Here's the story of LexAlign as told by our founder, Trevor Lain
I'd been working for many years advising the biggest banks, broker-dealers and corporations on a series of major events impacting laws and regulations. It was after the Financial Crisis of 2008 and the whole regulatory landscape had changed with the Dodd-Frank Act in 2010. I was helping the nation's biggest banks reform their mortgage servicing platforms to match the new requirements. For some projects I had to muster several law firms and over 100 lawyers. At the same time, I saw those banks sharply cut back on offering credit and other basic financial services to a large and growing population of subprime consumers.
I carved out time to work with the Appleseed Network in trying to address this issue: the millions of consumers in the U.S. that don't have access to traditional banking services — the so-called "unbanked" and "underbanked" populations. These are hard-working people who have no choice but to pay a huge portion of their income on basic financial services, like check cashing, small dollar loans, and money wires. They often fall prey to predatory operators.
I began to notice a growing number of small non-bank financial companies that were trying to use technology in innovative ways to address the same issue. I then stopped working with the large banks and turned my attention to helping these small companies with their regulatory obligations.
It was while counselling entrepreneurs across the country and representing one leading company in several regulator audits that I realized the huge disadvantage that small companies have compared to the large financial institutions in terms of their ability to manage their compliance risk. Small companies (which make up the bulk of all companies in any regulated sector) simply can't afford the range of expert services required to get a handle on which particular requirements apply to them, and what those requirements mean in an operational context. The expertise was both too scarce and too expensive. Given the complexity and volume of legal requirements, self help is not a practical option. At the same time, small companies lack the resources and resilience to survive a major compliance event, which is almost inevitable. Noncompliance with a consumer protection regulation means, at a minimum, having to reimburse all affected customers and suffer long-lasting reputation harm. It's like an ever accumulating 150% tax on revenue.
I called that the Paradox of Compliance: the smaller the company, the greater the risk from noncompliance, but the more unreachable compliance becomes.
I was taking time to care for my parents when inspiration hit: that the solution to the Paradox of Compliance was possible by merging my experience formulating algorithms for banks to contain regulatory risk with my experience auditing and advising high-tech companies that use technology to try to solve real-world problems. The solution is "to automate the law." More particularly, the answer was to systematically reverse engineer the law like computer code and translate it into 4-dimensional decision trees that could be coded, and to design and build a technology infrastructure and online interface that could obtain the required inputs and automatically and instantaneously create a company's Compliance Essentials.
I named the company "LexAlign" because we help businesses align their practices with the law ("lex" is the Latin root for "law"). We're a registered Public Benefit Corporation because our mission is to help small companies master compliance and thereby help those consumers I was most concerned about. More formally, our mission is to facilitate compliance with laws that protect consumers or promote national or economic security, and thereby foster innovation and competition in regulated sectors.
With LexAlign, we're building the rules engine for the regulated economy.