Cadwalader attorneys authored a memorandum analyzing several new federal court rulings related to marketplace lending.
The federal court in Colorado recently remanded to state court an enforcement action against Marlette Funding ("Marlette"), which had been doing business as a marketplace lender in Colorado under the name Best Egg. The federal court previously remanded to state court a similar action against another marketplace lender, Avant, and also dismissed two parallel actions brought by WebBank and Cross River Bank – the banks that partner with Avant and Marlette – to halt the state court proceedings.
As explained more fully in the memorandum, these new rulings illustrate the risks that persist in some states for marketplace lenders utilizing the "bank origination" model (i.e., when lenders use arrangements with unaffiliated banks to originate their loans).
The memorandum was authored by Scott Cammarn, Chris Gavin, Jason Halper, Kyle DeYoung, Jonathan Watkins, Jared Stanisci and James Fee. It follows up on previous analysis regarding two other federal court cases that recently challenged the marketplace-lending model.
Commentary / Jason M. Halper
Considered alongside the remand of the state enforcement actions against Avant and Marlette, the federal court's rejection of WebBank and Cross River's challenges to the state's enforcement powers is notable. Unlike many prior marketplace lending cases, the litigants were represented by nationally renowned law firms and supported by national trade groups as amici. Firms in the marketplace lending space should continue to closely monitor these developments
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