The U.S. Treasury Department issued a white paper in which it outlined the risks associated with online marketplace lending and recommended best practices for both established and emerging market participants.

In 2015, the Treasury issued a Request for Information soliciting public input on (i) the various business models and products offered by online marketplace lenders to small businesses and consumers, (ii) the potential for online marketplace lending to expand access to credit to historically underserved market segments, and (iii) how the financial regulatory framework might evolve to support the safe growth of the financial industry. The 2016 white paper incorporates responses to the Request for Information and recommends that the federal government and private sector participants encourage safe growth and access to credit through the development of online marketplace lending by means of the following actions:

  • support more robust protections and effective oversight for small-business borrowers;
  • ensure a sound borrower experience and well-planned back-end operations;
  • promote a transparent marketplace for borrowers and investors;
  • expand access to credit through partnerships that ensure safe and affordable credit;
  • support the expansion of safe and affordable credit through access to government-held data; and
  • facilitate interagency coordination through the creation of a standing working group for online marketplace lending.

The Treasury emphasized that the following potential trends will require monitoring: (i) the evolution of credit scoring, (ii) the impact of changing interest rates, (iii) potential liquidity risk, (iv) increasing mortgage and auto loans originated by online marketplace lenders, (v) potential cybersecurity threats, and (v) compliance with anti-money laundering requirements.

The Treasury urged regulators to consider policies that could minimize risks for borrowers and increase investors' confidence in a less favorable credit environment. The Treasury acknowledged that the white paper represents its own respective views, but also noted that research for the white paper included consultations with the Consumer Financial Protection Bureau, the FDIC, the Board of Governors of the Federal Reserve System, the Federal Trade Commission, the Office of Comptroller of the Currency, the Small Business Administration and the SEC.

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