The New York Department of Financial Services sent a letter to 28 companies last week seeking information about their online lending activities, Reuters reported. The companies include Prosper – the second-largest online lender – as well as Avant, Funding Circle, Upstart and others.
Online lenders have been controversial. Most either connect borrowers directly with investors or extend credit to borrowers, then bundle the loans into securities. By going those routes, they bypass many of the regulations that govern traditional banks, according to Reuters.
The New York finance regulator has demanded “immediate compliance” with state licensing requirements for debt collectors, money transmission and mortgage lending, according to Reuters. Online lenders that don’t believe they require licenses must provide descriptions of their products and services and cash flow charts.
The department also asked for the types of loans and fees the lenders pay to or receive from other financial institutions, Reuters reported.
New York state financial regulators are reportedly probing dozens of online lenders, according to a Reuters report.