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Over the last few years, online marketplace lenders have enjoyed "regulatory arbitrage" over incumbent institutions. Going forward, that advantage is likely to wither away as alternative lenders reach further down into the riskier credit spectrum. Tighter regulation could prevent P2P lenders from avoiding state-by-state lending rules.
Ask those associated with alternative finance what their nightmare regulatory scenario is, and a crackdown by the Consumer Financial Protection Bureau comes back as a common answer. "It's unclear to me for sure whether the CFPB's going to assert jurisdiction and if so how," Covington's Gumbs said in December. "I think that's a huge question mark, and I think that question mark will continue to grow as the industry grows."
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