-
Former Treasury Secretary Larry Summers, who sits on Lending Club's board, said in a speech Wednesday that such technology-focused marketplace lenders should be given a fair chance to compete.
April 15 -
The high-flying sector is primed for a correction, industry leaders said this week. Declining credit standards are one of the top concerns.
April 16 -
The simmering controversy over American Express' Bluebird card typifies a classic debate: When do regulations that ostensibly protect the public from shady operators really just protect incumbent businesses from competition?
October 22 -
Mike Cagney of Social Finance, honored Wednesday at LendIt's innovator of the year, chalks up his success to his company's "relationship-driven" model.
April 15
Former Treasury secretary Lawrence Summers urged regulators not to "give incumbents an unfair advantage" in a
Banks provide extensive protections to consumers on all of the products and services they offer. They are required to ensure that consumers can pay back loans before extending credit. If an unauthorized payment is made from a consumer's account, it is the bank that restores the money. All of this is ensured by a strict regulatory framework that ensures compliance and instills confidence.
Consumers have come to expect this level of protection from all of their financial services providers. But many new technology-focused companies offer little in the way of consumer protection. They do not have to establish ability to repay before making loans or offer protection from unauthorized payments. This lack of regulation can create instability. During the financial crisis, fly-by-night nonbank mortgage lenders quickly vanished when the problems they created came to light.
Contrary to Mr. Summers comments, I would argue that startups like the
Consumers must receive the same level of protection whether they choose to do business with a bank or with marketplace lenders and other challengers. Regulatory requirements that help customers should apply to all service providers. If there are any regulations that interfere with serving customers, those rules should be revised or removed not used to give nonbanks a market advantage over banks.
Banks and financial startups should be able to agree that protecting consumers is our mutual goal. Consistent rules are critical to achieving it.
Frank Keating is president and chief executive of the American Bankers Association and former two-term governor of Oklahoma.