Are Peer-To-Peer platforms involved in misconduct? Evidence from the US online lending

Misconduct might undermine confidence in the financial system, causing systemic risk. This work examines the propensity to engage in misconduct by Peer-to-Peer lending as they have been acting in the absence of “Skin-in-the-game”. Using data from Lending Club, the largest online platform in the US, I have performed a binary logistic regression in order to evaluate if the probability of default on issued loans is affected from the screening’s activity adopted by the platform. I find a higher likelihood that risk of misconduct occurs in the online lending market since most borrowers are not undergone to the verification status have a worsening in rating during the time of funding. It could be the first sign of misconduct in the Fintech market.