There is big news on the trade association front today. The Marketplace Lending Association (MLA), the trade organization for fintech lenders, has merged with the Online Lending Policy Institute (OLPI), the advocacy group for the online lending community have agreed to merge to form the American Fintech Council. Here is a link to the press release that LendingClub put out this morning about the merger. The tagline for the new organization is “Promoting a transparent, inclusive, and customer-centric financial system” while also “Fostering responsible innovation in financial technology.”
The MLA was formed in 2016 when LendingClub, Prosper and Funding Circle got together to create an industry group that would not just have a voice in Washington but to establish a code of conduct and operating standards for members. Their first executive director was Nat Hoopes, who held the position until he left the MLA to take a position at Upstart (an MLA member) late last year. There was a temporary executive director briefly but the position has been left unfilled for some time now. No doubt the search for a new ED is ongoing and that person will become head of the new association, obviously with the approval of the new executive committee (more on that later).
The MLA grew from the three founding members to 38 members today representing pretty much all the leading firms in the fintech lending space (including LendIt Fintech). They hosted an annual meeting for CEOs in Washington that was well attended and they helped provide access to lawmakers and others on Capitol Hill. They have advocated for the industry around “valid when made” and “true lender” and participated in the writing of federal legislation. They have been the primary voice of the industry in Washington for the sub-36% fintech lenders for several years now.
Here is an official quote from the MLA courtesy of Richard Neiman, Head of Regulatory and Public Policy at LendingClub:
This is a transformational merger between two organizations committed to financial inclusion and a customer friendly financial system. Together we will create a more expansive fintech association of companies that foster responsible innovation and growth while encouraging sound public policy.
The Online Lending Policy Institute was founded by Cross River Bank, Boston University and RocketLoans in 2016 and it is best known for hosting an annual summit in Washington DC (see my coverage of their 2016, 2017, 2018 and 2019 events – their 2020 event was held as part of the virtual LendIt Fintech USA). They would gather regulators and lawmakers as well as fintech leaders in Washington for a day of learning and networking. Led by the esteemed Boston University professor Cornelius Hurley they were focused on advocacy and engagement in Washington to further the responsible growth of the online lending industry.
Here is a quote from the Professor Hurley about the merger:
Fintech’s potential to close the long standing financial inclusion gap and to help migrate consumers and small businesses to the new era of financial services delivery is enormous and exciting. To enter this bold new world, however, will require responsible innovation guided by wise regulation and constant vigilance for bad actors. AFC and its members intend to play a meaningful role in ensuring that that potential is realized.
The executive committee of the newly formed American Fintech Council will consist of Affirm, Avant, Cross River, LendingClub, Marlette, Prosper, SoFi and Upstart and membership includes a total of 47 companies as of today. Of course, they still need to hire a full time executive director some time soon.
The American Fintech Council is open to new members who meet the following standards:
- Credit products must not exceed 36% APR, calculated according to the Military Lending Act.
- Small business financing must adhere to the responsible lending standards of the Small Business Borrowers’ Bill of Rights.
- Credit products must not be characterized as something other than credit to avoid lending law.
- Members advance standards of fair lending and nondiscrimination.
- Have 1 year of operating history.
I think this is a good move and something I have been supportive of since the idea was floated last year. We want to speak with a common voice in Washington and having two associations with very similar goals did not make sense to me.
I also like the name, American Fintech Council, as it gives the organization more scope. Already, many fintech lenders have applied to become banks and, of course, we have LendingClub who have already completed their bank acquisition. Many companies have already moved into other areas of finance beyond lending but they all fit within the fintech umbrella. And it also gives them the ability to attract new members such as the many digital banks that are getting traction today.
It will be interesting to see how the new organization grows and evolves. A lot will rest on the shoulders of the new executive director. But I think the American Fintech Council has a bright future.