Regulating On-Line Peer-to-Peer Lending in the Aftermath of Dodd-Frank: In Search of an Evolving Regulatory Regime for an Evolving Industry

Washington and Lee Law Review, Forthcoming

University of Toledo Legal Studies Research Paper No. 2012-04

39 Pages Posted: 16 Nov 2011  

Eric C. Chaffee

University of Toledo - College of Law

Geoffrey Christopher Rapp

University of Toledo College of Law

Date Written: November 15, 2011

Abstract

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act called for a government study of the regulatory options for on-line Peer-to-Peer lending. On-line P2P sites, most notably for-profit sites Prosper.com and LendingClub.com, offer individual “investors” the chance to lend funds to individual “borrowers.” The sites promise lower interest rates for borrowers and high rates of return for investors. In addition to the media attention such sites have generated, they also raise significant regulatory concerns on both the state and federal level. The Government Accountability Office report produced in response to the Dodd-Frank Act failed to make a strong recommendation between two primary regulatory options – a multi-faceted regulatory approach in which different federal and state agencies would exercise authority over different aspects of on-line P2P lending, or a single-regulator approach, in which a single agency (most likely the new Consumer Financial Protection Bureau) would be given total regulatory control over on-line P2P lending. After discussing the origins of on-line P2P lending, its particular risks, and its place in the broader context of non-commercial lending, this paper argues in favor of a multi-agency regulatory approach for on-line P2P that mirrors the approach used to regulate traditional lending.

Keywords: CFPB, Consumer Financial Protection Bureau, Dodd-Frank, Government Accountability Office, Lending, Lending Regulation, P2P, Peer to Peer, Person to Person, SEC, Securities Securities and Exchange Commission, Securities Law, Securities Regulation

Suggested Citation

Chaffee, Eric C. and Rapp, Geoffrey Christopher, Regulating On-Line Peer-to-Peer Lending in the Aftermath of Dodd-Frank: In Search of an Evolving Regulatory Regime for an Evolving Industry (November 15, 2011). Washington and Lee Law Review, Forthcoming; University of Toledo Legal Studies Research Paper No. 2012-04. Available at SSRN: https://ssrn.com/abstract=1959884

Eric C. Chaffee (Contact Author)

University of Toledo - College of Law ( email )

2801 W. Bancroft Street
Toledo, OH 43606
United States

Geoffrey Christopher Rapp

University of Toledo College of Law ( email )

2801 W. Bancroft Street
Toledo, OH 43606
United States

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