Treasury Launches Study of Peer-to-Peer Lending

How should 'the financial regulatory framework evolve to support the safe growth of this industry?' is one question the Treasury Department is asking.
Matthew HellerJuly 16, 2015

The U.S. Treasury Department announced Thursday it had opened a study of online marketplace lending, saying it will seek the public’s help in understanding how the fast-growing industry operates.

In less than a decade, online lending has grown to an estimated $12 billion in new loan originations in 2014, the majority of which is consumer lending. The technology has been promoted by Lending Club and other companies as an alternative to traditional bank lending, using online platforms on which borrowers are matched with investors.

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peer to peerAccording to Treasury’s request for information (RFI), the public may begin submitting comments July 20 on the various business models of and products offered by online marketplace lenders; the potential for the sector to expand access to credit to historically underserved market segments; and how “the financial regulatory framework should evolve to support the safe growth of this industry.”

The RFI noted that “while online marketplace lending is still a very small component of the small business and consumer lending market, it is a rapidly developing and fast-growing sector that is changing the credit marketplace.”

Antonio Weiss, counselor to the Treasury Secretary, said in a news release: “Innovation in financial services is creating new ways for consumers and small businesses to secure credit. By soliciting public comments on this relatively new industry, we hope to better understand the potential for online technology to expand access to safe and affordable credit for consumers and small businesses.”

Often called peer-to-peer lenders, the early online marketplaces connected borrowers with individuals who funded them. But as Bloomberg reports, Wall Street and other institutional investors have recently “gotten in on the act, providing money for the loans and bundling some of them into securities.”

The Treasury Department’s announcement “clearly suggests it sees value in the industry,” Jaret Seiberg, an analyst with Guggenheim Securities, told The Wall Street Journal. “It is only a matter of time before there is more federal oversight.”

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