Treasury Department Seeks Information on Online Marketplace Lending

by Ballard Spahr LLP

The U.S. Department of the Treasury has issued a request for information (RFI) regarding online marketplace lending. The RFI reflects the Treasury Department’s recognition that online marketplace lending “is a rapidly developing and fast-growing sector that is changing the credit marketplace” even though it “is still a very small component of the small business and consumer lending market.” The RFI is published in today's edition of the Federal Register, and responses are due on or before August 31, 2015. This is a very significant development since this scrutiny may presage more regulation of this industry.

The RFI describes “marketplace lending” as “the segment of the financial services industry that uses investment capital and data-driven online platforms to lend directly or indirectly to small businesses and consumers.” It describes marketplace lenders as falling into three general categories:

  • Balance sheet lenders that retain credit risk and are typically funded by venture capital, hedge fund or family office investments;
  • Online platforms that obtain financing through the sale of securities to enable third parties to fund borrowers and do not retain credit risk of  borrower non-payment; and
  • Bank-affiliated online lenders funded by a commercial bank that originate loans and directly assume credit risk.

It also notes that some companies have agreements with banks, whereby the bank makes loans to borrowers that apply on the platform, and the loans are then purchased by investors or the marketplace lender itself.

The RFI contains a series of questions involving 12 areas of interest. According to the Treasury Department, the information it seeks is intended to allow it to study the business models of online marketplace lenders and the products offered to small businesses and consumers; the potential for online marketplace lending to expand credit access for historically underserved markets; and how the financial regulatory framework should evolve to support the industry’s “safe growth.”

The Treasury Department also seeks additional information that marketplace participants believe would assist the Department’s efforts to become better informed about the impact of marketplace lending on small businesses, consumers, and the broader economy.

The RFI follows on the heels of the Second Circuit decision in Madden v. Midland Funding, LLC, which raises serious questions about the legal underpinning of a large segment of the marketplace lending industry—the ability of a purchaser of loans from banks to continue to charge the contract interest rate. We recently conducted two webinars focusing on issues of interest to marketplace lenders. In one webinar we focused on the implications of Madden for marketplace lenders, and in the other we probed a wide variety of legal issues facing the marketplace lending industry. (Copies of our webinar slides and audio links to both webinars are available upon request to our clients and friends.) Many of these same issues will be studied by the Treasury Department.

In the RFI, the Treasury Department notes that it only seeks comments on online marketplace lending that would not be covered by the Consumer Financial Protection Bureau’s potential rulemaking concerning payday and other small-dollar, high-rate loans. (We have reviewed the CFPB’s contemplated proposals for such loans in a series of four blog posts.)

Although this is not the first study conducted by a government agency about marketplace lending, the RFI is important because, to date, federal regulators have paid relatively little attention specifically to the marketplace lending business. (In July 2011, as required by the Dodd-Frank Act, the Government Accounting Office conducted a study and issued the report “Person-to-Person Lending: New Regulatory Challenges Could Emerge as the Industry Grows.”) The industry clearly has their attention now.

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.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.