States are Key Players in Transforming the Consumer Lending Environment
States are Key Players in Transforming the Consumer Lending Environment By: Michael Day, LEND360 Policy Director While the federal government gets most of the attention on the policy front, it might surprise you that in the past 12 months, almost a third of the states have passed more than 20 new laws that impact online lending. From loan caps and licensing to enhanced reporting and regulatory requirements, there has been a huge amount of change in consumer lending practices at the state level. While this will certainly impact how the fintech industry approaches doing business, some states have served as incubators, developing new ideas on how to reshape consumer lending – ideas that federal officials and agencies should take note. For example, Nevada recently passed and signed into law new consumer lending legislation. Assembly Bill 163 introduced by Edgar Flores (D-Las Vegas) is a bi-partisan solution passed by a Democratic legislature and signed by a Republican governor. This initiative demonstrates a balanced approach to consumer lending laws. The proposal contains reasonable repayment provisions, providing a list of electronically verifiable items for use in calculating ability to repay. It also allows for extended payment plans or “off ramps” should a consumer need flexibility and complies with NACHA rules — all items that many in the industry have supported. LEND360 has long recognized the significant role states play in growing the industry – it’s why we have always featured leaders from the state level as a part of our programming This year will be no different, with an expanded focus to include a listening session with some of the most innovative state policymakers. This will provide a chance to exchange ideas and create an ongoing dialogue with our state governments. There is so much currently going on at the state level. One topic often touched upon are the burdens that state–by–state regulations can create for fintech firms. In response to this, many states are now working to adapt existing state regulatory frameworks to support the rapidly changing financial services landscape. An important vehicle for these reforms will be the Nationwide Multistate Licensing System and Registry or NMLS. As many may recall, NMLS was developed as a way to license and monitor mortgage loan originators across state lines. However, it is now being examined as a vehicle to better coordinate and share information that will provide a more streamlined regulatory landscape beyond the mortgage process. Regulatory reform is not the only area where states will play a pivotal role. While much attention toward a national charter has focused on the OCC, that is just one of many options to address this issue. States can play an important role in a move for a national charter. Recognizing the opportunity that states can play, the Conference of State Bank Supervisors (CSBS) announced “Vision 20/20,” a series of initiatives aimed at working with the fintech industry. The listening session at LEND360 will allow attendees to engage with some of the key architects in this area looking for creative solutions. As you can see, there is a lot going on in the industry today, making attendance at this year’s LEND360 all the more important. This will be particularly key as the fintech community looks for new ways to provide consumers with a full compendium of lending solutions. Moving forward will take a coordinated effort – and the states are set up to play an integral role in this industry growth. Our programming demonstrates a key step in working with our state partners towards finding innovative solutions that will leverage technology to transform today’s consumer lending environment.