WASHINGTON — The New York State Department of Financial Services recommended Wednesday that online lenders be subject to the state's consumer protection laws, including measures to require "robust consumer disclosures," that apply to other financial institutions.

The department released a report that examined the results of a survey of 48 marketplace lenders. The report also recommended that existing rules barring firms from providing credit at usurious rates apply to online lenders and suggested that online lenders should have to go through a more rigorous licensing process.

“A loan is a loan from a borrower’s perspective, and the borrower deserves to get the benefit of New York’s protections, whether the borrower borrows from a bank or credit union or online lender,” the report said.

New York Gov. Andrew Cuomo signed a bill last June that required the state's Department of Financial Services to analyze online lending. Bloomberg News

The report presented to Gov. Andrew Cuomo comes just over a year after the governor signed a bill requiring DFS to analyze the differences between traditional and online lenders, as well as detail characteristics about online lenders operating within the state.

“Our review shows that while online lending has grown in recent years, our banking industry still supports the overwhelming majority of lending in New York while being subject to strong safeguards and oversight,” Maria Vullo, the superintendent of the department, said in a press release.

The department said online lenders have the capability to be upfront with consumers about what they are getting into if they take out credit.

“The use of technology easily permits transparency, including disclosures of the full cost of a loan to a borrower and providing the consumer with full understanding of the long-term consequences of accepting short-term relief for a financial need,” the department wrote.

The department also noted that many online lenders operating in New York are unlicensed, which potentially can allow them to avoid oversight relating to safety and soundness, or consumer compliance. Meanwhile, New York-chartered banks and credit unions undergo regular examinations conducted by DFS and federal agencies to ensure their compliance, the report said.

These department received responses from 35 of the 48 respondents. The report noted that some of the respondents declined to answer all of the survey’s questions and some did not report data for the three years that the department requested.

“The fact that a significant number of respondents either did not respond at all or did not fully respond to the Survey is a concern to the Department, as those companies seek to provide loans to New Yorkers without transparency or oversight,” the report said.

Nathaniel Hoopes, executive director of the Marketplace Lending Association, said in a statement that the findings show "that there is both great promise for access to credit and the potential for abusive practices in online lending."

"One of the key reasons that leading online lenders have come together to form this Association is to set high standards for conduct; only platforms that offer low APR, affordable, transparent, borrower friendly products are eligible for MLA membership," he said. "We will continue to offer independent data and information to the Department that will help them continue to draw these distinctions as they move forward.”

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