As the U.S. Treasury continues with its inquiry into the rise of the alternative lending and online loan marketplace industry, mainly by seeking out information from its main players, state-level authorities have taken their own action to probe the sector.
The Wall Street Journal reported Friday (Dec. 11) that state regulators have launched an inquiry into the marketplace lending industry.
The California Department of Business Oversight has reportedly sent requests to more than a dozen lending platforms, an unnamed source told the publication. Those recipients include OnDeck, Kabbage and Prosper Marketplace.
[bctt tweet=”California sent requests to more than a dozen lending platforms.”]
Reports said that the inquiries will focus on ensuring that these companies are doing business with the appropriate licenses and supervision as mandated under California law. A department official added that the probe will also examine whether changes to existing legislation or new laws will be needed for the industry.
According to officials, plans for the probe began before investigators discovered that some money used by the San Bernardino attackers earlier this month was obtained through the online lending marketplace Prosper.
The lending companies reportedly have until March to respond to the department’s request.
While California launches an inquiry, the U.S. Treasury, the Federal Reserve Board and other policymakers have taken to eyeing the market. Critics say the industry, largely unregulated, can lead to unfair loan terms and higher fees for business and consumer borrowers. Proponents say alternative lenders have filled a need for working capital among borrowers, especially SMEs, left unfulfilled by traditional financial institutions amid harsher regulations.
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