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September 01, 2015

American Banker, CUJournal pick up NAFCU's online lender warning

Both American Banker and Credit Union Journal picked up NAFCU's call for more consumer protection requirements for online lenders, in the association's letter to the Treasury Department last week.

In the letter, NAFCU Regulatory Affairs Counsel Kavitha Subramanian warned of the lack of consumer protections for borrowers who use online lenders. She also raised concerns about the "uneven playing field" created by the over-regulation of credit unions compared to the unregulated online lenders.

Subramanian also noted that the "increasing complexity of the regulatory environment" is hampering the credit union industry and leading to an increased number of "non-traditional" actors like online lenders.

"NAFCU continues to hear that many small businesses are forced to turn to online lenders because they are unable to secure lines of credit from traditional financial institutions," Subramanian wrote. "Credit unions are unable to adequately meet the needs of America's small businesses due to outdated and unnecessary regulatory burdens on the amount of member business loans that they are allowed to extend."

Subramanian urged Treasury and other financial regulators to hold online lenders to the regulatory requirements such as the Truth in Lending Act, underwriting standards for loans, and state usury laws.