By Lisa McGreevy
President and CEO, OLA
The online short-term, small dollar credit industry has certainly had its ups and downs over the last year. Yet, we continue to see ongoing growth and innovation within our industry.
A recent study conducted by Stephens Inc. has shown that online short-term loan volumes reached $18.6 billion in 2012, a 30 percent increase from 2011. As demand for our product continues to fuel the growth of the industry, it also sparks innovation.
Our industry is pioneering advances in technology and software which will provide 21st century credit to the 21st century consumer.
Unfortunately, the growth of our industry has lead to government overreach by state and federal regulators. This summer, federal agencies such as the Federal Deposit Insurance Corporation and Department of Justice began concerted efforts to pressure banks to stop processing legal, authorized payments between online lenders and their customers.
The overreach by these federal agencies was unprecedented, threatening the livelihood of many small businesses across the country and possibly further restricting credit access to millions of American families.
Rogue government bureaucrats who simply don’t like our lending products have been trying to end an entire industry, yet offer no alternatives to those who rely on access to short term credit.
While persistent attempts to misrepresent our industry continue, I am confident that we will become a stronger industry in the end. I believe this because of the way we have stuck together as an industry and persevered in the face of these threats.
We have proven that we are a legitimate and legal industry that provides essential financial products to millions of Americans. There is a path towards permanency and it continues in 2014.
The Online Lenders Alliance sees 2014 as an extremely important year for solidifying the permanency of the online lending industry.
We believe the best way to protect and grow is by finding a federal solution to ensure that consumers have access to the credit they need and lenders have the ability to provide them that credit.
Innovation in online lending has always been driven by consumer demand and feedback.
We believe that current state-by-state laws are insufficient to govern the global nature of the Internet. By passing a federal charter to regulate our industry, we would establish a framework that would best protect our industry, ensure nationwide access to short-term consumer credit and preserve consumer protection laws and regulations.
OLA supports bipartisan legislation, the Consumer Credit Access, Innovation, and Modernization Act (H.R. 1566), which would create a federal charter program for nonbank lenders.
H.R. 1566 would establish a clear set of rules for lenders and ensure all consumers have access to new, innovative financial products generally unavailable to them at banks and credit unions.
Win for Consumers
A federal charter would provide protection to consumers by subjecting the chartered lending institutions to federal and state oversight and provides assurance to consumers that they are dealing with licensed lenders who are compliant with all federal consumer protection laws.
H.R. 1566 would authorize the Office of the Comptroller of the Currency and Consumer Financial Protection Bureau with supervisory and enforcement authority.
Additionally, the bill specifically gives states attorneys general investigative and enforcement authority.
No one, including regulators and consumer groups that purport to represent consumers’ interests, has put forth any viable alternative for meeting underserved consumers’ credit needs.
Congress must find a federal solution or nonbank lenders will never be able to adequately meet underserved consumers’ credit needs because outdated, overly restrictive and differing state laws will continue to prevent them from doing so.
According to the FDIC, nearly 70 million American are either unbanked or underbanked. The struggle for credit options is real and our industry provides a solution to that problem.
The upcoming year will provide an enormous opportunity for not only companies across our industry but for elected officials and regulators alike. We have the opportunity to establish a legitimate and thriving industry that provides a vital service to millions across the country.