The Consumer Financial Protection Bureau (CFPB), the government agency responsible for consumer protection in the financial sector, recently announced that borrowers can now file formal complaints against marketplace lenders directly with the agency. What does this mean for the fast growing Fintech industry?

Many see this initial “opening of doors” to marketplace consumer borrowers as a signal that the CFPB plans to get more involved and will likely look into the future regulation of marketplace lending industry. It has been expected that CFPB will get involved in the online lending industry, and I have seen their representatives in many online lending conferences recently as they gather information and get to know us.

This is good news for the Fintech industry as a whole. Smart AltFi organizations have proactively invested in having compliance controls in place in anticipation of more regulation. This is just good business, as it helps grow their marketshare since borrowers have more confidence in these online lenders than those not making responsible investments in their future.

This move is further validation that the impact of online lending is being recognized by the traditional financial industry. According to this recent article in Bloomberg BusinessWeek, “Fintech was every banker’s buzzword at the World Economic Forum, as leaders of the world’s largest financial companies both touted the potential of new innovations and leaned on regulators to control the startups threatening parts of their business.”

It appears that regulators are listening to what the traditional financial institutions have to say and are focused on bringing regulation to the online commercial lending space. It is important to note that marketplace lenders are not unregulated – they currently operate and are regulated under many of the same laws as lenders and traditional banks. We at Cloud Lending Solutions see the need for marketplace industry regulations that deal with financial crisis, similar to the traditional lending market.

It is also clear that the CFPB is trying to balance the activity in such a way to not have a “chilling effect” on Fintech innovation. They recently released a new No–Action Letter policy that is designed to encourage innovation in financial services. This policy gives companies an opportunity to approach the CFPB to request a no action letter that, if provided, says that the CFPB has no intention to initiate enforcement or supervisory actions based on a new product in question.This gives AltFi a great opportunity to check new lending products for compliance concerns before launching them.  This both allows online lenders to protect their investment in new products, and assures customers that their online lender is acting as responsibly as a traditional lender would.

We see our clients already adopting controls in their businesses that will help them easily adapt when regulation comes to our industry. This has put them in a good position to continue growing quickly. Our market is only getting more competitive, as new alternative finance companies are being created everyday, and we are also seeing the traditional banks changing their infrastructure so they can become more nimble and efficient. As I said earlier, all of this is good business and good news for both lenders and borrowers.

Taming the True Cost of Collections

Costly. Complex. Time-consuming. These are just a few of the challenges companies face when trying to collect on non-performing loans and leases. Collections are a major strain on finance businesses worldwide. In the US, a company with a 5% net profit and $100,000 in...

Small Business Lending: A For-Profit Business

There is nothing small about small business.  There are 28.8 million small business in the United States, and small businesses make up 99.7 percent of all businesses in the country.  Small businesses are the engine that drives our economy, so ten years ago when our...

Winning Over Resistance to IT Changes

Finance organizations worldwide are struggling with aging lending and leasing systems. They have read much data and various case studies showing how new systems can improve operational efficiency, increase competitiveness and integrate with the third-party solutions...

Two Readily Available Solutions to Expand Funding for Smaller Businesses

Small and mid-sized companies are vital to the prosperity of the U.S. economy. Yet many struggle to secure the financing needed to grow their businesses. Access to financing has improved to some extent in the recent years as have the options with the influx of online...

Asset-Based Financing Models Can Narrow Funding Gap for UK SMEs

The shortage of affordable finance options for small and medium-sized enterprises (SMEs) in the UK has received widespread attention, and rightly so. The data trends are especially disturbing given the importance of small business sustainability and growth to the...

Marketplace Lending – How to Get to Market Faster

Marketplace lending platform represents a highly scalable, next generation lending approach that industry innovators are using to bring to market a wide range of specialized commercial and consumer lending products. Morgan Stanley estimates that the marketplace...
Load More

Get help from the industry's lending experts

For more information, ask a question or to request a demo, contact us.
Please Complete All Fields