Online Lenders Queried by Regulators on Referral Fees, Bank Deals

By Wack, Kevin | American Banker, May 10, 2016 | Go to article overview

Online Lenders Queried by Regulators on Referral Fees, Bank Deals


Wack, Kevin, American Banker


Byline: Kevin Wack

The steady stream of bad news continues for online marketplace lenders.

State officials in California have asked top online lending firms a series of probing questions regarding their compliance with laws and regulations dealing with referral fees, bank partnerships, fair lending and other sensitive issues.

The California Department of Business Oversight sent letters Monday to 14 online lenders, both consumer and small business lenders. The agency said that the letters represent the start of the second phase of its inquiry into the industry, following requests for data that were sent to same companies in December.

The most recent letters were not released publicly. But Tom Dresslar, a spokesman for the Department of Business Oversight, said in an email that they address five specific issues of regulatory interest. The letters also include follow-up questions that emerged from specific firms' responses to questions posed during the first phase of the inquiry.

The firms that were sent the letters are: Lending Club, Prosper Marketplace, Social Finance, CircleBack Lending, Affirm, Avant, OnDeck Capital, CAN Capital, Kabbage, Funding Circle, Bond Street, Fundbox, PayPal and Square. Among the group, only CircleBack did not respond to California's earlier letter.

The disclosure about California regulators' new probe comes after Lending Club's chief executive abruptly resigned on Monday, and Prosper announced the dismissal of about 170 employees.

Here are the five issues that were flagged Monday by California officials:

Fair lending. …

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