The CFPB announced that it is now accepting consumer complaints about loans obtained through marketplace lenders and also issued a consumer bulletin directed at consumers who are shopping for such loans. The CFPB’s press release contains the following description of a marketplace lender: “A marketplace lender uses an online interface to connect consumers or businesses seeking to borrow money with investors willing to buy or invest in the loan. Generally, the marketplace lending platform handles all underwriting and customer service interactions with the borrower. Once a loan is originated, the company generally makes arrangements to transfer ownership to the investors while it continues to service the loan.”
To initiate the process for submitting a complaint via the CFPB’s website, a consumer must first click on a “submit your complaint” link. The consumer is then directed to “choose a product or service to get started.” Among the products a consumer can choose are different types of loans, such as “mortgage,” “payday loan,” and “other consumer loan.” The CFPB has specifically included loans obtained from marketplace lenders in the “other consumer loan” category, which is described as covering “problems with pawn loans, title loans, online loans, store loans, and other installment loans, such as those used for person-to-person or ‘marketplace’ lending, rent-to-own, or medical debt.” However, the CFPB apparently contemplates that consumers will also use other loan categories to submit complaints about marketplace lenders. In its press release, the CFPB states “Because marketplace lenders offer several types of consumer loans, a consumer submitting a complaint should select among the different complaint categories for products and services that best apply to their situation. For example, a consumer can select products such as ‘mortgage,’ ‘consumer loan,’ or ‘student loan.’ ”
The CFPB’s bulletin, entitled “Understanding online marketplace lending,” tells consumers that marketplace lending “uses online ‘platforms’ to connect consumers or businesses who seek to borrow money with investors willing to buy or invest in the loan. In most cases, once a loan is made the platform collects principal and interest payments from borrowers and sends the payments, less certain fees that the platform keeps, to investors.” The bulletin advises consumers to consider certain issues before taking a loan (such as how much the consumer can afford and really needs to borrow), warns consumers about refinancing certain kinds of debt (such as fixed-rate federal student loans), advises consumers to check their credit reports, and lists various issues consumers should think about when loan shopping (such as loan term, interest rate, fees and penalties.) (The CFPB notes that consumers “should take these steps before applying for any loan,” not just a loan from a marketplace lender.)
The CFPB’s objectives in taking these actions are questionable, since consumers already could complain about marketplace loans using the CFPB’s existing loan categories. Rather than seeking to provide additional protection to consumers, perhaps the CFPB’s primary objective is to warn marketplace lenders that they are clearly on the CFPB’s radar screen.
Indeed, the CFPB’s advice to consumers appears to signal the type of scrutiny marketplace lenders can expect from the CFPB. The CFPB tells consumers to “keep in mind that marketplace lending is a young industry and does not have the same history of government supervision and oversight as banks or credit unions. However, marketplace lenders are required to follow the same state and federal laws as other lenders.” (While the CFPB is not currently taking complaints about business loans, including business loans made by marketplace lenders, it recently indicated that, subject to an assessment of feasibility, it plans to build an infrastructure to intake and analyze small business lending complaints.)