Latest Threat to Online Lenders: “Stacking” of Multiple Loans

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. Such loopholes, they said, can result in multiple lenders making loans to the same borrowers, often within a short period, without the full picture of their rising obligations and deteriorating ability to pay.

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