Recession, crisis, and panic almost always lead to times of financial emergencies. Where do people turn when these times are upon us? Fintech businesses such as online lenders serve as an important lifeline for consumers who are unable to access credit from their own banks and credit card providers, something far more common in the United States than many may think.
Unfortunately, fraudsters in every industry cause harm for the companies that are playing by the rules. The online lending industry is no different. Online lending companies provide a valuable service, but bad actors give everyone a bad rap. It is incumbent on every leader and innovator in the space to be vigilant and help root out fraudsters seeking to exploit consumers and businesses alike. As a fintech service provider, I have repeatedly called for sensible regulations that attack the scammers while allowing the good actors in the industry to serve their customers.
I founded the initiative ReformOnlineLending.org, which provides an outlet for employees who work in the industry to report bad actors or actions they have identified. Visitors can submit information that we provide directly to federal regulators and law enforcement for investigation.
Recently, the Los Angeles Times spotlighted the work of the Online Lenders Alliance (OLA) to prevent fraud. The LA Times reported that:
OLA hired an outside firm to build a program that will search the Web for sites using the term “no credit check.” The group is now picking out sites that are controlled by lenders or loan advertisers and asking them to take down any “no credit check” claims and fix other problems.
OLA Chief Executive Lisa McGreevy said the group has done similar monitoring work before, but only manually – typing various terms into Web searches, browsing sites and looking for misleading language or other bad practices.
This is the first time that the group has tried a more systematic approach.
“We’re trying to be the cop on the beat,” McGreevy said. “We’re not interested in having bad actors or people who do fraudulent business giving our good lenders a bad name.”
I applaud the efforts of the Online Lenders Alliance and others who are helping to systematically eliminate fraudsters and scammers who target consumers.
Government regulators and consumer groups should recognize these efforts and understand that legitimate businesses, especially those in highly scrutinized industries, often place a greater emphasis on customer service. This is one of the reasons the Consumer Financial Protection Bureau’s complaint database receives so few complaints from customers who use alternative lenders, while more traditional financial institutions like banks and credit card companies receive some of the highest.
No matter what industry you are in, when fraudsters strike, it gives the whole industry a black eye. Government regulators play an important role in ensuring the financial marketplace is safe for consumers, but state and federal regulators should not ignore or dismiss the great work the industry is doing to root out fraud and provide a better and safer borrowing experience for customers.