There is some confusion in the marketplace with respect to new loan products and services in the banking industry.  My definition of “FINTECH” is broad and encompasses computer programs, applications and other technology used to provide banking and financial services.  Perhaps you have noticed that many retail bank services have been streamlined through on-line payment, using the ATM and banking applications.

Marketplace Lending is a term that has recently been applied to consumer and commercial lending using a technology Fintech and Financial Institutionsplatform to connect borrowers and lenders in a “smart” manner.  These new entities are generally not government regulated in the same way banks are, but do have state licensing requirements and if consumer or residential lending companies, for example, are subject to a wide range of federal law.  Borrowers are able to gain access to funds quickly and oftentimes at lower interest rates.  The funding sources vary from private investors to warehouse lines of credit.    Third party brokers, specialty lenders, lead generators and other players are penetrating the market.  We place marketplace platforms with traditional bank partners who wish to expand their fintech presence.

The conventional thinking is that marketplace lending platforms are user friendly and require less state and federal compliance which might not always be true and correct.   Structuring a collaboration, although creative from the legal viewpoint,  can give rise to a myriad of regulations and corporate cultural differences,  especially if we are working with consumer loan products.

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