New York state launches inquiry of online lenders

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New York state’s financial regulator sent a letter to 28 companies this week requesting information about their online lending activities, according to a person familiar with the matter and a copy of the letter seen by Reuters. The New York Department of Financial Services sent the letter to San Francisco-based Prosper, the second-largest online lender, as well as to Avant, Funding Circle, Upstart and others, according to the person, who was not authorized to publicly discuss the matter. The business is raising some novel questions for banking regulators, because online lenders have shunned a traditional banking model that uses deposits to make loans, and bypass their regulations.

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