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Post LendingClub, Other Online Lenders Under NY Regulatory Radar

Post LendingClub, Other Online Lenders Under NY Regulatory Radar

New York State's financial regulator recently initiated an investigation into LendingClub Corp (NYSE: LC) and is now eyeing activities of other online lenders. Of particular concern is whether these peer-to-peer lenders should be allowed to conduct business in New York, Reuters reported, citing a person familiar with the matter.

The Reuters report assumes significance for online lenders such as On Deck Capital Inc (NYSE: ONDK) and Prosper, the second-largest marketplace lender.

According to the report, although the New York Department of Financial Services (NYDFS) has not yet established which companies will be subject to the probe, the information it receives in response to a May 17 subpoena to LendingClub "could shed light on broader industry practices that require scrutiny."

Related Link: LendingClub Ticks Lower Amid Report NY Regulator Has Subpoened Co

What Is Going On With LendingClub?

Last week, NYDFS subpoenaed San-Francisco based LendingClub seeking information about loans issued beginning May 17, 2013, to New York citizens. Information asked for by the regulator includes interest rates, underwriting standards and borrower verification. LendingClub has until June 21 to respond.

"U.S. regulators have taken baby steps so far to regulate the sector with the Treasury this month calling for greater scrutiny," the report said.

According to the report, "The NYDFS can determine whether a lender's interest rate practices comply with the state's usury laws, which cap interest rates at 16 percent. LendingClub charges interest rates as low as 5 percent and as high as 29 percent, according to the company's data."

Reuters said a detailed probe on the industry by NYDFS could result in licensing requirements for online lenders in New York, "along with additional oversight of business practices and loan terms."

At time of writing, On Deck Capital was down 0.81 percent at $4.90, while LendingClub was down 3.15 percent at $4.31.


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