Why it Matters
On March 7, 2016, the Consumer Financial Protection Bureau (CFPB) announced that it is now accepting complaints on consumer loans from online marketplace lenders (MPLs). Established in 2010 under the Dodd-Frank Act, the CFPB has historically relied on this complaint mechanism followed by enforcement actions to affect industry practices, and this announcement may be the agency's way of setting up a beachhead in an industry that has, until now, been the subject of somewhat fragmented regulators. The CFPB's jurisdiction is mainly focused on consumers and consumer-based financial issues. Accordingly, the new complaint process is not expected to impact the small business and real estate MPL segments. Depending on the nature and scope of complaints proffered up by consumers, MPLs should expect that various aspects of their business activity will come under increased scrutiny in the near-term. MPLs are encouraged to review closely the CFPB's marketplace lending consumer bulletin for hints about areas where the CFPB may be focusing its attention, including hidden fees, penalties and nature and extent of disclosure about costs of loans generated by an online platform. The CFPB is not the first agency to announce that it is focusing on MPLs. The California Department of Business Oversight has sent questionnaires to numerous MPLs who have licenses under California's Financial Lender Law and in 2015 the Department of the Treasury began gathering information about MPLs.
The CFPB bulletin can be found here.