Federal Trade Commission to Consider FinTech

Manatt, Phelps & Phillips, LLP

The Federal Trade Commission is joining the FinTech party, announcing a series of events to explore emerging financial technology.

What happened

First up: The agency will host a forum this summer to explore "the growing world of marketplace lending and its implications for consumers." The June 9 event will be the first in a series for the agency to consider consumer protection issues across different areas of emerging financial technology.

"Marketplace lending is a developing and fast-growing sector offering new ways for many consumers and small businesses to secure credit," the FTC said in a press release about the event. "As technological advances expand the ways consumers can store, share, spend, and borrow money, the FTC is working to keep consumers protected while encouraging innovation for consumers' benefit."

The forum will examine the various models used by companies in the industry as well as the potential benefits to consumers and possible consumer protection concerns, bringing together consumer groups, researchers, government representatives, and members of the industry. Participants will also discuss how existing consumer protection laws "might apply" to companies participating in the marketplace lending space.

The burgeoning online marketplace lending industry has caught the eye of other regulators as well. Last year, the Department of the Treasury published a Request for Information (RFI) posing 15 questions regarding online marketplace lending, seeking comment on the various business models and products offered by such lenders to both small businesses and consumers.

In November, members of the agency shared some of the takeaways from responses to the RFI, including concern that the new underwriting models have yet to be tested through a full credit cycle and the growing number of partnerships that online marketplace lenders are forging with banks, community development financial institutions, and other businesses.

California's Department of Business Oversight also inquired into the industry, sending an online survey to 14 lenders for more information and the Consumer Financial Protection Bureau (CFPB) recently announced that it will now accept complaints about online marketplace lenders.

Why it matters

The FTC has yet to announce the other topics for its FinTech Series and said it will release a full agenda for the marketplace lending forum closer to the event. Given the growth of the industry—and the attention being paid by other regulators—the Commission's interest in and decision to start its series with the marketplace lending industry is not surprising.

To read the FTC's press release about the forum, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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