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FDIC Proposes New Guidance Over Marketplace Lending

August 9 – FDIC has proposed updates to its guidance regarding third-party lending. At least one industry observer is calling the proposals more “hurdles for bank partners of marketplace lenders.”

According to the FDIC, the updates are part of a package to improve the transparency and clarity of the agency’s supervisory policies and practices, and to ensure that institutions have clear and fair avenues to pursue when there are differences of opinion regarding supervisory matters, according to FIL-50-2016, issued on July 29. The proposed Guidance for Third-Party Lending would apply to all FDIC-supervised institutions that engage in third-party lending, regardless of asset size.

The proposals would replace previous third-party guidance and would greatly expand the scope to include activities conducted through third-party lending relationships. The proposed guidance states that the FDIC would evaluate lending activities conducted through third-party relationships as though the activities were performed by the institution itself.

In its FIL, the FDIC acknowledges that regulatory burden does not emanate solely from statutes and regulations, but also comes from supervisory policies and procedures. The Board is therefore improving the FDIC’s supervisory policies and practices to make them more transparent and easy-to-understand. The changes respond to matters identified by the Office of Inspector General in its report issued in February 2016 related to the FDIC’s supervision of banks engaged in making refund anticipation loans as well as by commenters who provided input during the recent Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) process.

The proposed supervision appeals guidelines expand the circumstances under which banks may appeal a material supervisory determination. Comments on the supervision appeals guidelines will be accepted until 60 days after it is published in the Federal Register.

The proposed third-party lending guidance outlines the risks that may be associated with third-party lending as well as the expectations for a risk-management program, supervisory considerations, and examination procedures related to third-party lending.

FDIC defines third-party lending as an arrangement in which a bank relies on an outside source to perform a significant aspect of the lending process, such as originating loans for third parties, originating loans through third parties or jointly with third parties, and originating loans using platforms developed by third parties. The draft guidance supplements and expands on previously issued guidance and would apply to all FDIC-supervised institutions that engage in third-party lending programs.

Comments on the third-party lending guidance has been extended until Oct. 27. Comments should be sent to thirdpartylending@fdic.gov and will be posted on the FDIC’s website at https://www.fdic.gov/regulations/laws/publiccomments/.

 

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