[Editor’s note: This is a guest post from Jeff Knott, assistant vice president at Equifax. Equifax is a bronze sponsor and will be in attendance at LendIt USA 2015 on April 13-15. In this post, he talks about online best practices and great customer service.]
The online lending marketplace is a rapidly evolving environment that will continue to grow and change. Online marketplaces are transforming the way in which lending transactions take place, creating value for both lenders and borrowers alike. But just like traditional lending practices, this new era of lending is accompanied by challenges that can’t be ignored.
We are all living in a world today that was transformed by the housing market crash of 2008. Leading up to the crash, shortcuts were taken, information was ignored, and the reliance upon applicant-provided information was unprecedented – ultimately resulting in Americans being issued loans that they could not actually afford. Fast forward to 2015, and mortgage lenders have a plethora of complex regulations to comply with to help ensure a repeat of the ‘08 crash is not in America’s future.
What does this have to do with the online lending space? More than one might think. While online marketplace lenders are not nearly as regulated as their peers from the mortgage industry, it is still a good idea, and in everyone’s best interest, to proactively adopt lending practices that would stand up to such regulation if ever the need arises.
One of the first steps to doing this is to confirm that an applicant has the ability to repay the loan. As the mortgage industry learned, relying on borrower-provided documentation may not be enough; due to the chances the borrower may have misrepresented the information. And while all of this is of utmost importance, there is also the consumer to consider. Many of the online borrowers are a part of the Millennial generation – a group of Americans that are accustomed to using digital channels in many areas of their everyday lives and expect the convenience and immediacy of electronic confirmation of their applications, as opposed to a requirement to provide paper documentation. Remember, just because a document is uploaded during the application process does not guarantee the integrity of the information. Verifying the authenticity of the material and confirming the source of data remains important regardless of whether the interaction is in person or conducted remotely leveraging today’s technology options. Relying on trusted, verified information through the use of a dependable service provider, while also embracing technology, is key to addressing these two challenges. By relying on third party information, online lenders can better identify fraudulent documentation, and they’re also not burdening the applicant with gathering and providing the paperwork, which can ultimately lead to unwanted and unnecessary delays.
Maybe Thomas Aquinas said it best: “To live well is to work well, to show a good activity.” Adhering to this mantra, lenders can always be reminded to embrace safe lending practices that will ultimately benefit both the lender and the consumer alike.
About The Author
Jeff Knott is vice chairman, 2015 conference chair, and communications chair for the Electronic Signature and Records Association (ESRA) and assistant vice president at Equifax. He is a recognized leader in driving business strategies, product innovation and industry adoption of electronic signatures. Knott has vast experience guiding cross-functional teams and introducing creative business solutions as well as managing mergers and acquisition transitions. He is known throughout the industry for his contributions in reforming IRS policy to allow the acceptance of electronic signatures on Forms 4506-T, 8878, and 8879.