Online Lenders Seeking to Boost Their Influence Under Trump
(Bloomberg) -- Online lending companies are seeking to exert more influence in Washington under President-elect Donald Trump and a Republican-controlled Congress.
The companies increasingly are joining lobbying groups that want laws changed to make it easier for them to attract new borrowers and investors as they look for ways to grow and limit future regulatory scrutiny.
One of the largest groups, the Marketplace Lending Association, began in April with three members and has since expanded to 14. Consumer lenders Avant Inc. and Affirm Inc. as well as student lender CommonBond Inc., backed by former Citigroup Inc. Chief Executive Officer Vikram Pandit, are among the latest companies to join the group. Founding members include LendingClub Inc. and Prosper Marketplace Inc.
The ability of the lenders to get what they want in Washington likely will have a significant impact on the future of the industry. Based on public statements by Trump and his surrogates, it’s not clear whether the new administration will be more amenable to the companies’ legislative agenda than the Obama administration.
The desire to influence U.S. policy comes as regulators and lawmakers step up their scrutiny of marketplace lending. Online U.S. loan volume is expected to reach $120 billion by the end of the decade, up from $20 billion in 2015, according to Morgan Stanley research. The industry is also trying to overcome scandal after LendingClub in May announced its founder resigned amid an internal probe into a botched loan sale that revealed weaknesses in controls.
“The industry is maturing," said Nat Hoopes, MLA’s executive director. “It’s now even more important that our voices are heard with policy makers."
Online loan companies have splintered into a number of lobbying groups. They include the Innovative Lending Platform Association, founded last year, whose members include OnDeck Capital.
Marketplace lenders were often called peer-to-peer when they began less than a decade ago because they used the Internet to match borrowers with investors who wanted to fund them. As the industry has grown, lots of different models have evolved to extend credit to small businesses and consumers.
MLA is asking lawmakers to consider creating a new type of debt that would make it easier for investors to buy bonds backed by marketplace loans and exempt issuers from some disclosure requirements. The group also wants tax benefits for companies that offer student loan assistance to employees.
MLA is also pressing lawmakers to support a special charter that would give online lending companies the benefits that come with being a federally-regulated bank. That’s something regulators are already considering.
In December, the Office of the Comptroller of the Currency said it planned to start accepting applications for a special charter for technology companies that offer financial services products.
While a charter would subject firms to federal banking rules, such as anti-money laundering controls and consumer protections, some lawmakers oppose the move. U.S. Senator Sherrod Brown, an Ohio Democrat, is among those who argue it could enable fintech firms to avoid laws they don’t like, and potentially allow predatory practices to spread.