The Federal Reserve Bank of Cleveland’s recent study on P2P lending raises several serious issues concerning the use of proceeds for online loans and the result of marketplace lending. Specifically, the study highlights concerns related to use of proceeds for online loans, results of lending in terms of credit scores, and overall financial impact on borrowers.
The Online Lending Policy Institute (OLPI) looks forward to discussing this study with its authors, as well as reviewing the P2P lending study with the authors of a separate study by the Federal Reserve Bank of Philadelphia, which reached markedly different conclusions.
OLPI notes, however, that the Cleveland Fed’s study makes an unfortunate comparison between online lending and the subprime loans leading up to the Financial Crisis. There is no apt comparison between online lending and subprime lending preceding global financial crisis, and rhetorical flourishes such as this undermine serious research related to online lending that is both merited and necessary.
Similarly, the study’s concluding observation that “… there are no regulators that oversee the online lending marketplace and its players” is false and misleading. Online lending is subject to a wide array of federal and state consumer protection laws and regulations as detailed here.