Zopa, the UK based peer to peer lending company, is shutting down their US branch due as a result of toughening conditions that are currently being experienced by the US economy. Zopa provides loan services in the UK, as well as in Italy and Japan through a pure P2P style marketplace. Borrowers would request loans, and then the individual lenders would contribute as much or as little as they wanted to, towards the request. Then when enough funding has been collected, the loan is finally put together and granted. As the borrower pays back the loan, interest earned goes back to the lenders. This micro lending model has made the system popular in the UK and the Italy, and Zopa is soon to open a branch in Japan following the same model.
With the opening of the United States branch, Zopa found that they could not launch the same kind of lending system due to regulatory issues. In order to provide their service, they have teamed up with credit unions in order to provide these lending services. Lenders would park money in CDs with the credit unions, and this would allow their money to sit before borrowers request the money. This would enable the borrowers and the lenders to enjoy the same sort of interest rate benefits as the European users. The regulatory restrictions that were placed upon Zopa would ironically cause the same conditions leading to the closing of Zopa’s United States branch, however.
The same regulations behind the restriction of Zopa’s services are a part of the US economic crisis that has cause interest rates to skyrocket and the economy to experience a great deal of turmoil in the process. With less and less benefit being offered to lenders and borrowers, Zopa was forced to close down the United States branch. US lenders and borrowers will not be completely put out, however. Zopa is directing its current and future US customers to deal directly with the credit unions that it had partnered with.
Despite rumors, the credit unions had not reduced the amount of loans created. Rather, the credit unions has increased the number of loans made as traditional US bank and lending institutes have reduced their volume. Credit unions are not susceptible to the financial woes of Wall Street, and as such are making as many loans as before, if not more for making up the reduction that is a result of the economic crisis. For this reason, Zopa is glad to be able to provide US customers with a viable option that can provide a great service.
Existing customers will be gradually migrated to the partnered credit unions. Individual borrowers and lenders will still enjoy the same interest rates, customer service and federal insurance for CDs made. Payment schedule will also be identical, only payments will transfer over to the credit unions. This transition is made easy since in the US, loans were setup already with the credit unions.
Photo Credits: 1
Related Posts- Prosper in Quiet Period? I though Prosper had already done this: http://www.rateladder.com/2007/10/30/prosper-files-s1-with-sec/ From Prosper This morning: http://blog.prosper.com/2008/10/15/prosper-filing-registration-statement-enters-quiet-period/ Prosper 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.The registration filing is a necessary step toward making the......
- Prosper 1 Month Late or Worse Curves By Credit Grade The methodolgy or the sql for obtaining the data these curves from the private data export have already been explained in detail, but briefly... The Y axis is the percentage of all loans orginated of a given age that are currently 1 month late or worse... The X axis is......
- Prosper Marketplace Auctioning Debt The Baltimore Sun is reporting the Prosper Settlement. A settlement for $1 million dollars paid to 20 different states was announced today, with Prosper Marketplace agreeing to the payout after complaints poured in claiming that the peer-to-peer lending service was selling securities that were unregistered. Prosper Marketplace is a business......
- My Zopa CD is No More I received the following email... I had known it was coming: Zopa Shuts Down US Branch With all of the turbulence in the financial markets these days, we want to let you know that your Zopa CD is as safe and secure as ever. As you know, your Zopa CD......
- The Lending Club Offers New Alternative for Consumer Credit Following $600 Million SEC Registration Back in April of this year, the Lending Club announced that it would be going into a quiet period due to the beginning of a registration process involving the SEC, the United States Securities and Exchange Commission. Now the Lending Club is pleased to announce that the process has been......
