The Treasury Department is seeking views on what it calls “online marketplace” lending – i.e., new consumer- and commercial-lending products and pipelines that bypass traditional channels long established through banks, finance companies, and other physical providers. Treasury’s RFI is a very preliminary step towards action in an arena often characterized as “shadow banking,” with one major aspect of its inquiry in fact focused on how online marketplace lenders are regulated and any risks posed by disparities between their framework and that governing established players. Treasury lacks direct authority to govern both bank and non-bank lenders, but Dodd-Frank does give the Financial Stability Oversight Council –chaired by Treasury – authority to recommend regulation in an area in which it finds that activities and practices may pose systemic risk or problems for under-served, minority, and other consumers. Thus, Treasury’s conclusions could have considerable regulatory clout despite its lack of hands-on authority in this sector.
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