Peer-to-Peer: Innovation and Regulation

1. Peer-to-Peer: • Innovation and Regulation Brian Korn, Pepper Hamilton LLP Braden Perry, Kennyhertz Perry Rick Eckman, Pepper Hamilton LLP Candace Klein, Dealstruck, Inc. #LEND360 ● LEND360.org

2. 212.808.2754kornb@pepperlaw.com Brian Korn of Pepper Hamilton LLP • Corporate and Securities practice group, based in New York • Hands-on transaction execution and market expertise across product categories, including equity capital markets, debt capital markets, leveraged finance and private equity • Former in-house counsel at Barclays and Citigroup investment banks • Specialist in IPOs, the JOBS Act and SEC compliance, as well as early-stage fundraising, high yield debt and swaps/derivatives • Media Appearances: Fox Business Television, Bloomberg, NPR, CCTV America • Published or Quoted: Forbes, CNBC, MSNBC, New York Law Journal, Law360, Philadelphia Inquirer, Pittsburgh Post-Gazette, The Financier, Review of Securities & Commodities Regulation • Seasoned 16 year securities expert and frequent speaker: PLI, NYC Bar faculty member; Speaker at national securities and crowdfunding conferences • Board Member, Crowdfunding Professional Association • J.D. Northwestern University School of Law • B.A. with Honors and Distinction, University of California, Berkeley

3. 302.777.6580eckmanr@pepperlaw.com Richard P. Eckman is a partner in the Wilmington office of Pepper Hamilton LLP.  He is a finance and transactional lawyer and chairs the firm’s Financial Services Practice Group.  He has practiced consumer financial services law for over 35 years representing financial institutions, non-depository lenders, investors, and service providers in product design, compliance matters, strategic transactions, government investigations and enforcement actions.

4. 816.527.9447braden@kennyhertzperry.com Braden Perry, partner in the Kansas City-based law firm of Kennyhertz Perry, LLC is a former federal enforcement attorney and veteran in government compliance, having over 10 years of experience in the areas of financial services compliance, internal investigations, enforcement matters, regulatory issues, and litigation. He currently advises highly regulated firms and frequently speaks on compliance and regulatory topics. He was previously a Senior Trial Attorney for the U.S. Commodity Futures Trading Commission and the Chief Compliance Officer of a global financial firm.

5. 858.430.8301candace@dealstruck.com Candace Klein is Chief Strategy Officer for Dealstruck (dealstruck.com), an alternative Peer-to-Peer lending platform that provides loans and lines of credit to small business borrowers. Prior to Dealstruck, Candace co-authored the legislation that became the JOBS Act, then chaired the Crowdfund Intermediary Regulatory Advocates, the industry advocacy group for platforms and broker dealers affected by the JOBS Act. Candace was the founder and CEO of two companies: Bad Girl Ventures (bgv.bz) and SoMoLend (somolend.com). Candace continues to serve as General Counsel for Women Investing in Women, a global NGO focused on increasing access to capital for female entrepreneurs, and as Advisor to LoanHero, a peer-to-peer lending company for consumer loans at the merchant point of sale. Candace Klein received her bachelor degree in Communications from Northern Kentucky University. Candace began working as a lobbyist for the Northern Kentucky Chamber and United Way, and then began attending law school at Chase University. While attaining her law degree, Candace led the Communities Practice at Property Advisors, with the title of "Maven" and the job description, "run and think." 

6. Public Crowdfunding Background • Capital • Raising • Online • While • Deterring • Fraud and • Unethical • Non- • Disclosure

7. Backdrop: Current Crowdfunding Landscape – Five Varieties

8. Crowdfunding vs. Other Exemptions

9. Crowdfunding vs. Other Exemptions

12. In Philadelphia, it’s worth 50 bucks…

13. Peer-to-Peer

14. States Cannot Agree on Investor Legality

15. Top Legal issues in Peer-to-Peer • Neither LendingClub nor Prosper are banks • Peer-to-peer lending sites facilitate loans to consumers from WebBank, a Utah-chartered state industrial bank • WebBank allows interest rate to be “portable” • WebBank sets credit terms, extends credit and holds loan for 1 day • Both LC and Prosper have been in business over 5 years • Battles have been waged in each state to arrive at this point • Platforms retain servicing rights and service loan • $$ is not FDIC or SIPC insured • Bank regulatory “lite” applies – Platforms must comply with consumer finance credit, privacy and auto-deduction laws, but…… • Exempt from 23A and 23B affiliate rules* • Exempt from regulatory capital rules* • Exempt from too big to fail, living wills, Volcker • Will big banks start to care at some point, and then what happens? • Borrower may not pay and Lender cannot sue Borrower • Lender has limited ability compared to traditional lending • Limited recourse to enforce loan • Collection fees will exceed recovery

16. Lending Regulation Issues for Peer to Peer Lenders • Usury Laws • True Lender • State Licensing Requirements • Lending • Money Transmitter • Fair Credit Reporting Act

17. Consumer Protection Issues • Truth in Lending / Regulation Z • FTC Act Title 5 / CFPBUDAAP • Equal Credit Opportunity Act / Reg B and Fair Lending • Electronic Funds Transfer Act / Reg E • Fair Debt Collection Practices Act • Vendor Management Oversight