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The Misregulation of Person-to-Person Lending

Andrew Verstein

Wake Forest University School of Law

November 21, 2011

UC Davis Law Review, Vol. 45, No. 2, 2011

Amid a financial crisis and credit crunch, retail investors are lending a billion dollars over the Internet, on an unsecured basis, to total strangers. Technological and financial innovation allows person-to-person (“P2P”) lending to connect lenders and borrowers in ways never before imagined. However, all is not well with P2P lending. The SEC threatens the entire industry by asserting jurisdiction with a fundamental misunderstanding of P2P lending. This Article illustrates how the SEC has transformed this industry, making P2P lending less safe and more costly than ever, threatening its very existence. The SEC’s misregulation of P2P lending provides an opportunity to theorize about regulation in a rapidly disintermediating world. The Article then proposes a preferable regulatory scheme designed to preserve and discipline P2P lending’s innovative mix of social finance, microlending, and disintermediation. This proposal consists of regulation by the new Consumer Financial Protection Bureau.

Number of Pages in PDF File: 86

Keywords: microfinance, microcredit, borrowing, finance, banking, securities regulation, disintermediation, social networks, peer-to-peer, person-to-person, p2p, innovation, technology, web 2.0, social lending, online, consumer finance, internet, Consumer Financial Protection Bureau, Dodd-Frank, crowdfunding

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Date posted: April 26, 2011 ; Last revised: March 3, 2015

Suggested Citation

Verstein, Andrew, The Misregulation of Person-to-Person Lending (November 21, 2011). UC Davis Law Review, Vol. 45, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1823763 or http://dx.doi.org/10.2139/ssrn.1823763

Contact Information

Andrew Verstein (Contact Author)
Wake Forest University School of Law ( email )
P.O. Box 7206
Winston-Salem, NC 27109
United States
3367585433 (Phone)
HOME PAGE: http://law.wfu.edu/faculty/profile/verstea/

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