Cracking 2 Myths Of Online Lending

Of the many informative and innovative sessions powering the 2018 Benzinga Global Fintech Awards, none may be as important to the future of lending as the fireside chat between Cornelius Hurley, Executive Director at Online Lending Policy Institute, Colin Darke, General Counsel at Rocket Loans, and Jeremy Potter, Associate Counsel at Quicken Loans.

One of the main catalysts of the chat was a discussion about Hurley's two main myths surrounding the future of lending:

• Online lending is unregulated and is a shadow banking component.
• There is a nexus between payday lending and online lending.

Cracking The Myths

Potter held a strong opposition to the former, noting a sense of shock at the misconception.

"When we talk about and think about who is our regulator, it is interesting to hear that we’re unregulated or not regulated enough," Potter said during the chat on Tuesday afternoon. "When you look across some states that have multiple regulators, we are constantly juggling multiple sets of expectations."

He went on to stack up his company's regulation to the generic bank, saying, "We end up interacting with more regulators than the banks do. What we end up doing is having a entire structure dedicated to the entire examination process."

As it pertains to the second myth, Darke talked about his firm's efforts to reject questionable public beliefs.

"It happens with a lot of consumer groups and writer and reporters where there will be a story about payday lending, and a lot of the states did their homework on payday lenders, so they are quick to try and stop anything that resembles payday lending," said Darke. "It's our job to combat those rumors and explain that, not only are we heavily regulated, but we have a product that is long standing."

"It happens with a lot of consumer groups and writer and reporters where there will be a story about payday lending [that is framed as a story about online lending], and a lot of the states did their homework on payday lenders, so they are quick to try and stop anything that resembles payday lending," said Darke. "It's our job [at the Online Lending Policy Institute] to combat those rumors and explain that, not only are we heavily regulated, but we have a product that is long standing.”

A Look At OLPI

The majority of true online lenders and marketplace lenders offer a 36- to 60-month, fixed-rate — usually significantly under 36-percent APR — unsecured loans, Darke said. That’s in contrast to payday lenders that offer small dollar, 45-day loans with approximately 400-percent APR.

Darke said the OLPI strives to get the policy makers and thought leaders involved in fintech in the same room to understand what the products are, what the promise of online lending is, and to reach a consensus on what is responsible innovation.

The future of online lending in fintech is one of great interest and potential. That said, it's not without its fears, doubts and, in turn, myths.

Follow along the two-day event on Twitter with the hashtag #BZAwards.

Quicken Loans Chairman Dan Gilbert is an investor in Benzinga.

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