With coronavirus causing economic havoc around the world lenders find themselves with a very important role to play. Now, I am not minimizing the health crisis that is happening before our eyes but this article is focused on the economics of this crisis, in particular with regards to the lending industry.
Both banks and online lenders are responding to the quickly changing economic impact of the coronavirus. Most, if not all lenders, have communicated with their customers this month to provide detail on the measures they are taking to not just keep their own staff safe but how they are responding to requests from borrowers who are experiencing hardships.
The Marketplace Lending Association sent a letter, dated March 12, 2020, to Chairwoman Maxine Waters of the House Financial Services Committee as well as to high ranking members of Congress. The letter explained the actions being taken by members of the MLA:
MLA member institutions are implementing a range of proactive measures to help existing borrowers impacted by COVID-19. This includes providing impacted borrowers with forbearance, loan extensions, and other repayment flexibility that is typically provided to borrowers impacted by natural disasters. During the time of payment forbearance, marketplace lenders are also electing not to report borrowers as “late on payment” to the credit bureaus. Members are also waiving any late fees for borrowers in forbearance due to the COVID-19 pandemic, posting helplines on company homepages, and communicating options via company servicing portals. Finally, MLA and its members have postponed large gatherings and are implementing travel restrictions and asking employees to work from home.
Now, it is not just marketplace lending platforms that are being proactive here. On Friday the OCC and FDIC advised that banks “take care of customers affected by the novel coronavirus, recommending that lenders consider waiving fees and allow for short-term flexibility in loan repayment.” There have also been calls for a national moratorium on foreclosures and evictions for homeowners in financial distress. The big banks have all halted their share buybacks to free up capital so they are able to better deal with this crisis.
Of course, these actions to help consumers have consequences for the bottom lines of lenders. Banks have taken a beating with the iShares U.S. Regional Banks ETF (IAT) down another 14% today to its lowest level since 2013. Publicly traded fintech lenders LendingClub (LC), OnDeck Capital (ONDK) and GreenSky (GSKY) each touched all-time lows today.
For those lenders looking for more information on how to best deal with the crisis PwC has created this coronavirus resource page which has a wealth of information targeted at consumer lenders. And here at LendIt we have also been working hard to support the industry during this difficult time. Stay tuned for announcements regarding new online offerings we are developing including webinars, workshops and roundtables to help lenders interact and learn from each other outside of our face to face events.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.