Senators Merkley, Brown, Shaheen Ask GAO for Updated Report on the Financial Technology Marketplace

WASHINGTON, D.C. –(ENEWSPF)–April 18, 2016. Today, Oregon’s Senator Jeff Merkley and U.S. Senators Sherrod Brown (D-OH) and Jeanne Shaheen (D-NH) wrote to the head of the U.S. Government Accountability Office (GAO), asking for an updated report on the rapidly-expanding financial technology, or “fintech,” marketplace.

Merkley, Brown and Shaheen serve respectively as the top Democrats on the Senate’s Financial Institutions and Consumer Protection Subcommittee; the Banking, Housing and Urban Affairs Committee; and the Small Business Committee.

GAO last conducted a study of the fintech marketplace in 2011, in a report that focused exclusively on peer-to-peer lending sites. In the five years since, the fintech marketplace has grown significantly and branched out into new areas, including small business lending.

“Observers have questioned what the appropriate role of federal regulators should be in supervising fintech companies that provide small business capital and consumer lending,” the Senators wrote. “… [I]t is possible that the current online marketplace for small business loans falls between the cracks for federal regulators. As we saw during the crisis, gaps in understanding and regulation of emerging financial products may result in predatory lending, consumer abuse, or systemic issues.”

They continued, “We are very interested in ensuring that fintech provides credit to small businesses and consumers in a way that prevents abusive practices while expanding economic opportunity. To that end, we are requesting that the GAO provide information.”

Specifically, the Senators asked the GAO to address the following questions in their report:

  • Since many fintech companies are privately held, information about the size of their portfolios is often not transparent. Please detail the current size and structure of fintech lending. What has been the evolution and growth of online marketplace lenders since the 2011 Report, including in both consumer and small business lending?
  • The 2011 Report noted that risks could grow as the investor base shifts from individual investors to institutional investors. Can you determine whether the risks you identified in 2011 related to institutional investors has grown as anticipated?
  • What changes, if any, have occurred in the oversight structure of fintech, including but not limited to marketplace lending, since the 2011 Report? Could you also update your findings as it relates to the regulatory structure?
  • Some fintech lenders have relationships with financial institutions, which are regulated by the federal and state financial regulators. How do these relationships impact the broader financial system and regulatory framework?
  • What is the authority of federal agencies to supervise and examine companies offering consumer and online small business loans? Specifically, how do regulators account for risk and treat these assets on the balance sheets of financial institutions?
  • What requirements must fintech companies follow when offering loans or advances to small businesses and consumers? How are the protections applicable to small business owners different from the protections applicable to consumer loans?
  • What are the requirements for disclosing terms to small business owners and ensuring that they are presented transparent fees and interest rates?
  • What requirements apply to fintech companies related to anti-money laundering, data security, and privacy?
  • Many fintech companies use non-traditional data to underwrite loans, such as social media information or search engine history. What implications are there from the use of non-traditional data?  What impact might fintech have on enforcement of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act?  More generally, what obligations do fintech companies have to comply with fair lending laws?
  • What recommendations do you have to modernize consumer protection laws in response to the growth of fintech?

The full text of the letter can be accessed here.