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Marketplace Lending Is Changing the Game [COMPLY2016 Rewind]

By Gianna Barrere
August 1, 2016

We kicked off the afternoon of COMPLY2016 with our session “Marketplace Lending Is Changing the Game.” Legal and compliance officers from three of the country’s leading marketplace lending companies—OnDeck, LendUp, and Affirm—shared their thoughts on the industry, the regulatory landscape, and how marketplace lenders and regulators can work together to support each others’ goals.

Get up to speed on this rapidly growing industry with the 5 most important takeaways from this panel of experts:

  1. Customer experience matters. Exceptional customer experience is becoming the competitive edge that will set a company apart from others. According to Manny Alvarez, General Counsel and Chief Compliance Officer at Affirm, Affirm is pushing to minimize fine print in order to streamline the customer experience. LendUp, as explained by their Chief Regulatory Counsel Jesse Silverman, is also striving for a user-friendly process for borrowers and small business owners, which they believe will allow them to gain and retain customers in the long run.
  1. Be ahead of the curve of where regulation is going. The marketplace lending industry has been shaken up by two major regulatory cases this year: Google’s ban on payday loan advertisements through AdWords, and the resignation of Lending Club’s CEO amid regulatory scrutiny. How can marketplace lenders keep up with the rapidly changing regulatory landscape? “Skate to where the puck will be,” advised Cory Kampfer, Chief Legal Officer of OnDeck, whether through the formation of trade associations (as OnDeck did with CAN Capital and Kabbage) to develop consumer educational materials together, or the adoption of compliance solutions to solve for regulatory concerns before they become costly penalties. (In fact, OnDeck won PerformLine’s Kraken Award for being Most Innovative in Marketing Compliance.)
  1. Regulators and lenders need to have more two-way discussions. Our panelists agreed that regulators need to familiarize themselves with the nuances of the industry rather than create a one-size-fits-all solution. Cory and Jesse called for regulators to differentiate between different types of lenders (mortgage, student loans, marketplace lending, etc.) and business models before engaging in dialogue about industry best practices and self-regulation. In turn, Manny said that marketplace lenders need to engage in honest conversations with regulators about consumer protection issues and steps they'll take to resolve them.
  1. Increased regulatory activity will bring attention to the fintech industry’s potential. Being in the spotlight isn’t always a bad thing. For marketplace lenders, it gives them the chance to show their dedication to consumer protection: “Increased scrutiny in the short term will create competitive advantage in the long term and give us the chance to show that we have consumers’ best interests in mind,” Manny suggested. The amount of good favor your business receives may depend on which regulatory agency you’re working with, though. While federal banking agencies are familiar with the lending industry as a whole and their pain points, state attorney generals tend to have very specific agendas that may exclude lenders’ interests. It’s important to understand each agency’s goals and to align oneself with them.
  1. Regulators need to embrace technology. There's no doubt that marketplace lending has allowed consumers and small businesses to get loans in a shorter time span than if they went through traditional financial institutions. Our panelists agreed it’s time for regulators to view marketplace lending as a clear avenue for increasing the efficiency of the lending process and work to facilitate it rather than restricting it. As Jesse said, “Technology is here to stay.”

Watch the video of the full session "Marketplace Lending Is Changing the Game" and other sessions from COMPLY2016, THE Marketing Compliance Conference, by clicking below.

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