Financial technology representatives told Congress on Tuesday that they were wary — but not outright opposed — to new regulations being considered for the online lending sector.
“The existing regulatory framework has created a reasonable balance between consumer protection and allowing these companies to bring innovations to market,” Sachin Adarkar, general counsel of peer-to-peer lending company Prosper Funding, told the Financial Institutions and Consumer Credit Subcommittee. “I would be cautious about a new structure for that reason, without knowing more about where the tradeoffs would be.”
The hearing followed months of talk and white paper publications from federal agencies, bankers, Silicon Valley startups and companies in the financial technology, or fintech, industry as they grapple with how the fast-growing lending disruptors should be governed. A report by Citigroup found that fintech attracted $19 billion in investments in 2015, up from $1.8 billion in 2010.
Rep. Patrick McHenry, R-North Carolina, the vice chairman of the House Financial Services Committee, introduced two fintech friendly bills late Monday. One would allow peer-to-peer lenders to collect the same interest rate on a purchased or assigned bank-originated loan, a process that McHenry said was threatened when the U.S. Supreme Court declined to take up Madden v. Midland. The second bill would require the Internal Revenue Service to automate its income verification services, an improvement sought by online lenders who specialize in quick funding decisions.
In May, the U.S. Department of the Treasury issued a white paper recommending additional rules for the financial technology industry, suggesting, for instance, that small business loans of less than $100,000 may be more appropriately treated like consumer loans, which carry additional consumer protection provisions.
The Office of the Comptroller of the Currency, a division of the U.S. Treasury, published its own fintech report in March, raising the idea of creating a specialized charter for online lenders. And on Monday, a coalition of companies that includes Apple Inc., Google Inc. and PayPal Holdings Inc. released a 39-page paper arguing that fintech products and services are already heavily regulated.