New York DFS Says Online Lenders Should be Subject to State Regulations

In a report out this week by the New York Department of Financial Services (DFS), Superintendent Maria Vullo argues that online lenders in the state should be licensed and supervised by her department.

“DFS Supports the promise that new technologies are able to reach more consumers, but innovation must also be responsible, and all associated risks must be appropriately managed, including by strong underwriting standards, compliance with usury laws, and capital requirements,” Superintendent Vullo said in a statement. “All lenders must operate on a level playing field and address market risk. As the regulator of the financial services industry in New York, DFS has and will continue to be a leader in enforcing robust market safeguards and consumer protection through strong state regulation, licensing, and supervision.”

The report is based on results of a “New York Marketplace Lending Survey” that was sent to 48 institutions believed to be engaged in online lending activities in the state. 35 institutions responded to the survey.

The report also detailed the rise in lending throughout the state. The 35 institutions that responded to the survey reported having 235,320 customers in New York, which was an increase of 79 percent from 2015. The amount of lending also increased to more than $2.9 billion, up 42 percent from 2015.

Among the report’s recommendations were to apply New York’s usury limits to all lending in New York. This would apply New York’s consumer protections to all lenders. It also recommends that New York’s consumer protection laws should be equally applied to all consumer and small business lending activities, and that all lenders operating within the state should be licensed and subject to DFS supervision.