MARKETPLACE LENDING PRACTICE
The marketplace lending industry is radically changing the face of finance
markets around the world, disrupting traditional relationships and creating new
paradigms for the provision of credit.
The rapid growth of the industry is reflected
in the profusion of names that have been
used to describe this type of lending market
as it has evolved through creativity and
innovation—names such as P2P lending;
online lending; marketplace lending; digital
lending; algorithmic credit; direct lending.
With continuing innovation and the right
regulatory climate, perhaps in future years it
will simply be called “lending”!
Why K&L Gates?
As technologies and regulatory guidelines
shape the burgeoning future of marketplace lending, K&L Gates can assist sector
participants in achieving their business and
investment objectives while at the same
time managing risks. marketplace lending
practice are part of a multidisciplinary
and multijurisdictional team focused on
consumer financial services regulation,
e-commerce regulation, fund formation,
cybersecurity, finance, and intellectual
property. Our experience spans the globe,
with members of our team in the
Americas, Europe, and the Asia Pacific
region, including Australia.
Our Approach
K&L Gates is a globally integrated law firm.
Our Marketplace Lending Practice seamlessly provides comprehensive advice to
players in the middle market. We leverage
our deep experience in consumer financial
services regulation, e-commerce regulation, private equity, private fund formation,
cybersecurity, finance, and intellectual
property to provide holistic support to
market participants and provide the legal
underpinning to innovation in the delivery of
financial services in marketplace lending.
We work in integrated multidisciplinary and
multijurisdictional teams to serve the needs
of lending platforms, institutional investors,
joint venture partners, service providers,
and other participants in this sector.
Multidisciplinary collaboration within
one law firm allows marketplace lending
participants to chart a holistic strategy
to achieve their desired business and
legal objectives.
We represent a cross-section of
marketplace lending participants.
Whatever market niches, strategies, and
algorithms our clients wish to develop, we
work side by side with them to innovate
and navigate the legal, regulatory, and
commercial challenges of this evolving
consumer debt market segment.
Client Strategy
• combine digital technology with
crowdfunding techniques to offer
consumers unsecured credit
• partner with banks and platforms to
provide credit in entirely new ways
• service consumer and commercial
loans on behalf of institutional investors
• explore new frontiers of providing
secured credit on internet sites
or web apps
• invest in marketplace loans as a
new credit asset class
The P2P market
could reach
$US150 billion
by 2025
$US150
Source: PricewaterhouseCoopers
Our Experience
Consumer Financial Services and
Bank Regulation
We have one of the preeminent consumer
financial services regulatory practices in
the United States and are active in Europe
and Australia. We represent mortgage
lenders, consumer finance companies,
loan servicers, payday lenders, moneyservices businesses, online financial service
aggregators, and technology companies in
regulatory compliance and
enforcement actions.
In the United States, we have extensive
experience with the statutes and
regulations enforced by the Consumer
Financial Protection Bureau (CFPB), including Regulation B, E, and Z and GrammLeach-Bliley. We have further experience
with requirements imposed by the Financial
Crimes Enforcement Network (FinCEN)
and the Federal Trade Commission (FTC)
related to the Bank Secrecy Act, suspicious
activity reporting, consumer-privacy protection, and data-security policies.
Our practice includes traditional and
e-commerce applications of current law
governing consumer financial services. We
have a dedicated group of professionals that
for more than 20 years has helped companies obtain and maintain (i) state licenses
nationwide, including navigating the on-line
Nationwide Multistate Licensing System,
and (ii) federal agency and GSE approvals,
to engage in all manner of residential mortgage finance activities. In recent years, the
state licensing work has expanded to cover
the consumer, commercial mortgage, and
non-real estate-secured commercial/business finance activities of the marketplace
lending sector of the economy. We are also
very familiar with applicable state laws and
federal preemption affecting usury, assignee
defenses, and other issues.
Investment Funds and Investment
Adviser Regulation
We advise investment advisers and investors on all aspects of fund formation and
maintenance, including fund documentation, structuring, and sponsor equity. We
have a well-regarded team in the United
States that represents institutional investors
and high-net-worth individuals on a cross
section of fund investments.
In the areas of global regulatory compliance, we guide investment advisers and
alternative investment fund managers on
the U.S. Investment Advisers Act of 1940
and Investment Company Act of 1940;
the Alternative Investment Fund Manager
Directive and implementing legislation in
EU member states including the UK and
Germany; and the Australian Corporations
Act 2001, which includes financial services
licensing required for financial advisors.
Securities Regulation
K&L Gates was named the “Law Firm of
the Year” for Securities Regulation in
both the 2015 and 2016 U.S. News-Best
Lawyers ® survey.
K&L Gates has extensive experience in
traditional registered offerings, private
placements, and other exempt offerings
around the globe, including under the
U.S. Securities Act of 1933 and Securities
Exchange Act of 1934, the MiFid Directive and the Prospectus and Transparency
Directives (and implementing legislation in
several EU member states), and Australian
securities laws administered by ASIC. We
also have significant experience in crowdfunding and other innovative capital raising
techniques provided by new laws such as
the JOBS Act, Regulation A/A+, and other
new exemptions from registration under
securities laws.
With a global team in place, our capital
markets and securities transactional
capabilities span numerous jurisdictions.
We regularly represent issuers, investment banks, placement agents, investors,
and investment groups in a wide range of
transactional, compliance, and regulatory
securities matters. In addition to serving as
company counsel, we provide experienced
representation as underwriters’ counsel in
public offerings and other transactions.
Private Equity, Venture Capital, and
Emerging Growth Companies in the
Fintech Space
We advise private equity and venture
funds, corporate investors, and individuals
in connection with their investments in
startup, early-stage, and emerging-growth
Fintech companies. With lawyers on
the ground across the world’s leading
technology hubs, including Silicon Valley,
Austin, Seattle, Pittsburgh, London, Berlin,
Paris, Singapore, and Tokyo, we have deep
experience in high-growth and technologydriven ventures.
Whole Loan Sales, Servicing
Transfers, and Warehouse Finance
We advise on whole loan sales, sales of
servicing rights, joint venture agreements,
and warehouse financing, using traditional
credit agreements and repurchase agreements. We are well-versed in the transactional and regulatory implications of table
funding of marketplace loans.
The financial services industry is a prime target
for cyberattacks, and with the continued growth
in online lending, the marketplace lending
segment could see an uptick in data security
breaches, distributed denial of service,
and other attacks.
Securitization
e-Merging Commerce
Our securitization lawyers understand the
nuances of marketplace lending and have
participated in comment letters in response
to the U.S. Treasury Department’s 2015
Request for Information on the marketplace
lending sector. We have advised on a wide
variety of transactions involving term and
revolving assets, including structured
warehouse facilities, ABCP conduits and
medium-term note programs, term securitizations, and revolving structures. We have
significant experience in consumer financial
assets such as mortgage loans, home equity
loans, automobile loans and leases, credit
cards, receivables, and student loans. We
have worked with securitization sponsors
and others on compliance with credit risk
retention and other regulatory challenges
under the Dodd-Frank Act.
We understand how evolving laws
relating to technology and information apply
to e-commerce, and how our clients—
whether they are licensors, licensees, or
buyers or sellers—protect their opportunities and respond to the transformative
nature of conducting all or part of their
business electronically.
Intellectual property
From proprietary risk models and order
management systems to technology
platform and lender partnerships, we are
well positioned to help marketplace lending
participants establish, enforce, and leverage their intellectual property rights. On the
transactional side, we can advise on the
intellectual property and related branding
aspects of partnerships between financial
institutions and lending platforms.
We recognize that e-merging commerce
regulations overlay traditional laws and
industry practices. As this modern commerce involves, it’s important to engage
lawyers who grasp all facets.
One of our partners literally wrote the book
on e-commerce, publishing The Law of
Electronic Commercial Transactions, (LexisNexis 2003–2015). Authoring and updating
relevant chapters in consultation with other
K&L Gates lawyers requires collaboration
across numerous disciplines. As a result,
we are able to stay on the cutting edge and
help clients leverage new defenses and
legal trends.
Payment Systems
We help marketplace lending participants
navigate the legal, regulatory, policy, and
business issues surrounding platforms,
services, and technologies, including cloud
platforms, mobile, bill payment, cards and
codes, and technologies (e.g. RFID, NFC,
and peer-to-peer VOIP). We also understand payment systems typically involve
e-contracting and consumer protection
disclosures that require compliance with
special rules for electronic dealings. We
have experience in investigating and
conducting due diligence on merchants,
agents, and business partners seeking
access to the financial system to ensure
compliance with anti-money-laundering,
counter-terrorist-financing, and other
criminal laws around the world.
Cybersecurity
The financial services industry is a prime
target for cyberattacks, and with the
continued growth in online lending, the
marketplace lending segment could see an
uptick in data security breaches,
distributed denial of service, and other
attacks. We help sector participants
manage Internet security, deter attacks and
data breaches, pursue perpetrators, and
mitigate risk and loss. Our team includes
members with extensive experience in
public policy, cyberforensic investigations,
Internet tracking, rapid response, and
insurance coverage.
“Financial institutions ranked security
protocols/standards of third-party vendors
as a top challenge.”
Source: PricewaterhouseCoopers Global State of
Information Security ® Survey 2016
15219
Learn more about our marketplace lending capabilities at klgates.com.
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K&L Gates comprises approximately 2,000 lawyers globally who practice in fully integrated offices located on five
continents. The firm represents leading multinational corporations, growth and middle-market companies, capital
markets participants and entrepreneurs in every major industry group as well as public sector entities, educational
institutions, philanthropic organizations and individuals. For more information about K&L Gates or its locations,
practices and registrations, visit klgates.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard
to any particular facts or circumstances without first consulting a lawyer.
©2016 K&L Gates LLP. All Rights Reserved.