By Guglielmo de Stefano on Thursday 7 April 2016
Funding Circle, Lending Club, Prosper have partnered to promote responsible business practices and sound public policy, aimed at benefitting both borrowers and investors.
In a move that is long overdue and has been extensively trailed, the three biggest US marketplace lending platforms – Funding Circle, Lending Club and Prosper Marketplace – have today established the Marketplace Lending Association (MLA), a non-profit membership organization that aims to support the responsible growth of marketplace lending; to foster innovation in financial technology; and to encourage sound public policy. AltFi Data estimates that between them, these three platforms have just over a 60% share of the US Online Direct Lending Sector.
The parallels between the MLA and the UK’s Peer to Peer Finance Association (P2PFA) are plain to see. The P2PFA was founded in 2011, again by the biggest three UK platforms at the time. According to its website, the P2PFA ‘seeks to secure public policy’; ‘to ensure members demonstrate high standards of business conduct’ and ‘to raise awareness and understanding’.
According to the three US giants, the growth of marketplace lending and the benefits it provides depend on marketplace lending platforms upholding strong operating standards that protect borrowers and investors. That’s why the MLA’s members have established the Marketplace Lending Operating Standards – a code of business conduct addressing transparency for investors, responsible lending, governance and controls, and risk management – designed to promote responsible practices industry-wide.
The MLA has developed 6 Operating Standards:
Each standard is in turn divided in sub-standards that define each topic more in depth. You can read the full code of conduct by clicking here.
“Marketplace lending platforms have a unique opportunity to make credit more affordable for consumers and more available to small business owners, while offering attractive investment opportunities to retail and institutional investors. This opportunity will only materialize if our technology and business model advantage is coupled with sound business practices […]. This Association will help the industry adopt and propagate high standards and inform and collaborate with policymakers.”
The MLA’s board of directors is comprised of Conor French (from Funding Circle) that covers the position of US General Counsel; by Richard Neiman (from Lending Club), Head of Regulatory and Government Affairs; and by Sachin Adarkar (from Prosper Marketplace) that joins the board as Chief Compliance Officer.
“The launch of this Association reflects our industry’s commitment to the highest standards of transparency and customer protection, while also delivering innovative new ways to provide better value and experiences for consumers, small businesses and investors. In the fast-growing marketplace lending sector, we want to continue to act as a thought leader and thought partner to the appropriate bodies in Washington to ensure continued innovation and responsible growth in the sector."
As the UK’s P2PFA has grown from the founding three members to eight members currently, we expect membership of the MLA to grow. As we know, MLA has only three members (its founders), but it is open to accept new ones in the future. As we read on its website, the membership application process will be announced soon. However, the association states that it will be open to all marketplaces that meet the following criteria:
“Prosper is committed to operating a transparent and consumer-centric business that enhances our customers' financial well being. We’re proud to be part of the launch of this industry association, which is a significant step forward in helping us communicate the benefits of marketplace lending for both borrowers and investors, as well as giving us a stronger voice with regulators and policymakers.”
The UK industry has been hugely successful in attaining government buy in and support for the industry. This has created a regulatory environment, which is often sighted as the best in the world to enable the marketplace lending industry to grow responsibly. As Renaud Laplanche confirmed to AltFi in an interview late last year: “I think the regulatory framework and the way government embraces marketplace lending in the UK is actually ahead of us in the US.” This enviable position is likely, at least in part, down to the organisation, lobbying and hard work of the P2PFA. If the MLA is able to emulate this success it promises to provide a significant boost to the US industry.