Post by jo on Nov 12, 2017 13:36:32 GMT
Wonkish article about US P2P consumer borrowing:
clevelandfed.org/newsroom-and-events/publications/economic-commentary/2017-economic-commentaries/ec-201718-3-myths-about-peer-to-peer-loans.aspx
Interesting conclusions:
'Conclusions
Based on our findings, one can argue that P2P loans resemble predatory loans in terms of the segment of the consumer market they serve and their effect on individual borrowers’ financial stability. The 2007 financial crisis illustrated the importance of consumer finance and the stability of consumer balance sheets. The crisis inspired a wide set of research that explored the contagion mechanisms across financial institutions, across individual consumer credit accounts, and across consumers in local markets. The bulk of this academic research calls for stable financial markets and long-term sustainable credit markets.
While P2P lenders do not yet claim a significant share of the retail financial market, the double- and triple-digit growth rates of P2P origination volumes and the rapidly expanding P2P customer base indicate that online lenders have the capacity to represent a formidable market force in the near future. The evidence we document, combined with the fast growth of the P2P market, suggests that the P2P industry has the potential to destabilize consumer balance sheets. Consumers in the at-risk category—those with lower incomes, less education, and higher existing debt—may be the most vulnerable. The overall performance of P2P loans strikingly resembles that of the subprime mortgage market before the 2007 subprime mortgage crisis (figure 1).
Laws and regulations designed to protect this at-risk segment of the population have existed since the creation of the Equal Credit Opportunity Act of 1974; the protections have been reinforced with a series of antipredatory laws and the Dodd-Frank Act. Interestingly, the Equal Credit Opportunity Act defines creditors as lenders who make decisions and set terms, such as interest rates. Such a definition offers an opportunity for regulatory agencies to apply fair-lending rules and antipredatory lending laws to online lenders. Yet currently there are no regulators that oversee the online lending marketplace and its players. It might be time to look more closely at P2P lending practices and evaluate their implications for consumer finance.'
clevelandfed.org/newsroom-and-events/publications/economic-commentary/2017-economic-commentaries/ec-201718-3-myths-about-peer-to-peer-loans.aspx
Interesting conclusions:
'Conclusions
Based on our findings, one can argue that P2P loans resemble predatory loans in terms of the segment of the consumer market they serve and their effect on individual borrowers’ financial stability. The 2007 financial crisis illustrated the importance of consumer finance and the stability of consumer balance sheets. The crisis inspired a wide set of research that explored the contagion mechanisms across financial institutions, across individual consumer credit accounts, and across consumers in local markets. The bulk of this academic research calls for stable financial markets and long-term sustainable credit markets.
While P2P lenders do not yet claim a significant share of the retail financial market, the double- and triple-digit growth rates of P2P origination volumes and the rapidly expanding P2P customer base indicate that online lenders have the capacity to represent a formidable market force in the near future. The evidence we document, combined with the fast growth of the P2P market, suggests that the P2P industry has the potential to destabilize consumer balance sheets. Consumers in the at-risk category—those with lower incomes, less education, and higher existing debt—may be the most vulnerable. The overall performance of P2P loans strikingly resembles that of the subprime mortgage market before the 2007 subprime mortgage crisis (figure 1).
Laws and regulations designed to protect this at-risk segment of the population have existed since the creation of the Equal Credit Opportunity Act of 1974; the protections have been reinforced with a series of antipredatory laws and the Dodd-Frank Act. Interestingly, the Equal Credit Opportunity Act defines creditors as lenders who make decisions and set terms, such as interest rates. Such a definition offers an opportunity for regulatory agencies to apply fair-lending rules and antipredatory lending laws to online lenders. Yet currently there are no regulators that oversee the online lending marketplace and its players. It might be time to look more closely at P2P lending practices and evaluate their implications for consumer finance.'