Online lenders ignore scandals to increase US market share

Online lenders set up to shake up US retail banking in the wake of the financial crisis continue to grow despite scandals and setbacks from some of the biggest names in the industry.

Financial technology groups generated $ 15 billion in personal loans in the first half of the year, according to figures released Thursday by TransUnion, the credit bureau whose database covers the borrowing habits of 220 million consumers.

This represented almost a third of the total new personal loan market in the United States – a larger share than traditional banks or credit unions or other consumer finance companies – and down from just 4% in 2012. and 28% in 2015.

Demand for personal loans has swelled as consumers take on debt and low interest rates encourage refinancing. The wave of new loans has increased total personal loan balances to over $ 100 billion in the United States.

The expansion has been fueled by online platforms, which have sought to capitalize on lost consumer confidence in big business and post-crisis regulations that have limited banks’ ability to take risks.

As the pace of their market share gains moderated after an explosive period, data shows that tech-driven newcomers remain a great force even after a series of high-profile struggles.

Upstart market capitalization Loan Club, however, collapsed from more than $ 10 billion in 2014 to $ 2.3 billion after a governance scandal erupted last year that forced its founder Renaud Laplanche. The company has since sought to strengthen internal controls.

Ron Suber, former chairman of another large San Francisco-based group, Prosper, resigned earlier this year. His departure came shortly after Prosper struck a deal to sell up to a third of his shares to a consortium led by Fortress, Jefferies and Third Point.

Meanwhile, it emerged in September that Mike Cagney, chief executive and chairman of SoFi, was stepping down following lawsuits alleging sexual harassment and unfair labor practices.

Despite these setbacks, John Wirth, vice president of fintech strategy at TransUnion, said, “The fintech business model appears to be working well. Their use of the latest technology. . . probably helped them to become leaders.

While typically used to consolidate existing loans, personal loan cash can also be used to directly finance consumption. Volumes tend to increase towards the end of each year due to festive spending.

In the second quarter of this year, more than 16 million Americans had a personal loan, up 3 million from two years ago. Outstanding amounts increased from $ 45 billion in 2012 to $ 106 billion. Subprime borrowers accounted for a quarter of these loans.

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