Latest threat to online lenders: ‘stacking’ of multiple loans

By Heather Somerville, Olivia Oran and Joy Wiltermuth SAN FRANCISCO/NEW YORK (Reuters/IFR) – Many online lenders have failed to detect the “stacking” of multiple loans by borrowers who slip through their automated underwriting systems, lending company executives and investors told Reuters. The practice is proliferating in the sector – led by LendingClub, OnDeck and Prosper Marketplace – because of many lenders’ hurried, algorithmic underwriting, use of “soft” credit inquiries, and patchy reporting of the resulting loans to credit bureaus, according to online lending and consumer credit experts. Stacking is “causing problems with the whole industry," said Brian Biglin, chief risk officer of LoanDepot, a five-year-old mortgage lender that last year started making personal loans online.

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