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Online lenders vilified despite support of legislation

Nov 12, 2013 Quinn Thomas

Inaccurate headlines outlining the dangers of online lending have dominated the news in recent months. In New York, financial regulators have attempted to clamp down on such practices, claiming that online lenders were conducting illegal operations, despite many critics, including several Congressmen, condemning the overzealous statements.

In a recent article in U.S. News, Lisa McGreevy, president of the Online Lenders Alliance (OLA) argued that online loan providers are being unjustly targeted by financial officials across the country. She noted that if online lending is eliminated from the United States, as many as 60 million underbanked Americans would be unable to access the financial support they rely on.

More worrying is that she indicated these aggressive steps are being taken and there have been no suggestions as to how alternative services could be put in place to fill the void. Perhaps it's because there may not be a better option.

Online lenders embrace regulations
McGreevy also asserted that the majority of online lenders adhere to 18 separate federal lending and consumer protection laws, as well as follow best practice guidelines listed by organizations such as the OLA. For this reason, millions of Americans trust these financial services and use them in a fiscally responsible manner. If the industry was as dangerous as critics claim, it's unlikely that so many Americans would be comfortable taking out loans from these outlets.

Although many regulators claim that online lenders are fighting against regulation, McGreevy says this is simply not the case. For example, she noted that the she has openly expressed support for the Consumer Credit Access, Innovation and Modernization Act that, according to GovTrack, was referred to the House Financial Services Committee in April. If implemented, the pending legislation would expand Americans' access to online loans as well as create a federal regulatory framework for online lending regulations.

This shows that many in the industry are willing to take the necessary steps to provide responsible financial services so the sector can thrive for years to come. Harboring negative practices is hardly beneficial, and McGreevy's argument is evidence of the proactive steps online loan providers are making to support their endeavors.

However, false accusations made by critics in the press do little to help the large portion of Americans who use online short term lending services. Instead of leveling such inaccurate statements, critics should attempt to educate the public about how online lending works and how they can access these loans in a responsible fashion.