Online Lenders Should Treat Regulation Seriously

In recent years, online business lending has exploded. Dozens of “financial technology” (fintech) players have come into play.Alternative and marketplace lenders are growing with rapid advances, and this is explained by the fact that they aren’t subject to the same strict regulations as banks.

 

Regulations in the Online Lending Industry

State and federal officials aim to regulate the industry more tightly.Online lenders should be concerned about the effects some companies are experiencing on innovation and a potential regulatory response.

 

Last year, the Treasury Department reported it was seeking responses that would allow policymakers to study the various business models and products offered by online marketplace lenders, the potential for online marketplace lending to expand access to credit to historically underserved borrowers, and how the financial regulatory framework could evolve to support the safe growth of this industry.

 

In 2016, top federal bank regulator Thomas Curry, US Comptroller of the Currency, told marketplace lenders in Washington D.C. to expect a tougher regulatory framework for the industry. As Curry noted, the framework would support responsible innovation.

 

In Chicago, Mayor Rahm Emanuel launched an initiative in 2016 focused on preventing small businesses from taking out loans they couldn’t afford. The Consumer Financial Protection Bureau is expected totarget unscrupulous small-business lenders after establishing a new position of assistant director for the CFPB’s Office of Small Business Lending Markets.

 

Moreover, the Illinois bill would prevent online lenders from making loans in which the total monthly payments exceeding 50% of the borrower’s monthly net revenue. Based on a separate requirement, lenders would disclose the percentage of their loans that had defaulted. Also, online small-business lenders operating in other states would have to obtain Illinois lending licenses.

 

Online Lenders Should Be Serious About Regulation

The complaints associated with unfair practices and outcomes are getting louder. Instead of waiting to see how things will develop, small-business lenders would better tostart working with Congress to develop proper regulations for the industry.

To get a better understanding of the industry regulations, including merchant cash advance regulations, turn to a reputable business funding provider in the field. With the true professional in the field, you can get the right merchant financing solutions for your business needs.

 

The maturing small-business lenders should be willing to make changes that would address legitimate concerns. Otherwise, they’ll likely appear in the same business-crushing situation as the payday lenders.

 

Payday lenders were ignorant towards the legitimate complaints and worked against finding aregulatory and legal compromise. This made the payday loan industry and its customers suffer from sometimes extremely restrictive state and federal regulations. As a result, some lenders had to leave the market.

 

Business Funding expert, Nathan Hale, founded First American Merchant with his eyes set on helping the backbone of our country, small business owners. His passions include writing/producing music, and travel. First American Merchant is America’s Best merchant cash advance regulations company, serving both traditional and high-risk Businesses.

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