Wall Street Said to Limit Support for Online Lenders

Bloomberg
Tuesday, August 25, 2015

Wall Street banks are scaling back their role in supporting debt sales that have helped online lending companies double their originations every year since 2010. Historically, investment banks have earned fees by helping lenders pool and store their loans until enough are aggregated for sale to investors. But now, a number of Wall Street firms are considering limits to their financing for companies that lend to higher-risk borrowers. The caution comes in response to a May ruling by the U.S. Appeals Court in Manhattan, which threatens to remove a protection that non-bank lenders have relied on to make high-interest loans. The core issue is whether alternative lenders can pay a bank in an unregulated state to make loans to borrowers in other jurisdictions, where the interest rates could be considered usurious.