Blend Labs Inc

Previous wording

Industry forecasters expect overall mortgage originations, including refinancing loans, to increase in 2024. As a large portion of our revenue is driven by mortgage and mortgage related transaction volumes, changes in the mortgage origination volumes have had, and are likely to continue to have, material effects on our business.

Current wording

Industry forecasters expect overall mortgage originations, including refinancing loans, to increase for the full year 2024 despite estimating a decline in mortgage origination activity in the first six months of the year compared to the same period in 2023. As a large portion of our revenue is driven by mortgage and mortgage related transaction volumes, changes in the mortgage origination volumes have had, and are likely to continue to have, material effects on our business.

Previous wording

On April 29, 2024, we entered into an Investment Agreement (the “Investment Agreement”) with Haveli Brooks Aggregator, L.P. (“Haveli”) and issued 150,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.00001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $150.0 million. In connection with the issuance of the Series A Preferred Stock, we issued a warrant (the “Warrant”) to Haveli to purchase up to 11,111,112 shares of Class A common stock, at a purchase price of $4.50 per share of Class A common stock. The Warrant is exercisable for a period of 24 months from issuance.

Current wording

On April 29, 2024, we entered into an Investment Agreement (the “Investment Agreement”) with Haveli Brooks Aggregator, L.P. (“Haveli”) and issued 150,000 shares of the Company’s Series A Convertible Perpetual Preferred Stock, par value $0.00001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $150.0 million. In connection with the issuance of the Series A Preferred Stock, we issued a warrant (the “Warrant”) to Haveli to purchase up to 11,111,112 shares of Class A common stock, at a purchase price of $4.50 per share of Class A common stock. The Warrant is exercisable for a period of 24 months from issuance.

Previous wording

In connection with the issuance of Series A Preferred Stock, on April 29, 2024, we paid approximately $146.1 million to repay in full all amounts outstanding and payable under the Credit Agreement, and terminated the Credit Agreement.

Current wording

In connection with the issuance of the Series A Preferred Stock, on April 29, 2024, we paid approximately $146.1 million to repay all amounts outstanding and payable under the Credit Agreement in full, and terminated the Credit Agreement.

Previous wording

In our Blend Platform segment, we generate revenue from fees paid by customers to access our software platform and complete the transactions. Fees are assessed based on completed transactions, such as a funded loan, new account opening, or closing transaction. Completed transaction fees are determined by the number and type of software platform components that are needed to support each product offering. We do not charge for abandoned or rejected applications, even though they cause us to incur costs related to these applications. Arrangements with our customers do not provide the contractual right to take possession of our software at any point in time. Revenue is recognized when access to our platform is provisioned to our customers or as transactions are completed, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. To a lesser extent, we generate revenue from professional services related to the deployment of our platform, premier support services, and consulting services. We also earn revenue through commissions or service fees when consumers use our Blend Platform integrated marketplaces to select a property and casualty insurance carrier, or real estate agent.

Current wording

In our Blend Platform segment, we generate revenue from fees paid by customers to access our software platform and complete the transactions. Fees are assessed based on completed transactions, such as a funded loan, new account opening, closing transaction or API call. Completed transaction fees are determined by the number and type of software platform components that are needed to support each product offering. We do not charge for abandoned or rejected applications, even though they cause us to incur costs related to these applications. Arrangements with our customers do not provide the contractual right to take possession of our software at any point in time. Revenue is recognized when access to our platform is provisioned to our customers or as transactions are completed, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. To a lesser extent, we generate revenue from professional services related to the deployment of our platform, premier support services, and consulting services. We also earn revenue through commissions or service fees when consumers use our Blend Platform integrated marketplaces to select a property and casualty insurance carrier, or real estate agent.

Previous wording

Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expense, associated with our engineering personnel responsible for the design, development, and testing of new products and features, professional and outside services fees, software and hosting costs, and allocated overhead costs. Research and development costs are expensed as incurred, unless they qualify as internal-use software development costs.

Current wording

Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expense, associated with our engineering personnel responsible for the design, development, and testing of new products and features, professional and outside services fees, software and hosting costs, and allocated overhead costs. Research and development costs are expensed as incurred, unless they qualify as capitalizable internal-use software development costs.

Previous wording

Other income (expense), net consists primarily of interest income earned from our investment portfolio. For the quarter ended March 31, 2024, other income (expense), net also includes an adjustment to the carrying value of investment in non-marketable equity securities.

Current wording

Other income (expense), net consists primarily of interest income earned from our investment portfolio. For the six months ended June 30, 2024, other income (expense), net also includes an adjustment to the carrying value of investment in non-marketable equity securities, a loss on extinguishment of debt, and a loss on transfer of our subsidiary in India.

Previous wording

Interest expense relates primarily to debt financing used to fund our acquisition of Title365 and includes interest payable under the terms of the Credit Agreement entered into in connection with the closing of the acquisition of Title365 and amortization of debt discounts and debt issuance costs.

Current wording

Interest expense relates primarily to debt financing used to fund our acquisition of Title365 and includes interest payable under the terms of the Credit Agreement entered into in connection with the closing of the acquisition of Title365 and amortization of debt discounts and debt issuance costs. In connection with the full repayment of the Term Loan and termination of the Credit Agreement, the final interest payment under the Credit Agreement was fully paid in the quarter ended June 30, 2024.

Previous wording

(2) Net of $0.6 million of additions to capitalized internal-use software development costs for the quarter ended March 31, 2024 and none for the quarter ended March 31, 2023.

Current wording

(2) Net of $0.5 million and $1.1 million of additions to capitalized internal-use software for the three and six months ended June 30, 2024, respectively, and none for the three and six months ended June 30, 2023.

Previous wording

Cost of revenue decreased $4.7 million, or 22%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by a decrease of $3.9 million, or 30% within the Title segment, primarily due to the lower volume of title orders, and a decrease in Blend Platform cost of revenue of $0.8 million, or 9%, primarily due to the lower volume of mortgage banking transactions.

Current wording

Cost of revenue decreased $0.5 million, or 3%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, driven by a decrease of $0.7 million, or 6% within the Title segment, primarily due to the lower volume of title orders, and offset by an increase in Blend Platform cost of revenue of $0.2 million, or 2%.

Previous wording

Research and development expenses decreased $12.1 million, or 46%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily due to a $4.8 million decrease in personnel related expenses and a $4.1 million decrease in stock-based compensation expense attributable to a decrease in headcount, in each case, related to our restructuring actions, a $2.6 million decrease due to the capitalization of internal-use software development costs and a $0.4 million decrease in software and hosting costs.

Current wording

Research and development expenses decreased $9.2 million, or 42%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to a $4.9 million decrease in personnel related expenses and a $1.8 million decrease in stock-based compensation expense attributable to a decrease in headcount, in each case, related to our restructuring actions, a $2.3 million decrease due to the capitalization of internal-use software development costs and a $0.5 million decrease in software and hosting costs.

Previous wording

Sales and marketing expenses decreased $7.4 million, or 42%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily due to a $3.6 million decrease in personnel related expenses, and a $1.8 million decrease in stock-based compensation expense attributable to a decrease in headcount, in each case, related to our restructuring actions, a $0.7 million decrease in advertising and promotion expenses, a $0.4 million decrease in commissions and a $0.3 million decrease in software and hosting costs.

Current wording

Sales and marketing expenses decreased $6.8 million, or 42%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to a $3.9 million decrease in personnel related expenses and a $1.1 million decrease in stock-based compensation expense attributable to a decrease in headcount, in each case, related to our restructuring actions, a $0.9 million decrease in commissions, a $0.4 million decrease in advertising and promotion expenses, and a $0.4 million decrease in software and hosting costs.

Previous wording

General and administrative expenses decreased $6.7 million, or 33%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily due to a $3.0 million decrease in personnel related expenses and a $1.4 million decrease in stock-based compensation expense attributable to a decrease in headcount, in each case, related to our restructuring actions, a $0.8 million decrease in professional and outside services costs, a $0.7 million decrease in insurance expenses, and a $0.6 million decrease in software and hosting costs.

Current wording

General and administrative expenses decreased $7.1 million, or 36%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was due to a $3.6 million decrease in stock-based compensation expense, primarily attributable to vesting of the second tranche of Head of Blend options in 2023 and a decrease in headcount related to our restructuring actions, which was also a driver of a $1.2 million decrease in personnel related expenses, a $0.6 million decrease in professional and outside services costs, a $0.6 million decrease in insurance expenses, and a $0.6 million decrease in software and hosting costs.

Previous wording

Restructuring expenses decreased $11.8 million, or 92%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to the execution of the January 2023 workforce reduction plan. The restructuring charges included cash expenditures for compensation and severance payments, executive transition costs, employee benefits, payroll taxes and related facilitation costs.

Current wording

Restructuring expenses decreased $2.1 million, or 91%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to the execution of the January 2023 workforce reduction plan, which was larger than the January 2024 workforce reduction plan. The restructuring charges included cash expenditures for compensation and severance payments, executive transition costs, employee benefits, payroll taxes and related facilitation costs.

Previous wording

Interest expense decreased $2.5 million, or 33%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to the optional prepayment of the outstanding Term Loan under the Credit Agreement in an aggregate principal amount of $85.0 million. The borrowings under the Credit Agreement accrue interest at a floating rate which can be, at our option, either (i) an adjusted Term SOFR rate for a specified interest period plus an applicable margin of 7.50% or (ii) a base rate plus an applicable margin of 6.50%. The effective interest rate on our Term Loan was approximately 14.55% and 13.96% as of March 31, 2024 and March 31, 2023, respectively.

Current wording

Interest expense decreased $6.3 million, or 79%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to the optional prepayment of the outstanding Term Loan under the Credit Agreement in an aggregate principal amount of $85.0 million on November 27, 2024 and repayment of all remaining amounts outstanding and payable under the Credit Agreement in an aggregate amount of $146.1 million on April 29, 2024. The borrowings under the Credit Agreement accrued interest at a floating rate which could be, at our option, either (i) an adjusted Term SOFR rate for a specified interest period plus an applicable margin of 7.50% or (ii) a base rate plus an applicable margin of 6.50%. The effective interest rate on our Term Loan was approximately 14.55% as of April 29, 2024, the date of its termination.

Previous wording

Revenue decreased $2.4 million, or 6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by a decrease in Title segment revenue of $1.5 million, or 12%, primarily due to the lower volume of title orders, and a decrease in Blend Platform revenue of $0.9 million, or 3%. Within Blend Platform revenue, Mortgage Suite revenue decreased $2.7 million, or 15%, primarily due to the lower volume of mortgage banking transactions, with our customers, Consumer Banking Suite revenue increased $1.5 million, or 29%, primarily due to the increase from new deployments and incremental platform fees, as well as the increase in close and home equity transactions, and Professional Services revenue increased by $0.4 million, or 21%, primarily due to an increase in professional services associated with the deployment and support of our platform.

Current wording

Revenue decreased $4.7 million, or 6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, driven by a decrease in Title segment revenue of $2.2 million, or 9%, primarily due to the lower volume of title orders, and a decrease in Blend Platform revenue of $2.5 million, or 5%. Within Blend Platform revenue, Mortgage Suite revenue decreased $6.5 million, or 16%, primarily due to the lower volume of mortgage banking transactions with our customers, Consumer Banking Suite revenue increased $3.7 million, or 33%, primarily due to the increase from new deployments and incremental platform fees, as well as the increase in close and home equity transactions, and Professional Services revenue increased by $0.4 million, or 9%, primarily due to an increase in professional services associated with the support of our platform.

Previous wording

Gross margin was 52% for the three months ended March 31, 2024 compared to 42% for the three months ended March 31, 2023. Within Blend Platform segment, gross profit increased by $0.1 million, while gross margin increased to 67% in the three months ended March 31, 2024, as compared to 65% in the three months ended March 31, 2023, driven by growing adoption of our product add-ons within the Mortgage Suite, such as close and income verification, faster deployments of our higher margin Consumer Banking Suite products due to utilization of Blend Builder platform, as well as our operating efficiencies and cost optimizations. Within the Title segment, gross profit increased by $2.3 million while gross margin increased to 19% in the three months ended March 31, 2024 as compared to (2%) in the three months ended March 31, 2023 due to operating efficiencies and ongoing cost optimizations.

Current wording

Gross margin was 53% for the six months ended June 30, 2024 compared to 49% for the six months ended June 30, 2023. Within Blend Platform segment, gross profit decreased by $1.9 million, while gross margin was 69% in the six months ended June 30, 2024 and 2023. The decrease in gross profit was primarily due to lower Blend Platform revenue. Within the Title segment, gross profit increased by $2.3 million while gross margin increased to 15% in the six months ended June 30, 2024 as compared to 4% in the six months ended June 30, 2023 due to operating efficiencies and ongoing cost optimizations.

Previous wording

Other income (expense), net increased $2.8 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to the $4.4 million gain on investment on non-marketable equity securities recognized in the three months ended March 31, 2024 due to an observable price change, offset by a $1.6 million decrease in interest income on our investment portfolio due to a smaller invested cash balance in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Other income (expense), net decreased $4.9 million, or 80%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily due to the $5.5 million loss on extinguishment of debt recognized in the six months ended June 30, 2024, a $3.3 million decrease in interest income on our investment portfolio due to a smaller invested cash balance in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, and a $0.6 million loss on transfer of our subsidiary in India, offset by the $4.4 million gain on investment on non-marketable equity securities recognized in the six months ended June 30, 2024 due to an observable price change.

Previous wording

Since our inception, we have financed our operations primarily through proceeds from the issuance of our stock and warrants and cash generated from the sale of our product offerings, as well as debt financing. As of March 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $128.0 million. Cash and cash equivalents are comprised of bank deposits and money market funds. Marketable securities are comprised of U.S. treasury and agency securities, commercial paper, and corporate debt securities. Most of our cash and cash equivalents are held in the United States.

Current wording

Since our inception, we have financed our operations primarily through proceeds from the issuance of our stock and warrants and cash generated from the sale of our product offerings, as well as debt financing. As of June 30, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $112.6 million. Cash and cash equivalents are comprised of bank deposits and money market funds. Marketable securities are comprised of U.S. treasury and agency securities, commercial paper, and corporate debt securities. Most of our cash and cash equivalents are held in the United States.

Previous wording

We have generated significant losses from operations and negative cash flows from operating activities in the past as reflected in our accumulated deficit of $1,362.3 million as of March 31, 2024. We expect to continue to incur operating losses for the foreseeable future due to the investments that we intend to make in our business and the pressures on revenue growth due to the current macroeconomic environment and, as a result, we may require additional capital resources to grow our business.

Current wording

We have generated significant losses from operations and negative cash flows from operating activities in the past as reflected in our accumulated deficit of $1,381.7 million as of June 30, 2024. We expect to continue to incur operating losses for the foreseeable future due to the investments that we intend to make in our business and the pressures on revenue growth due to the current macroeconomic environment and, as a result, we may require additional capital resources to grow our business.

Previous wording

On April 29, 2024, we entered into an Investment Agreement with Haveli Brooks Aggregator, L.P. and issued 150,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.00001 per share, for an aggregate purchase price of $150.0 million. In connection with the issuance of the Series A Preferred Stock, we issued a warrant to Haveli to purchase up to 11,111,112 shares of Class A common stock, at a purchase price of $4.50 per share of Class A common stock. The Warrant is exercisable for a period of 24 months from issuance.

Current wording

On April 29, 2024, we entered into the Investment Agreement with Haveli and issued 150,000 shares of the Company’s Series A Preferred Stock for an aggregate purchase price of $150.0 million. In connection with the issuance of the Series A Preferred Stock, we issued the Warrant to Haveli to purchase up to 11,111,112 shares of Class A common stock, at a purchase price of $4.50 per share of Class A common stock. The Warrant is exercisable for a period of 24 months from issuance.

Previous wording

In connection with our acquisition of Title365, on June 30, 2021, we entered into a credit agreement (as amended from time to time, the “Credit Agreement”) that provides for a $225.0 million term facility and a $25.0 million revolving facility. The term facility was funded on July 1, 2021 and was fully drawn upon to provide, in part, the acquisition consideration being paid in connection with the purchase of a 90.1% interest in Title365. On November 27, 2023, we entered into the Second Amendment to the Credit Agreement (the “Second Amendment”), which, among other things, terminated the revolving facility and amended the maturity date of the term facility to provide for a springing maturity extension to June 30, 2027, in the event that certain conditions are satisfied. These conditions have not been met as of March 31, 2024. In connection with the Second Amendment, we opted to prepay the outstanding term facility under the Credit Agreement in an aggregate principal amount of $85.0 million. In connection with the issuance of Series A Preferred Stock, on April 29, 2024, we paid approximately $146.1 million to repay in full all amounts outstanding and payable under the Credit Agreement, and terminated the Credit Agreement.

Current wording

In connection with our acquisition of Title365, on June 30, 2021, we entered into a credit agreement (as amended from time to time, the “Credit Agreement”) that provided for a $225.0 million term facility and a $25.0 million revolving facility. The term facility was funded on July 1, 2021 and was fully drawn upon to provide, in part, the acquisition consideration being paid in connection with the purchase of a 90.1% interest in Title365. On November 27, 2023, we entered into the Second Amendment to the Credit Agreement (the “Second Amendment”), which, among other things, terminated the revolving facility and amended the maturity date of the term facility to provide for a springing maturity extension to June 30, 2027, in the event that certain conditions are satisfied. These conditions were not met as of the termination date of the Credit Agreement. In connection with the Second Amendment, we opted to prepay the outstanding term facility under the Credit Agreement in an aggregate principal amount of $85.0 million. In connection with the issuance of the Series A Preferred Stock, on April 29, 2024, we paid approximately $146.1 million to repay all amounts outstanding and payable under the Credit Agreement in full, and terminated the Credit Agreement.

Previous wording

Our material cash requirements arising from known contractual and other obligations primarily relate to our obligations under our Credit Agreement, leases for our office locations, and purchase commitments. Other than the recent developments described above, there have been no significant changes in our material cash requirements from the contractual obligations described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

After the termination of the Credit Agreement, our material cash requirements arising from known contractual and other obligations primarily relate to lease obligations for our office locations and purchase commitments. Other than the termination of one of our leases and the transfer of lease obligations in connection with the transfer of our subsidiary in India to a third-party described in Note 7, Leases, there have been no significant changes in our material cash requirements from the contractual obligations described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 and 2023, was $3.9 million and $46.7 million, respectively. The decrease in cash used in operations reflects our net loss adjusted for noncash items, such as charges associated with stock-based compensation, depreciation and amortization, gain on investment in equity securities, amortization of deferred contract costs, amortization of operating lease right-of-use assets, and amortization of debt discount and issuance costs on our long-term debt, and changes in operating assets and liabilities. Fluctuations in operating assets and liabilities are affected primarily by changes in trade and other receivables, prepaid expenses and other current assets, accrued compensation, deferred revenue, accounts payable and other liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $10.5 million and $81.0 million, respectively. The decrease in cash used in operations reflects our net loss adjusted for noncash items, such as charges associated with stock-based compensation, depreciation and amortization, gain on investment in equity securities, amortization of deferred contract costs, amortization of operating lease right-of-use assets, and amortization of debt discount and issuance costs on our long-term debt, loss on debt extinguishment, and changes in operating assets and liabilities. Fluctuations in operating assets and liabilities are affected primarily by changes in trade and other receivables, prepaid expenses and other current assets, accrued compensation, deferred revenue, accounts payable and other liabilities.

Previous wording

Net cash provided by investing activities during the three months ended March 31, 2024 was $60.6 million, which was primarily due to sales of marketable securities of $100.3 million and maturities of marketable securities of $10.6 million, offset by $2.0 million in purchases of property and equipment and $48.3 million used in the purchase of marketable securities.

Current wording

Net cash provided by investing activities during the six months ended June 30, 2024 was $35.5 million, which was primarily due to sales of marketable securities of $100.3 million and maturities of marketable securities of $15.6 million, offset by $76.5 million used in the purchase of marketable securities and $3.8 million in additions of property and equipment, primarily related to capitalized internal-use software development costs.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2023 was $28.9 million, which was primarily due to the purchases of $186.2 million of marketable securities and $0.3 million in purchases of property and equipment, offset by sales and maturities of marketable securities of $157.6 million.

Current wording

Net cash provided by investing activities during the six months ended June 30, 2023 was $2.3 million, which was primarily due to the maturities of marketable securities of $197.7 million, offset by purchases of $195.0 million of marketable securities and $0.5 million in purchases of property and equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $3.2 million, primarily consisting of payment of taxes related to net share settlement of equity awards of $3.8 million, offset by proceeds from the exercises of stock options of $0.6 million.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $10.5 million, primarily consisting of $144.5 million repayment of long-term debt, $9.1 million payment of issuance costs related to the Series A Preferred Stock and the Warrant, payment of taxes related to net share settlement of equity awards of $7.0 million, offset by $149.4 million proceeds from the issuance of Series A Preferred Stock and the Warrant, and proceeds from the exercises of stock options of $0.7 million.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2023 was $2.4 million, primarily consisting of payment of taxes related to net share settlement of equity awards.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 was $3.5 million, primarily consisting of payment of taxes related to net share settlement of equity awards.

Previous wording

We administer escrow and trust deposits held at third-party financial institutions representing funds received under real estate contracts, escrowed funds received under escrow agreements, and/or undisbursed amounts received for settlement of mortgage and home equity loans. Cash held for these purposes was approximately $3.4 million, net of outstanding checks in transit of $25.3 million as of March 31, 2024. These funds are not considered assets of ours and, therefore, are not included in our unaudited condensed consolidated balance sheet; however, we are contingently liable for the disposition of these funds on behalf of consumers.

Current wording

We administer escrow and trust deposits held at third-party financial institutions representing funds received under real estate contracts, escrowed funds received under escrow agreements, and/or undisbursed amounts received for settlement of mortgage and home equity loans. Cash held for these purposes was approximately $3.9 million, net of outstanding checks in transit of $26.7 million as of June 30, 2024. These funds are not considered assets of ours and, therefore, are not included in our unaudited condensed consolidated balance sheet; however, we are contingently liable for the disposition of these funds on behalf of consumers.