The Consumer Financial Protection Bureau (CFPB) has taken two notable steps that signal a new interest in regulating marketplace, or “peer-to-peer,” lending. The CFPB announced that it will expand its consumer complaint portal to accept complaints about marketplace lenders. Simultaneously, the CFPB released a consumer bulletin containing information and tips for consumers considering taking out a loan with a marketplace lender.
Marketplace lending now joins mortgages, student loans, auto loans or leases, payday loans, bank accounts and services, credit cards, prepaid cards, credit reporting, debt collection, money transfer or virtual currency, and payday loans as categories of financial services for which the CFPB accepts complaints. The consumer complaint portal has been and continues to be controversial in the financial services industry. The complaints are publicly available and not vetted or filtered by the CFPB for accuracy or veracity, although it scrubs personal information from the narrative and takes steps to confirm a commercial relationship between a consumer and a company. The financial services provider receiving a complaint is expected to submit an answer within 15 days if possible, and no later than 60 days.
The consumer bulletin does not set standards or expectations for marketplace lenders. Instead, it is a guide to consumers that explains marketplace lending and questions that a consumer should consider before applying for a loan with a marketplace lender. It encourages consumers to fully understand the terms of the loan (fixed or flexible interest rate, interest rate charged, total APR, etc.) and the effect on current debt, as well as the total cost of the loan.
Both of these actions signal that the CFPB has “planted its flag” with respect to the regulation of marketplace lenders and that it intends to be a part of any federal regulation of the industry. The CFPB’s actions follow two other regulatory developments in marketplace lending—the US Department of the Treasury Request for Information in July 2015 and the inquiry by the California Department of Business Oversight in December 2015. Thus, it is increasingly likely that some sort of regulation or guidance at the federal or state level with respect to marketplace lending will be forthcoming in the foreseeable future.
The possibility of regulatory action, in conjunction with ongoing developments in the courts, create more regulatory uncertainty in the marketplace lending industry than there was a year ago. In turn, the marketplace lending industry will need to evolve and likely undergo changes to its business activities as regulatory oversight over the industry increases. The scope and timing of any changes, of course, remain to be seen.