USA LAW AND PRACTICE Contributed by: Margo H.K. Tank, Michael Fluhr, Era Anagnosti, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Kathleen Birrane and Chezelle McDade, DLA Piper LLP
support their assertions that the relationship was customer-initiated.
(UDAAP)) with which online lenders originating con - sumer loans will likely need to comply, depending on the specific features of the product. More regulations are triggered under federal law if the consumer prod - uct being offered is secured by real estate (ie, resi - dential mortgages). At the state level, lenders offering consumer loans must be licensed in nearly all states, and many states have their own laws similar to UDAAP. Small business and commercial loans are often exempt from many federal laws and regulations, and state licensing, usury, and disclosure requirements, depending on the features of the product. However, a number of federal regulations may still apply to these loans in certain circumstances. A minority of states require lenders to provide spe - cific disclosures to commercial loan recipients. Com - mercial lenders are subject to licensure in fewer than half the states, often only where the interest rate or principal amount deviates from specified thresholds. 4.2 Underwriting Processes Underwriting processes in the US vary by industry but generally assess credit risk, income, collateral, and the borrower’s ability to repay. Banks and traditional lenders follow regulatory guidelines set by agencies like the OCC, FDIC, and CFPB, while private lend - ers and fintechs often use proprietary models with fewer regulatory constraints. Mortgage and small business loans adhere to strict federal rules, including the Dodd-Frank Act and SBA requirements, whereas corporate and commercial lending relies on financial metrics and risk-based assessments. 4.3 Sources of Funds for Fiat Currency Loans Sources of funds for loans will vary depending on several factors, including the type of loan, economic environment, and creditworthiness of borrowers. P2P lending allows individuals or businesses seek - ing financing to borrow money directly from anoth - er person without applying to a traditional financial institution. P2P loans are often issued to borrowers with lower credit profiles, resulting in a higher risk of default. P2P lending platforms are generally less regu - lated than traditional lending but may be subject to loan brokerage laws.
3. Robo-Advisers 3.1 Requirement for Different Business Models Robo-advisers provide asset management services to their clients through online algorithmic-based pro - grammes, and are typically investment advisers reg - istered with SEC, subject to SEC oversight, and must comply with the Advisers Act. Depending on the types of services they provide, robo-advisers also may be subject to other regulatory regimes. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Many major US banks, broker-dealers and investment advisory firms have implemented a robo-adviser plat - form. Within the US, the robo-adviser industry is antic - ipated to experience high growth due to digitalisation in the financial sector. 3.3 Issues Relating to Best Execution of Customer Trades The Advisers Act establishes a federal fiduciary stand - ard for all investment advisers, including robo-advis - ers. When a robo-adviser selects broker-dealers and executes customer transactions, the robo-adviser is obligated to seek “best execution” of customer trans - actions. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities There are significant differences in US regulation of loans made to consumers and loans made to busi - nesses. Loans to individuals for consumer purposes (ie, fam - ily, household, or personal use) are highly regulated. At the US federal level, there are a variety of con - sumer protection laws (eg, TILA, ESIGN, FCRA, EFTA, and unfair, deceptive, or abusive acts and practices
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