Though online lending may face changes in regulation in the coming years, it's not clear what these would entail. According to a PEW Charitable Trusts study from 2012, online sources have represented around one-fourth of available payday loans. However, that same source said that borrowers do not seek out online loan sources when their state uses legal protections. Is there a way that online lenders and regulations can co-exist?
In a more recent Forbes article, Marc Prosser said that possible regulations are still in the early stages. The Department of the Treasury is currently researching the industry, although this doesn't necessarily mean that any real legislation is imminent. For this department to take action, there needs to be a systemic risk from any financial companies they investigate that aren't banks, the source said.
Some of the areas where online lenders could face regulation include Annual Percentage Rates and proper collection methods. Prosser noted that there are some cases in which lenders themselves take on self-regulation instead of waiting for official government intervention. This could help fill in any gaps left through lack of government rules, especially as businesses create their own sets of standards for best practices.
"Businesses can create their own sets of standards for best practices."
One example Prosser gave is the Small Business Borrowers' Bill of Rights, which includes several provisions designed to support applicant activity. Under these standards, small businesses have the right to fair practices, transparency and accurate, responsible credit information. While these regulations might not be the law, they show the different consumer-facing priorities that some lenders are focusing on.
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