UPDATE: After a second reading I think my assumption about the secondary market is incorrect… (My own hopes for such a market might have clouded my vision.) It looks like LC is just registering for a license that they think they need to continue working with “lenders”: http://www.techcrunch.com/2008/04/08/lending-club-puts-moratorium-on-lending-activity/
I am leaving hte rest of my original post unchanged: http://www.rateladder.com/2008/04/08/big-lending-news/
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7 comments ↓
Ain’t this a curious turn of events? I had high hopes for Lending Club (as a borrower). Whatever happened to Loanio and GlobeFunder? They both seem to be frozen in time – as in late 2007 time.
Eric: Check out GlobeFunder’s lender requirements. That is why you hear nothing about them — it is for hedge funds. It may save them lots on customer service issues of dealing with the general public.
As for Loanio, they have missed so many self-imposed deadlines that they are going to have some credibility issues to overcome. Of course, their delays could be regulatory issues that are completely out of their control.
Loanio is what they call ‘vaporware’ .
LendingClub news is pretty surprising, Causing your business to come to a grinding halt is pretty serious.
Eh, One of the advantages of not having your own forum is you don’t have long threads of unhappy lenders about the whole thing.
I have nothing specific to back this up, but I would speculate that your first post regarding a secondary market may have been more accurate than you think.
They were growing by leaps and bounds, so shutting down lending like this for what may be several months is obviously going to cause them some pain. I don’t think they would be doing it unless they felt there was going to be a big payback.
As for loanio, I actually do know what’s going on there, but I can’t say anything. To the best of my knowledge, they will be coming soon
Probably sooner than you might think.
So would you guess that the reason why prosper has not halted their lending portal is because they have already started the process in registering an S1 with SEC?
Here is my logical progression…
You don’t stop operations that have been successful (LC was closing the gap between Prosper and LC in terms of origination) unless you have to.
There are regulatory agencies with the power to shut down all operations if they deemed it prudent. Such agencies usually give a warning initially rather than a formal cease and desist. A normal reaction to a warning is to fix the problem immediately or risk being put out of business.
Prosper is the lead dog. They were in business 1.5 years longer. They have multiple state licenses. Prosper started the process to registered with the SEC. Which organization do you think has had more scrutiny of it’s business practices… LC or Prosper? I would guess prosper by a long shot…
which tells me, that there is something different between the way prosper and LC are setup or are going about business. I have no idea what the difference is or why it mattered.
Regardless the fact the prosper is still operating business as usual and in fact expanding to a national charter tells me that the circumstances at Prosper and LC are fundamentally different.
Off the top of my head the biggest difference is a free market to set rates at Prosper vs fix criteria and rates at Lending Club. I am sure there are many many more differences, but I am not privy to why Lending Club stopped letting me lend money of their site.
Could it be that Prosper makes the investor choose their borrower or borrower profile – LC might cross the SEC line of “Managerial efforts” with their portfolio loan system. With no prior precedent in this areana – one move in the wrong direction can give the regulators something to chew on….. I know there are other P2P firms out there waiting to hear the outcome.
When/if there is a secondary market for Prosper and LC – how does that effect the consumer lenders?? Will that make those lenders less significant to Prosper and LC?? Lehman, Merrill, Goldman – these guys have billions sitting on the sidelines accumulating after licking their wounds from the subprime demise. I would assume once a secondary market is solidified, the big boys will be throwing serious money at the opportunity to purchase this kind of paper. The issue being – how will the rating agencies start to view the P2P business??
All very interesting to watch it unfold and grow.
Thanks for providing a great platform for us to discuss
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