The CFPB’s actions are likely the first steps in identifying consumer issues with marketplace lenders.
The Consumer Financial Protection Bureau (CFPB or Bureau) is flexing its muscles once again, and this time the target is marketplace lenders. In a surprising move, the CFPB announced on March 7 that it would be accepting complaints on consumer loans from online marketplace lenders. The Bureau also released a consumer bulletin to provide an overview of marketplace lending and things for consumers to consider before taking out a loan.
Consumer Complaint Database
The consumer complaint database will allow for consumers to make complaints against marketplace lenders and categorize the complaints by the products they are dealing with, such as consumer loans, student loans or mortgages. The CFPB complaint database currently accepts complaints on a number of consumer financial products that the Bureau regulates, including mortgages, bank accounts and services, credit cards, student loans, auto and other consumer loans, credit reporting, debt collection, and payday loans.
Marketplace lenders need to be aware that the Bureau will start forwarding complaints to them if filed. The CFPB expects to get a response from the companies within 15 days. Additionally, the Bureau anticipates that companies will close most complaints within 60 days. Consumers are given a tracking number after submitting a complaint and are able to check the status of their complaint.
Marketplace Lending Consumer Bulletin
The Bureau also released a consumer bulletin that offers an overview of marketplace lending. The bulletin provides a list of things for a consumer to consider before taking out a loan from a marketplace lender.
The issues include:
- looking at your income and spending
- deciding how much you can afford and need to borrow
- checking credit reports
- shopping around.
The bulletin also warns consumers to be careful when refinancing certain types of debt that, in some cases, have consumer protections that will not follow when the loan is refinanced.
- The Bureau has typically used the complaints it receives to build a case for regulation in a given space. The fact that the CFPB is taking complaints is likely to be the first step in identifying consumer issues with marketplace lenders. This step appears to be a prelude to the larger participant rule focused on installment lenders, which the Bureau has indicated is forthcoming.
- Marketplace lenders need to consider the ramifications of becoming part of the CFPB consumer complaint database. The CFPB uses complaints as a prelude to enforcement activities, so it is important for marketplace lenders to work to minimize complaints. The Bureau also has specific expectations for companies to respond in a timely fashion to inquiries. This means marketplace lenders need to institute a system for reviewing and responding to these complaints. Additionally, because the consumer complaint database is available to the public, this change represents an additional opportunity for reputation risk that needs to be addressed and monitored by marketplace lenders.