Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 29 On December 11, the California Department of Business Oversight (DBO) announced that it had launched an inquiry into the online lending industry, known as “marketplace lending.” The DBO requested a wide array information from 14 marketplace lenders, including five-year trend data about their loan and investor funding programs, and information about their business models and online platforms. The DBO’s announcement indicated that the goal of the inquiry is to better understand marketplace lending and to determine the industry’s size and scope. The DBO’s inquiry follows the July 16 announcement by the U.S. Treasury Department that it was requesting information from marketplace lenders regarding their business models and products, as well as requesting input into how the financial regulatory framework should evolve in light of the industry’s growth. On May 19, the CFPB entered consent orders with PayPal and Bill Me Later concerning their online-payment services. The CFPB alleged violations of the CFPA for the payment processors’ failure to honor advertised promotions, misprocessing consumers’ payments, and engaging in other allegedly deceptive and unfair practices relating to consumer enrollment, fees, and billing disputes. The consent order requires the companies to pay $15 million in redress to affected consumers and $10 million to the CFPB in civil money penalties. In Madden v. Midland Funding, LLC, the Second Circuit ruled that although a national bank can charge an interest rate that exceeds state law maximums under state usury laws, the bank’s assignee cannot. In reversing the lower court’s ruling, the Second Circuit rejected the argument that the National Bank Act’s preemption applied to assignees of a debt from a national bank. The court held that the assignee “did not act on behalf of” a national bank “in attempting to collect on [the plaintiff’s] debt.” The court reasoned that applying a state law interest rate limitation to the assignee of a national bank “would not significantly interfere with any national bank’s ability to exercise its powers under the NBA.” Midland Funding is seeking review of the Second Circuit’s decision by the U.S. Supreme Court. Although Midland Funding is a secondary market purchaser of unpaid debt and the decision most directly affects that industry, it also has a significant impact on FinTech consumer finance companies. Many marketplace lenders operate on a model where they generate loans but use a national bank to originate the loans at rates higher than state usury limits, and then repurchase the loan from the bank with that interest rate. Arguably, the Second Circuit’s ruling bars such lenders from this practice within that jurisdiction. If the U.S. Supreme Court accepts the appeal, it will be one of the most closely watched decisions in 2016 for disruptors in consumer finance lending. Online Lending & FinTech Online lending and FinTech companies are seeking to disrupt (and in some ways are disrupting) traditional banking and lending models. While they have begun to get the attention of regulators, in 2015 they largely avoided the focus of enforcers. We expect this may change in 2016 based on highlights from the past year.