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5/17/16 - Navigating Credit Risk in Marketplace Lending Opportunities

Internet-based “marketplace” lenders have been crowding into the consumer and small-business loan markets over the past several years, and the lenders’ success has encouraged banks to consider loan partnerships with marketplace firms. But recent tremors in marketplace lending have given some bankers pause. Doubts about underwriting have led to funding stress at some lenders, and federal and state regulators are focusing their attention on the industry.

Despite these tremors, the right marketplace-lending transactions offer banks real economic value. How can banks tell which marketplace lenders will more consistently produce high-quality assets, and which will leave the bank with substandard loans and credit losses, perhaps accompanied by a regulatory enforcement action? Please click “Read More” below to read a Sightlines InFocus by B.J. Sanford that offers banks a series of questions to consider about a potential partner’s business model, practices, vision, and culture. Forward-looking marketplace lenders can also address these questions to anticipate concerns of potential bank partners.