Online Lenders Already in Turmoil Facing U.S. Call for Rules

Thursday, May 12, 2016

Marketplace lenders need to be more transparent about their business practices and some should be subject to additional oversight from U.S. regulators, according to a Treasury Department study released as the industry grapples with market turmoil and a scandal involving one of its leading firms.

Companies in the burgeoning industry need to develop a public database for tracking data on their loans, and firms that lend to small businesses in particular should be subject to more federal consumer protection laws, Treasury said in the report released Tuesday.

U.S. regulators are focusing attention on online marketplaces amid explosive growth in an industry that is threatening to upend traditional lending models by matching borrowers with investors willing to finance loans. The Treasury study comes as firms such as OnDeck Capital Inc. and Prosper Marketplace Inc. grapple with sluggish returns and a day after LendingClub Corp. was buffeted by the disclosure of improprieties that led to the resignation of its founder and chief executive officer.

‘Greater Transparency’

“There is a clear need for greater transparency in the market for borrowers and investors,” Treasury Counselor Antonio Weiss said Tuesday in a call with reporters. He said Treasury recommends that regulators form a group to examine oversight needs for the industry and figure out “where further regulatory clarity could benefit the market.”

Source: Bloomberg (link opens in a new window)

lending, regulations