The Marketplace Lending Best Practices

Marketplace lending is lowering the cost of credit, increasing access to capital, providing opportunities to investors of all sorts, and contributing to a stronger financial system. To encourage the responsible growth of this industry, the MLA advocates for the following practices:

I. Investor Transparency and Fairness

The marketplace lending model can provide a higher level of transparency to investors than many traditional investments, through detailed loan-level data and investment in specific loans. MLA members provide investors with highly transparent data and fair access to loans within the marketplace investment programs they participate in.

Investor Disclosure Standards
Additional Standards for Non‐Accredited Investors
  1. Expected returns net of fees and losses, where permitted
  2. An explanation of how those expected returns are calculated
  3. Any fees or charges that may be assessed to the investor
  4. Clear indication that these investments are not FDIC insured
  5. Disclosure of the risks of marketplace lending
  6. Description of the loan product available for investment
  7. Description of any automated investing program the marketplace offers that may be available to the investor
  8. Notice of potential delays that may occur in deploying money allocated to the marketplace and result in “cash drag”
  9. The process for withdrawing money or liquidating investments, if applicable
  10. General description of how creditworthiness is evaluated, including how loan pricing is determined
  11. Any requirements for investment, including eligibility and minimum investment amounts
  12. Information on arrangements in the event of the marketplace ceasing operations
Fair Loan Selection

II. Responsible Lending

MLA members provide access to responsible, borrower‐friendly loan products.

Transparency
Responsible products
Non-discrimination
Collections and Debt Sale

III. Safety and Soundness

The marketplace lending model offers advantages of financial stability and resiliency, relative to traditional lending models. Nonetheless, MLA members must maintain strong internal policies that ensure their reliability for the benefit of borrowers and investors alike.

Operating Liquidity
Business Continuity Plan
Orderly Wind Down

IV. Governance and Controls

MLA members must develop and maintain strong internal controls that ensure compliance with laws, as well as the integrity of their investment programs and the marketplace’s financial transactions.

Compliance management
Client Money Management
Audit Standards
Business Information
Regulatory Responsiveness
Complaint Resolution

V. Risk Management

Managing risk is a core function of the marketplace lending model. MLA members must maintain robust programs to manage the risks they face.

Model Risk Governance
Customer Authentication, Fraud Detection, and Money Laundering Prevention
Enterprise risk management
Information Security
Privacy
Vendor management

VI. Best Practices Management

Revision