The Wall Street Journal reports:
Small businesses have been a growing source of revenue for online lenders. Now, federal regulators are exploring whether they should intensify oversight of these loan deals.
“These are basically mom-and-pop operations getting, you know, very small loans,” John Williams, president of the Federal Reserve Bank of San Francisco, told The Wall Street Journal. “What’s the borrower protection…and what’s the right way to think about it?”
With online, or marketplace lending, firms generally connect potential borrowers with loan funders, or investors. Marketplace lenders have expanded in part by offering credit to startup firms that may have trouble getting loans from banks. They maintain further regulation could slow or derail the lending process for underserved borrowers.
The leading marketplace lenders originated about $1.9 billion in small-business loans last year, up nearly 60% from 2014, according to a Treasury Department study.
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