Wednesday, March 1, 2017
The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.
BITCREDIT: MARKETPLACE LENDING AND CONSUMER PROTECTION
Christopher K. Odinet
The digital economy is changing everything, including how we borrow money. In the wake of the 2008 crisis, banks pulled back in their lending and, as a result, many consumers and small businesses found themselves unable to access credit. In the space left vacant by these traditional financial institutions have come a wave of online firms called marketplace lenders. These platforms are fast making antiques out of many mainstream lending practices, such as face-to-face interviews with loan officers and long paper applications. Instead, through underwriting by automation—utilizing big data (including social media data)—loan processing that once took weeks can now be done overnight. The result of these technological advances has been quicker access to capital, more economic efficiencies, and even greater prospects for access to credit for theunbanked and underbanked. “Click here” is the new “sign on the dotted line.”
But there is a lot still to learn about the online lending marketplace. How do these marketplace lenders work and what kinds of products do they offer? Moreover, what role will they play in the future of American debt and credit markets? This Article explores these questions and assesses current government responses to the nascent industry. It also surveys the currentregulatory landscape for marketplacelenders and analyzes a multi-year dataset of complaints submitted to the CFPB relative to consumer loans offered by these firms.The Article concludes by offering some broad policy considerations for how investors, small businesses, and consumers could be protected in this new world of BitCredit.