I was so fixated on the community wars that I completely missed Lending Club securing the ability to lend nation wide without interest rate restrictions. From the increasingly ill-named Prosper Lending Review:
Lending Club has finally eliminated all this confusion – they are available to borrowers in all states and are not bound by state interest rate limits any more. In the official announcement, Lending Club CEO Renaud Laplanche said, “We went National today, 6 months after the launch of our Facebook application and 3 months after the limited opening of our public website at http://www.lendingclub.com/.” He estimates that this will open up their platform to an additional 108 million borrowers.
I have seen theories that they partnered with a national bank (which does not have loan restrictions) to get around the state caps. Therefore, Lending Club rounds up the borrower, asks the bank the make the loan, buys the loan from the bank, and then the lenders buy the loan from Lending Club. Or something like that. Everything clear now?
Of course, this'll place Prosper at a competitive disadvantage in the high quality borrower market. When will Prosper follow down this road?
Update: Those national bank partner theories were not just theories. RateLadder had the dirt:
Is Lending Club regulated?
Lending Club has partnered with WebBank, a FDIC-insured, state-chartered Industrial Bank organized under the laws of the State of Utah to originate the loans in a consistent manner across all 50 states. Lending Club loans are regulated under WebBank’s Industrial Loan Charter.