal officer, is now serving as acting CEO.
Meanwhile, Ritesh Gupta, formerly the company's chief customer operations officer, has been promoted to chief operating officer.
The leadership shakeup stems from problems that emerged after the company expanded its product offerings several years ago, according to a source familiar with the matter.
CAN Capital, which was founded in 1998, made its name as a provider of merchant cash advances. Small businesses that use merchant cash advances make daily payments to the company based on a percentage of their daily revenue. But if a small business does not make any sales on a particular day, it is not required to make a payment to CAN Capital on that day.
The company started offering term loans in 2010, and sought to ramp up the new product's growth in 2012, according to the source. The term loans require daily payments by the borrower, regardless of whether it made any sales on any particular day.
Problems arose when CAN Capital used old systems, which were not designed to require daily repayments, to collect money owed by term loan borrowers, the source said. As a result, the lender was not collecting all of the money that it was owed by term loan borrowers, according to the source.
CAN Capital alluded to the problems in an emailed statement late Tuesday.
"As the board and our leadership team conducted our business reviews and looked at how we can best position the firm for future growth, we self-identified that some assets were not performing as expected and that there was a need for process improvements in collections," the company stated.
"It became clear that our business has grown and evolved faster than some of our internal processes."
CAN Capital has provided more than $6 billion in financing to small businesses since it was founded in 1998, and is among the top merchant cash advance providers in the U.S.
The merchant cash advance industry has come under fire for the high cost of the financing it provides, as well as for what critics call hard-to-decipher written disclosures that often leave customers confused.
Last month, in response to the criticism, CAN Capital and two other large online small-business lenders unveiled a uniform pricing disclosure box.
DeMeo had been CAN Capital's CEO since 2013. His removal follows recent leadership changes at Lending Club and Prosper Marketplace, two of the nation's largest online consumer lenders.