Top federal bank regulator Thomas Curry, US Comptroller of the Currency, last year told marketplace lenders in Washington D.C. to expect a tougher regulatory framework for the industry. The Office of the Comptroller of the Currency would be collaborating with other regulators.

Tougher Regulatory Guidelines

Tougher guidelines are in line with those that govern the rest of US banking. Calls for such guidelines followed an explosive expansion in the online lending industry and a series of high-profile missteps.

The OCC reports, in 2015, so-called marketplace lenders generated about US$29bn of consumer loans, which was a six-fold increase from 2013.

Some city and state governments have already started focusing on online small-business lenders:  the practices of MCA companies may be examined more carefully. In Chicago, Mayor Rahm Emanuel launched an initiative in 2015, the purpose of which was to prevent small businesses from taking out loans they couldn’t afford.

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Alternative Lenders

The broader sector of alternative lenders should take into account the effects some companies are having on innovation and a potential regulatory response. Small business lenders shouldn’t wait to see what comes next. They should work with Congress to develop proper regulations for the industry.

Thanks to disclosure requirements established across the industry sectors, and rate limitations, as well as other measures to prevent lender abuses, small business owners will become better protected from catastrophic results. Also, this will help legitimize the industry.

Some lenders support the regulation and think it’d be right to engage with regulators. Lenders having this attitude aren’t in the majority but are for industry-wide disclosure requirements, rate limitations and other measures that could help prevent lender abuses, protect business owners and legitimize the industry.

It’s not practical to keep the industry self-regulated. It’s neither realistic nor advisable. The certainty of uniform rules is beneficial for everyone. It may not be easy but it’s possible to regulate the industry

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