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Cleveland Fed pulls harsh MPL report after industry outcry

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By Sasha Padbidri
20 Nov 2017

The Cleveland Federal Reserve took down a report on marketplace lending following withering criticism from the industry over the central bank’s comparison of the market to pre-crisis subprime mortgage lending.

A spokesperson for the Cleveland Fed told GlobalCapital on Saturday that an updated version of the study will be posted “as soon as it’s completed”.

“The authors have received several questions about the composition of the underlying data set they used in their analysis. In light of the comments received, the authors are currently revising their paper to further clarify the data sample they used in the study,” said the spokesperson in an email.

The report, written by Yuliya Demyanyk, senior research economist, Daniel Kolliner, research analyst, both of the Cleveland Fed; and Elena Loutskina, a professor of business administration at the University of Virginia’s Darden School of Business and contributing author at the Cleveland Fed, challenges the belief that marketplace loans have expanded credit to borrowers with limited access to debt since the financial crisis.

The report pooled data from TransUnion on 90,000 borrowers who received their first online loan from 2007 to 2012.

Most ABS and marketplace lending participants speaking with GlobalCapital last week took issue with some of the report’s conclusions, including the limited data set used by the authors, pointing out that more granular data was needed to have “productive conversations” about the market.

“It read like a hatchet job. [Marketplace lending] has almost zero similarity to subprime mortgages,” complained one source over the weekend. 

Nat Hoopes, executive director of the Marketplace Lending Association, also called for the Cleveland Fed to “temporarily retract and revise” its report in a Friday commentary published by American Banker.

GlobalCapital will publish an update when the revised version of the report is released.

By Sasha Padbidri
20 Nov 2017