On September 13, 2016, Comptroller of the Currency Thomas J. Curry discussed marketplace lending’s risks and associated policy questions. He delivered his remarks at the inaugural Marketplace Lending Policy Summit. Remarks.
marketplace lending
Bill Introduced in Congress to Make “Valid When Made” the Law of the Land
Chief Deputy Whip Patrick McHenry (R, NC-10), the Vice Chairman of the House Financial Services Committee, introduced H.R. 5724, the Protecting Consumers’ Access to Credit Act of 2016, which would reaffirm the longstanding legal precedent under the National Bank Act and the Federal Deposit Insurance Act that federal law preempts a loan’s interest if valid when made. The legislation was introduced to address one of the issues raised by the Second Circuit in Madden vs. Midland Funding. Legislation.
Rating Agency Developments
On May 18, 2016, Fitch issued a report entitled: Fitch: NSFR Rule Could Constrain Trust Banks’ Liquidity Position. Report.
On May 16, 2016, Fitch issued a report entitled: Fitch: Confidence in US Marketplace Lending ABS Takes a Hit. Report.
On May 12, 2016, Fitch issued a report entitled: Fitch Updates U.S. RMBS Seasoned and Re-Performing Loan Criteria. Report.
On May 12, 2016, Fitch issued a report entitled: Fitch Updates U.S. RMBS Loan Loss Model Criteria. Report.
On May 12, 2016, Fitch issued a report entitled: Fitch Publishes Revised EETC Criteria: Allows for Ratings in the ‘AA’ Category. Report.
U.S. Treasury Department Issues White Paper on Online Marketplace Lending Industry
On May 10, 2016, the Department of the Treasury issued a white paper on online marketplace lending that maps the current market landscape, reviews industry insights and offers policy proposals for the road ahead. Based on approximately 100 responses from online marketplace lenders, financial institutions, investors and other key industry figures, the Treasury, in consultation with the CFPB, FDIC, Federal Reserve Board, FTC, OCC, SBA and SEC, made several notable recommendations and observations.
The white paper explores policies that would expand regulatory oversight, including standardized representations and warranties in securitizations, pricing methodology standards, the implementation of a registry for tracking data on transactions and the reporting of loan-level performance, among others. In addition, the Treasury mentions potential cybersecurity threats, anti-money laundering, the uneven protections and regulations in place for small business borrowers and the growth of the mortgage and auto loan markets as some of the emerging trends to monitor. The Treasury is also considering the role of federal agencies in regulating these areas, including the formation of an interagency working group for online market place lending. Press Release. White Paper.
The CFPB Releases Consumer Bulletin on Marketplace Lending and Announces It Is Accepting Consumer Complaints
On March 7, 2016, the Consumer Financial Protection Bureau (the “CFPB”) released a consumer bulletin with information and tips for consumers of marketplace lending. The bulletin provides consumers with an overview of the peer-to-peer lending platform, as well as tips and general steps that should be taken when shopping for a loan. In conjunction with the release, the CFPB also announced that it is accepting complaints from consumers taking out loans from online marketplace lenders. Complaints are anticipated to be addressed within 60 days. CFPB Guide. Press Release.
Treasury Extends Comment Period on Marketplace Lenders RFI
On August 18, the Treasury Department extended the comment period for responding to the Request for Information (RFI) on marketplace lending titled “Public Input on Expanding Access to Credit through Online Marketplace Lending” by 30 days. The comment period will now end on September 30, 2015. Treasury Note.
Treasury Request for Public Input on Expanding Access to Credit through Online Marketplace Lending
“Online marketplace lending refers to the segment of the financial services industry that uses investment capital and data-driven online platforms to lend to small businesses and consumers.”[1]
On July 20, the Department of the Treasury published a Notice and Request for Information (“RFI”) seeking comment on various aspects of online marketplace lending, including –
- the business models and products offered to small businesses and consumers
- the potential to expand access to credit to underserved market segments
- how the financial regulatory framework should evolve to support the growth of the industry
- Treasury asks for comment on 14 categories of questions, some of which include multiple specific questions, which we summarize and, with respect to some, offer initial thoughts on below.
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[1] 80 Fed. Reg. 42866 (July 20, 2015)