Regulators Put Marketplace Lenders on Notice
Federal regulators are planning to tighten the screws on marketplace lenders over concerns about consumer protections and reckless lending. At a marketplace lending policy summit, U.S. Comptroller of the Currency Thomas Curry told lenders to expect a new regulatory framework this fall that would support “responsible innovation.” However, “innovation can’t be responsible if it abuses customers,” Curry said, according to Reuters. Although he didn’t go into the specifics of the plan, Curry said the Office of the Comptroller of the Currency (OCC) will collaborate with other regulators to develop the framework.
Marketplace lending has surged over the past few years, reaching $29 billion in 2015—a sixfold increase from 2013, according to the OCC. But as the industry has grown, it’s also drawn the scrutiny of regulators and consumer advocates who claim lenders often don’t effectively ensure that borrowers have the ability to repay their loans. Lenders also have been accused of employing unfair and deceptive practices to collect on loans and charging interest rates that are higher than allowed by state laws.
Regulators also have focused on payday loans—which are similar to marketplace loans, but are typically for a lower dollar amount and shorter time period. In June, the CFPB proposed a rule that would require lenders to bolster vetting of potential borrowers and bar repeated attempts to collect on a loan via debits, which can lead to multiple fees for borrowers.