A week ago I wrote about the Cleveland Fed report on “p2p lending”. I use that term in quotes because as I said in the article, in reality it was not about p2p lending at all. Over the weekend the Cleveland Fed decided to pull the report and now they have this statement on the report’s webpage:
Since working paper no. 17-18 and related commentary on peer-to-peer lending were posted on our website on November 9, the authors have received several questions about the composition of the underlying data set they used in their analysis. In light of the comments received, the authors are currently revising their paper to further clarify the data sample they used in the study. Their revised paper will be posted as soon as it is completed.
This followed not just my article but also this highly critical op-ed in American Banker by Nat Hoopes, the Executive Director of the Marketplace Lending Association. He openly called for the Cleveland Fed to retract their report which is exactly what they did over the weekend.
The shame of all this is that all the sensational headlines have already been written and confirmed in many people’s minds the supposed shady nature of our industry. It would have been far better for everyone if the authors of this report had done their homework and produced a thoroughly researched report in the first place.
Now, having said all that, the report did bring up some interesting points. As Todd Baker pointed out, “we really should know which online lenders are adding to consumer financial health and which ones are detracting from it.” The P2P lending industry has been built on the premise that it is good for consumers and the recent study by the Philadelphia and Chicago Feds confirmed this to be the case. But that was just based on Lending Club data.
I am not so one-eyed that I will only believe positive studies on this industry. We need to understand consumer behavior better and every company should be able to answer definitively how and whether their products are benefiting consumers. That was what the Cleveland Fed study was trying to do but unfortunately they fell short. Maybe the revised study will provide more insight.