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To get a line of credit, a borrower might put up their house as collateral. But for a new credit card being developed, the collateral is underneath the house.<\/p>\n
A fintech company called Frontlands is launching a credit card backed by mineral rights \u2014 stakes in oil, gas and other resources, often found right on the homeowner’s property. The card is set to launch in June, and Frontlands says it’s the first of its kind.<\/p>\n
“It’s very similar to a home equity line of credit, except the underlying collateral is your mineral rights,” Brandon Cotter, Frontlands’ CEO, told American Banker.<\/p>\n
About 12.5 million Americans own oil and gas mineral rights, according to the It’s a market that Brian Riley, director of credit advisory services at the consulting firm Javelin Strategy & Research, called an “interesting opportunity.”<\/p>\n “While this is not a mass-market play, it illustrates how credit cards can be used to tap into cash flows held by a select group of people,” Riley told American Banker. “For the issuer, it presents a low-risk lending opportunity. For the borrower, it creates a channel to smooth out royalty payments and avoid leveraging their assets.”<\/p>\n The target interest rate for the card is between 14% and 18%, Cotter said, below the national credit card average of about 24%, according to Frontlands sees the card as a way to “unlock” value that’s usually hard to tap into, for multiple reasons. On a practical level, the royalty checks from a stake in an oil well are often small, and accessing the asset’s full worth requires selling it.<\/p>\n Then there’s a psychological barrier: Many mineral rights are passed down from generation to generation, and families train their children never to give them up.<\/p>\n “There’s a stigma around selling. It’s like selling the family jewels,” Cotter said. “They’re getting letters all the time from potential acquirers, but these folks have heard their whole life, ‘Never sell.'”<\/p>\n Frontlands’ approach, he said, is different.<\/p>\n “We come along and say essentially the opposite: Keep your mineral rights, but you’re able to get some of that liquidity,” Cotter said.<\/p>\n At the end of March, Frontlands announced that it had secured a $50 million credit facility from Star Mesa Capital, a Denver-based investment firm. Separately, the fintech has raised $5.5 million in equity from a handful of venture capital firms.<\/p>\n Issuing Frontlands’ credit card will be TransPecos Banks, a community bank based in Pecos, Texas, with $968.3 million of assets.<\/p>\n