Michael P. Regan, Columnist

Fintech Needs to Expand the Club

Peer-to-peer lending needs a secondary market.

May 11, 2016 at 3:21 PM UTC

Michael P. Regan is the global team leader for cryptocurrencies at Bloomberg as well as a former senior markets editor and former Americas team leader for Bloomberg's Markets Live blog. He has covered Wall Street for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

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The Treasury Department's white paper on marketplace lenders like LendingClub and On Deck Capital was called a "'welcome to the real world' moment" by analyst Ian Katz at Capital Alpha.

That's the logical takeaway from other observers as well -- the notion that the industry was overdue for a critical look from regulators such as the Securities and Exchange Commission and the Consumer Financial Protection Bureau. That's fair, and true enough. How long, for example, did anyone really expect On Deck to get away with annual percentage rates as high as 98.4 percent without someone in Washington taking notice?

But there's another "welcome to the real world" moment in the Treasury's report that isn't receiving as much attention, and it's this: How long does anyone expect investors to continue buying loans from these companies without being able to sell them into a secondary market? As the Treasury put it, summing up responses to its request for information, or RFI: