Certain online consumer lenders are "pushing the envelope" with their business practices, underscoring the complexity of conducting Internet lending where the lender's state laws may differ from those of the borrower's state. The legality of some online lending is being called into question, with lenders that are licensed in one state but lending in many others, for example.

Jeremy T. Rosenblum, Practice Leader of Ballard Spahr's Consumer Financial Services Group, said, "How these online transactions will ultimately be regulated still remains, to some extent, and an open question." Mr. Rosenblum views any approach that avoids state-by-state licensing as falling under the "choice of law" doctrine. "It's fair to say that there is a clear demarcation between the state-by-state online companies, and all the companies that operate some kind of 'choice-of-law' model," he added.

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Consumer Financial Services