InfoBytes Blog
CFPB's Jeffrey Langer Lends Perspective on Marketplace Lending
On April 12, CFPB Assistant Director for Installment Lending and Collections Markets Jeffrey Langer delivered remarks at the San Francisco LendIt USA Conference on the marketplace lending industry. Langer began his remarks by summarizing the CFPB’s Project Catalyst initiative, which was designed to support and encourage consumer-friendly innovation pertaining to financial products and services, such as marketplace lending. Langer, referencing the CFPB’s recently released consumer bulletin on online marketplace lending, commented that marketplace lending is a “young” industry with both potential benefits and potential risks. For example, Langer explained that marketplace lenders may be able to offer consumers faster and more convenient methods of obtaining credit, and may also have fewer overhead costs to pass along to consumers as compared to brick-and-mortar institutions. However, Langer also expressed concerns about the industry’s agility in changing markets, opining that, “[i]t is unclear whether marketplace lenders’ have adequate loan servicing infrastructure or the ability to scale infrastructure quickly and effectively in the event of [an economic] downturn.” According to Langer, “it is simply too soon to know whether marketplace lending will be able to realize its potential as a means of delivering credit at a lower cost to consumers (and small businesses) who have the ability to repay the loans they obtain or whether the marketplace lending business model will prove unable to sustain itself through a full business cycle.” Langer additionally noted that marketplace lenders could face fair lending risk as a result of introducing new types of data and/or analytics in making credit decisions.