Lending Club Halts New Lenders. Prosper Next?
Lending Club has announced that they're not allowing lenders to invest in loans until they get a few things sorted out with the government (I'm assuming the SEC):
Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.
The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.
Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.
Lending Club will continue to fund borrower loans using their own money, a most interesting example of being confident that their platform is sound enough to put their own money in. All eyes are now on Prosper. Prosper got started with the SEC back in October last year, but has been quiet since.
Update 3: The PLP link had an interview with Chris Larsen talking about how they went after the regulatory framework from the get-go. Prosper is acting like they believe they're in the clear.
That's enough updates for now.
Update 2: Just go over to Personal Lending Portfolio. They've got all the good goods.
Update: Why did I go and take yesterday off. Some more digging gives:
The NetBanker article had an official comment from Prosper:
Person-to-person lending is an increasingly popular way for individuals to borrow and lend money at attractive interest rates. Understandably it must be done in a secure and trusted way. While we’re not in position to comment on another company’s regulatory stance, Prosper believes that the way we have structured the Prosper marketplace is in compliance with applicable state and federal laws. Currently Prosper has over 650,000 members, and more than $130 million in loans have funded through the Prosper marketplace.
Tech Crunch added:
Since Lending Club both loans and borrows money from users, instead of connecting them directly, it’s not a pure P2P service. While the legality of its lending practices is not in question, its borrowing practices could be interpreted as the sale of securities, which requires a license Lending Club doesn’t appear to have.
This suspicion has been reinforced by Veronica McGregor, an attorney with the law firm Perkins Coie. She says that “it looks like they are getting themselves a license to buy and sell securities.”
