New Credit Card Turns Mineral Rights Into Borrowing Power for Owners

A new credit card will allow borrowers to use the gas and oil mineral rights they own as collateral. The secured card comes from Frontlands, a fintech company that helps people who own income-producing mineral rights gain access to funds.

The company plans to launch the card sometime in June, but we have the scoop for you now on the details of the new payment product and how it stands to benefit borrowers.

This year hasn’t been a great one for many U.S. households from a financial perspective. The rising cost of goods is an economic burden for many consumers.

Consumer sentiment in April dropped to a new record low in the more than 70 years of the University of Michigan’s survey. April’s results of 47.6 were below the March reading of 53.3 and reflected Americans’ concerns over the effects on the economy of the Israel-Iran war. April’s reading broke the previous record low of 50 recorded in June 2022. 

Dire financial conditions can force people to seek credit to pay for life’s essentials, such as housing, groceries and utilities. But borrowers may find that current economic conditions have led certain creditors to deny their applications for a credit card or loan product.

That’s where Frontlands steps in to offer a financial lifeline to people with mineral rights. And in the U.S., that number may be higher than you’d expect. Approximately 12.5 million people in the country are private owners of mineral rights for gas and oil, according to the National Association of Royalty Owners.

People who hold mineral rights may see an offer for the new card show up in their mailbox in the near future. According to American Banker, Frontlands aims to use both traditional underwriting and proprietary AI models to assess the relevant assets people own and offer those consumers a line of credit worth up to half of that value.

Frontlands says the card is the first of its kind. The company’s CEO, Brandon Cotter, told American Banker that — other than the fact that the underlying collateral for the card is a borrower’s mineral rights — it’s similar to a home equity line of credit.

The current economic climate may require credit card issuers to think outside the box when it comes to drumming up new business that aligns with their underwriting standards.

Brian Riley, Director of Credit Advisory Services and a Co-Head of Payments at Javelin Strategy & Research, told American Banker that while the new payment product from Frontlands may not be a mass-market play, it shows how issuers can work with cash flows that only a select group of borrowers may have.

“For the issuer, it presents a low-risk lending opportunity,” Riley explained. “For the borrower, it creates a channel to smooth out royalty payments and avoid leveraging their assets.”

Consumers looking for a new card with a relatively low annual percentage rate may find that the new payment tool from Frontlands meets their needs. The average APR on credit cards is in the neighborhood of 25%. But Cotter told American Banker that the target rate for the new Frontlands card is somewhere in the 14% to 18% range.

“Our goal isn’t to pile on more debt,” Cotter revealed in a post on the fintech’s website. “But the opportunity to help our customers move away from high-interest credit card debt — and provide a path toward greater financial stability — is compelling.”

Frontlands plans to offer the new credit card with an APR that comes in well under the national average.

Frontlands has introduced an early version of the card in states across the U.S., including New Mexico, North Dakota, Pennsylvania, and Texas. The company said on its site that early demand for the card has surpassed expectations. The average credit line on the product is in excess of $30,000, which is more than twice the figure from early projections.

The company has secured more than $50 million thus far from an investment firm in Colorado and multiple venture capital outfits to support the launch of the new product. 

Borrowers who want to apply for the card but don’t have the requisite mineral rights may want to keep an eye out for future announcements from the company. Frontlands has plans for the near future that may expand access to its products.

“We believe that there are opportunities outside of just oil and gas,” Cotter told American Banker. “Our gut is that solar is next, but we’re also really curious about uranium. … We’ll let the market push us as we get customer demand for different things.”