The Green Sheet Online Edition
July 27, 2026 • 26:07:02
Heads up! The lending industry may be heading into a crisis
The lending industry is under growing pressure to modernize its systems to meet new compliance and security requirements while continuing to support business growth. However, a new survey from Carleton Inc. revealed that while 87 percent of lenders surveyed are in the process of transitioning from legacy to modern platforms, only 8.7 percent of lenders have fully completed the process.
Seventy-five percent of respondents said they still rely primarily on legacy systems. This indicates that the lending industry may not be evolving as fast as it should be.
Carleton is a provider of loan calculation and disclosure solutions. The company helps lenders navigate increasingly complex compliance requirements while automating many aspects of the lending process. Because it serves many of the nation's largest lenders, it has a strong vantage point from which to assess the industry's migration from legacy to modern systems.
Lenders must evolve
The survey indicated that lenders understand they need to evolve. Most lenders understand the risk they are undertaking by not upgrading their systems. Indeed, 76.5 percent of those surveyed said their need to move to more modern systems is urgent, yet many still have no firm timetable for completing the transition. This means it may be years before those who define their need as urgent come close to modernizing their systems.
Why lenders are not upgrading
Unfortunately, the lending market is not in the best position at the moment. Almost a third of lenders are unable to upgrade their systems due to cost or resource constraints. Around 15 percent of participants in Carleton's survey indicated that upgrading their systems would cause serious disruption to their business.
What is interesting to note is that 5 percent said they were happy with their current system. This means 95 percent of respondents recognize the need to upgrade and understand their current systems may be holding their businesses back, but many cannot yet afford to modernize.
This points to a potential crisis. Many companies are spending their resources on maintaining their current systems, rather than developing new systems. In fact, some companies indicated that up to 80 percent of their budget was spent purely on maintenance.
However, many also understood that if they did upgrade their systems, then maintenance costs would go down.
Why this looks like a crisis
The main issue is legal compliance. Many lenders are moving closer to falling foul of the law, and the longer they delay modernization, the greater the risk becomes. However, this is not the only issue and, for many companies, not the most important one.
Nearly a quarter of respondents said they believed that their current systems are not accurate in their lending calculations. This could impact legal compliance, trigger enforcement and harm borrowers along with the company's reputation. This can lead to significant losses for businesses in this situation.
Since lenders are not updating their systems fast enough, there is a fear that, eventually, regulations will rapidly outpace system upgrades. More than 10 percent of companies reported that their processes are so slow that it can take upward of a year to adapt to a regulation change. If a lender is hit with too many changes to make at once, the lender could be unable to do so and end up looking at serious fines.
What this means for the future
The outlook remains challenging for lenders that are as yet unable to upgrade their systems. There are too many financial limitations in place and, unless lenders can dedicate vast sums of cash to handling the problem, it is likely lenders will be dealing with this problem for years to come. The challenge is no longer recognizing the need for modernization. It's finding the money, time and resources to make it happen before compliance requirements move even farther ahead. 
Chad Otar is CEO of Lending Valley Inc. For information about the company, please visit www.lendingvalley.com. To reach Chad, send an email to chad@lendingvalley.com.
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