Each year, millions of credit-challenged Americans get access to emergency funding by employing the services of a storefront payday lender or online installment lender. Internet-based lenders’ market share is growing substantially, even though the industry as a whole has posted nominal gains for the last few years. This consistent growth demonstrates the incredible need and consumer demand for innovative credit products. The increased demand for these services has brought increased scrutiny upon web-based businesses by state and federal regulators, brick-and-mortar payday lenders, interested media and the general public.

Today, many online financial service businesses operate in a sort of gray area. Consumer lending laws vary widely from state-to-state and there is a lack of uniform federal regulatory guidance dealing with non-bank consumer lending across state lines. Even fundamental business questions such as “where does the transaction occur?” are as of today unresolved by lawmakers, and the thin body of legal precedent that exists on the matter is inconsistent.  This presents more compliance challenges than it resolves, making it more difficult and more expensive for law-abiding businesses to serve the consumers who want the products. This unsettled regulatory environment makes building a compliant lending business a dubious proposition, even with best practices and responsibility at top of mind. I understand this problem very well: Several years ago I made the decision to shutter my online lending business after the inconsistency and ambiguity between state and local regulations made it impossible to operate without expensive, time-consuming legal challenges from regulators outside of our jurisdiction.

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Today I act as a consultant and service provider to the online financial services industry.  My company provides expertise, technology, and on-demand manpower to help operate these businesses. And although some dismiss these products as expensive or unfair and their providers as “predators,” the reality is that these products satisfy a very important need that is not currently being met by banks, credit unions, or other traditional financial institutions. Even the United States Postal Service recently acknowledged this need when they proposed offering short-term borrowing and check cashing at their branch offices. The goal? To help close a widening gap in their operating budget by providing small dollar financing to the millions of American consumers who use these products every year.

The online lending industry has reached a tipping point: Consumers demand more from us, and we have an obligation to provide it. Several progressive startups such as Zest Finance and LendUp are using social technology and big data in exciting new ways, pioneering the next generation of innovation that will eventually drive costs down for consumers. This type of innovation is creating a product that is more favorable for borrowers and regulators alike.

As this pendulum swings, we continue to deal with threats from financial predators who take advantage of consumer desperation while disparaging our industry. These criminals commit egregious violations of state and federal laws, charging customers for loans they never received, collecting on phantom debts never incurred, even going so far as to threaten bodily harm under the auspices of being a “collection agency.” They also sully our reputations by claiming to be representatives of our industry. These activities are immoral, illegal, and should be condemned by every legitimate business in our industry.  We must work together to shine a light on these crooks and choke off their access to consumers.

Yet there are some in our space who seem to be interested in sticking their heads in the sand and continuing on, “business as usual.” More than any of the issues I’ve outlined, it is this complacency that worries me for the future of this industry. The online consumer lending business is in an “adapt or die” moment. Rather than digging in our heels and resisting change to maintain the status quo, we have an obligation to act as agents of reform. This will preserve our industry, and the ability to serve our consumers, for years to come.

We, as members of the short-term lending industry, must stand up and force those who operate in the shadows and who take advantage of American consumers to either change or shut down. Every year our companies serve millions of consumers who are in need; we cannot allow criminals to use our industry to take advantage of hard-working Americans who are genuinely in need of help. Join with me to ensure that the criminals in our industry are held to account, while the law-abiding financial services providers are equipped and enabled with guidance on best practices and innovative solutions.
 
Curry is the founder and CEO of MacFarlane Group which provides back-office support for Internet-based financial services companies.