The spartan home page on Virgin Money’s web site reads: “Everyone’s better off with simplicity in a complex world”. This is apparently the strategy Virgin Money is pursuing with their American business, as they seem to have dropped their loan servicing, student loan, direct mortgage, and mortgage licensing products from the site entirely.
Prosper Lending Review broke the news this morning that Pertuity Direct seems to have ceased operations. Apparently a special meeting of the board of trustees of the National Retail Fund (the mutual fund that underlies Pertuity Direct’s investment vehicle) was convened “to approve the liquidation and distribution of all shares of the fund”.
Just two weeks after opening to California lenders, Prosper has shut down again, citing a renewed desire to complete their SEC registration. With their recent relaunch, Prosper had only been cleared by California state regulators.
I think Wiseclerk put it best when he wrote “What a mess.” It was disappointing enough that Prosper re-launched without SEC approval, but to now shut down so suddenly after re-opening raises serious concerns about the company’s viability. And now that Prosper is back in a quiet period, it’s impossible to tell what is really happening, and how soon (if at all) the company will be back.
One day after Lending Club’s regulatory approval and site launch, Prosper has closed their site to new loan funding, and announced that they will be seeking regulatory approval for a secondary market. After 2.5 years of continuous operation and $178 million in loans funded, it is odd that Prosper would make such a rash decision. Unfortunately, given the quiet period, it is unlikely that Prosper will reveal any further information about what caused this change.
The full message posted on Prosper’s Blog was:
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 secondary lending market available to the community. This is something many of you have been asking for, and we believe the liquidity of a secondary market will make Prosper even more vibrant.
Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you’re an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you’ll be able to track and monitor your loans; and you’ll be able to withdraw funds from your Prosper account.
If you’re a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you’re a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources.
A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we’re required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.
We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.
Today LendingClub stopped allowing new lenders to register and fund loans on their site, and entered a “quiet period” in which they will not issue public statements or talk to the press. LendingClub posted this official statement on their web site:
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.
Borrowers continue to post loan requests, but without lenders, it is hard to imagine that they would be fulfilled. It looks like some loans are being funded by LendingClub themselves, but this doesn’t seem like a sustainable solution.
Although no public complaint has been issued, It is suspected that LendingClub has been asked to shut down by the US Securities and Exchange Commission, and that LendingClub complied for fear of receiving a formal cease and desist, which would hurt its reputation and prevent it from raising further capital.
Only a few weeks after launching their web site, IOU Central shut down their web site on February 29 in response to a request from securities regulators in Quebec. A statement on the IOU Central site states: “IOU Central is now operating with limited functionality while we resolve a regulatory matter.”
However, only a few days later, on March 3, an official statement from the Autorité des Marches Financiers (AMF), the regulatory body that covers securities in Canada, included the following language:
At the request of the Autorité des marchés financiers (AMF), the Bureau de décision et de révision en valeurs mobilières (BDRVM) issued an order on February 27, 2008 against IOU Central Inc. (“IOU”) to cease any activity, directly, indirectly or by Internet, in respect of a transaction in a form of investment governed by the Securities Act (the “Act”), including any activity as a securities dealer. The BDRVM also ordered Philippe Marleau and all directors, officers, employees, representatives and mandataries of IOU to cease any activity in respect of a transaction in securities in a form of investment governed by the Act for and on behalf of IOU, including any activity as a securities dealer.
Microlending.ca has the full details of the Canadian government’s complaint against IOU Central. The complaint focuses on two facts:
Colin Henderson, the founder and CEO of the competitor site CommunityLend was quoted by the Toronto Star, saying ”it’s not really a surprise to us”. The regulatory issues that IOU Central has been facing are undoubtedly very familiar to Colin and his team, and explain in large part the continued delay on the launch of CommunityLend.com.