by Wolf Richter
The New York Department of Financial Services sent a letter to 28 online lenders, requesting information about their online lending activities, “according to a person familiar with the matter,” Reuters reported on Saturday. The lucky recipients include Prosper, the second-largest online lender after beleaguered Lending Club, but also Avant, Funding Circle, and Upstart.
Online lenders have been able to bypass banking regulations so far because they get their money for funding loans directly from retail and institutional investors, and/or from securitization of their loans, rather than from depositors. But now, after the Lending Club debacle, regulators have woken up. Reuters: