The new group led by Talbott plans to show how its members’ business models differ from payday lenders and consumer peer-to-peer companies. The group intends to highlight to agencies including the Consumer Financial Protection Bureau that small business borrowers present a different risk profile than consumers do.
Diverse Models
Because online lenders have diverse business models -- including how they fund loans, measure risk and what kinds of customers they serve -- numerous advocacy groups are being formed.
Earlier this month, marketplace lenders including LendingClub Corp. and Prosper Marketplace Inc. formed their own lobbying group. They aim to advocate for issues specific to companies that arrange loans over the Internet by matching borrowers to investors, opposed to models that use their own balance sheets to fund loans.
Another outfit whose members include giant technology firms such as Apple Inc. and Amazon Inc. aims to advocate for "tech-friendly" financial reform.
While many online lending firms set out to compete with banks, the two industries are increasingly becoming partners. For example, JPMorgan Chase & Co. has partnered with On Deck to use their technology to offer small businesses loans to the bank’s customers.
Regulators so far have taken only preliminary steps toward oversight. Treasury kicked off a process to examine online lenders last year. Comptroller of the Currency Thomas Curry said this month that he wants to establish a framework for regulating new financial services technologies and firms. The CFPB is also collecting information.