Nearly three years after starting to build out what they hoped would be the first social lending company in Canada, CommunityLend has finally launched for borrowers and lenders in the Canadian province of Ontario. Despite having a lot of the technical pieces in place for years, CommunityLend’s launch was continually delayed for regulatory reasons. Now that CommunityLend is licensed and registered in Ontario as a Portfolio Manager and Exempt Market Dealer, the site is available for borrowing and lending.
You might not think the nascent peer-to-peer lending market in Italy has room for another player, but three guys in Milan think otherwise. Prestiamoci, which means “let’s lend to each other” in Italian, is the brainchild of Mariano Carozzi, Paolo Galvani, and Giovanni Tarditi. Carozzi, who was previously a lawyer with online bank Banca Sella, was inspired to start Prestiamoci after finding out about Prosper in the US. He dragged his two banker friends in with him, and in 2007 Prestiamoci was born.
Comunitae, the leading Spanish P2P lending company, recently announced in their July newsletter that they had funded 10 loans during their first month of activity. Comunitae launched in June after about a month of beta testing. Ever since their launch, Comunitae has been mobbed by the Spanish media, including print, radio, and television.
After nine months of downtime, Prosper, the first American P2P lending company, re-opened its doors this afternoon, with a blog post by CEO Chris Larsen claiming “we mean it this time“. And they do — Prosper’s loan marketplace is now blessed by the SEC, and open for business. Prosper has also opened a secondary market, operated through Folio Investing, so that lenders who already hold notes can sell them to others.
It has been a little over six months since Prospershut down its social lending marketplace under threat (and later consummation) of a cease and desist action from the SEC. Early this morning, the site was reopened after a weekend-long outage, with some expected differences but also many unexpected changes.
Regulatory Issues with SEC
Although Prosper will be open to borrowers from any state in the US (including South Dakota, which was previously closed), lenders are restricted to California residents only. According to a blog post by Prosper CEO Chris Larsen, it seems that Prosper has only been able to get clearance from the California Department of Corporations to issue securities to California investors.
Larsen doesn’t go into a lot of detail in his post, but his strongly-worded message includes the following screed that hints at what Prosper must be running up against with the SEC:
We remain hopeful that the SEC, which until now has effectively hamstrung the growth of the peer-to-peer and micro-lending industries in the U.S. will start applying the same common sense approach as California’s regulators. California has recognized that Internet auctions, just like the Google IPO, are the most efficient means of price discovery; that loan level transparency is better than the opaque loan pooling that brought the financial system to its knees; and that requiring regulatory filings every other day of web site transactions that are already visible in real time, is redundant and cost prohibitive.
There are three specific comments in there: 1) Prosper wants prices set by auction, 2) Prosper is opposed to loan pooling, and 3) Prosper is opposed to daily regulatory filings. Regarding auction pricing, Lending Club has always had a fixed-price model, so that is not an issue for them. And Lending Club has also submitted to daily regulatory filings (although, as Larsen says, they are redundant). Regarding loan pooling vs. loan-level transparency, it’s unclear what Prosper is arguing against.
Perhaps in an effort to frame its as yet unapproved bid to the SEC, Prosper is positioning the new site as a response to the global financial crisis. A press release issued this morning is entitled “Prosper Expands P2P Loans Marketplace in Response to Financial Crisis“, and the company has launched a site at FixTheCreditCrisis.org which encourages investors to contact their state legislators and help push through SEC approval for Prosper. It also includes this low-quality video featuring Larsen:
New brand: Prosper Loans Marketplace
Possibly one of the most visible (and puzzling) changes on the new Prosper site is a re-branding towards the name “Prosper Loans Marketplace”. The name is used in the site’s new logo and in a few other places, although the name of the company remains (according to the copyright) “Prosper Marketplace, Inc.” Few companies have been known to lengthen their company’s name, but Prosper seems to think that the Google juice earned by adding the word “loans” to their name will be worth the semantic confusion of having a plural noun sandwiched between two singular ones.
Open Market Loans
The biggest change on Prosper’s new site is the addition of what are called “open market loans”. According to Prosper, the open market is the lending market that takes place off-Prosper (i.e., loans that are underwritten and originated by traditional lenders). With the changes released today, these traditional lenders can start offering already-issued loans as securitized notes at auction to Prosper lenders (individuals).
At the moment, there are only open market loans available from CPS, an auto lending company. On an open market listing, in addition to the borrower’s Prosper Rating (more below) and credit profile, the loan’s payment history to date can be seen. This kind of professional underwriting and payment history data may attract a new kind of lender to P2P lending.
Secondary Market Still Pending Approval
Although it was the original stated reason for their shutdown, Prosper’s secondary market is not yet available, pending SEC approval. We know from their SEC filing that the marketplace will be operated by Folio Investing, but few other details are available.
Credit Grades are now Prosper Ratings
Before shutdown, the Prosper site scored borrowers by making a direct translation from their Experian credit score to his or her credit grade (e.g., a 700 credit score was a B credit grade). On the new site, a borrower’s “Prosper rating” is a combination of his or her credit score and a proprietary Prosper risk score that is based on historical performance. Although Prosper provides a help page on the Prosper score, they don’t actually publish the formula for determining a borrower’s Prosper score.
Prosper has also raised the minimum borrower credit score from 520 to 640, effectively blocking what were previously D, E, and HR credit grades from borrowing. Confusingly, the Prosper ratings look the same as the old Prosper credit grades. So although many high risk borrowers are cut out of the picture, their old labels (D, E, and HR) will be taken up by new, less-risky borrowers.
Some borrower listings appear to be 14-day listings. This may be a temporary change to allow the lower number of California lenders to bid on more listings, or a permanent change.
Prosper has made changes to the lender account section that takes a more note-centered approach. Lenders can now see failed payment details, although other details have been removed at the note level.
This is an interesting and unexpected move on Prosper’s part. They are obviously unhappy with their treatment by the SEC, and rather than submitting to the SEC’s whim, they’re calling the SEC out, and hoping that the power of their constituency (the Prosper lenders) will persuade the SEC to approve their filing.
It will be interesting to see how this situation develops. Will Prosper take a state-by-state approach to investor regulation (the same way they approached borrower regulation pre-WebBank)? Or will the “Fix the Credit Crisis” mini-site eventually move the SEC to approve Prosper’s desired model?
In a press release today, peer to peer lending site Pertuity Direct took the “beta” label off their site and started accepting new borrowers and lenders.
Pertuity Direct’s tagline is “mutually responsible banking”, and the “mutual” part of that tagline hints at their method. Rather than having lenders choose the borrowers they wish to finance, lenders invest in an SEC-compliant mutual fund, and Pertuity Direct chooses the borrowers who get funded.
Loans are available to borrowers whose credit score is 660 or higher. The rate currently advertised on the home page is 9.6% APR, and the full range of interest rates offered is from 8.9% to 17.9%, although there are no specific details on how rates are set. If approved for a loan, borrowers pay a 1-2% origination fee (depending on their credit score), and if they go late, borrowers will pay failed payment and late payment fees.
On the lending side, the minimum investment is $1,000, and lenders are investing in one of two mutual funds, which have estimated fees of 3.17%. To add a human element to the process, lenders can also contribute Pertuity Bucks (which are free) to a borrower’s loan, reducing the balance that the borrower owes.
From the company’s perspective, this provides the following advantages to their customers over existing P2P lending models:
For borrowers, there is complete privacy. Pertuity doesn’t require the public posting of personal credit information or any other information about the borrower’s loan.
For lenders, there’s no choosing of loans. An investor has the choice of two mutual funds (organized by National Retail Fund), and that’s it.
Pertuity Direct’s model is a big paradigm shift from what Zopa, Prosper, and Lending Club have done in the past. The mutual fund route lets Pertuity Direct avoid the regulatory pitfalls that have plagued the other sites, but with minimums of $1,000 and annual fees of 3.17%, it will be hard to attract lenders. On the borrowing side, things should be fine if Pertuity can accruately gauge the risk of their borrowers. We look forward to seeing how things progress for this innovative company.
Lending Club received regulatory approval from the SEC, and re-launched the Lending Club site at the Finovate 2008 conference in New York. CEO Renaud Laplanche presented the newly-launched site along with a secondary market hosted by registered broker-dealer FOLIOfn. The core borrowing and lending components of the Lending Club site have remained largely the same, although new income and net worth requirements may prevent less-than-wealthy investors from participating. The same requirements apply for buying and selling notes on the Trading Platform by FOLIOfn.
The trading platform is an entirely new web site where lenders can take notes they have purchased through Lending Club, and offer them for sale to other lenders. Only notes created after Lending Club’s quiet period can be traded, and are sold in a fixed price marketplace. To sell a note, the seller chooses the price for the note based on the principal outstanding and accrued interest. On the buying side, investors can search through the notes being sold, view the details of each note, including credit score history, and buy notes one-by-one or in bulk. When a note is sold on the secondary market, the seller pays a 1% transaction fee to FOLIOfn, and the buyer gets the note in their Lending Club account.
As of now, lending is only available to customers from 16 states, but should eventually be available nationwide as Lending Club gets clearance from more state securities regulators. Notably, Lending Club hasn’t yet secured approval from regulators in California, where they are headquartered.
Canada’s IOU Centrallaunched yesterday, becoming the first person to person lending site in the great white north. CommunityLend, which had made their intention to launch public months before, is still sitting on the sidelines working out regulatory issues.
On the IOU Central site, borrowers can request loans between $1,000 and $25,000 (Canadian dollars), along with the minimum they will accept should the loan not get 100% funded. Listings last 2 weeks, and the borrower can choose the loan term, between 1 and 36 months. Borrowers pay IOU Central an origination fee based on their credit score, which is determined by TransUnion Canada.
Interest rates are set in a Prosper-style auction, and lenders bid as little as $25 for the privilege of participating in a borrower’s loan.
As Netbanker has noted, the VP of Technology and the Product Manager at IOU Central were previously the founders of the Danish P2P lending firm FairRates, presumably acquired through some kind of merger or acquisition, although none has been announced.
Eric from Eric’s Credit Community, the Prosper statistics site, today launched a statistics site for tracking LendingClub loan data. Reports include Loans by status, Lending Club loan growth, Loan breakdown by credit, and Loan breakdown by amount.
The data on the site is updated weekly, since LendingClub only releases trading activity on Fridays.
MicroPlace, eBay‘s answer to Kiva, launched today. Through MicroPlace, investors can make microloans to the working poor in developing nations around the world.
Rather than choosing borrowers directly (as lenders on Kiva do), MicroPlace investors buy securities (complete with a prospectus) for a microfinance institution (MFI) which makes the loan to the borrowers. MicroPlace lets you see the profiles of specific borrowers, but ultimately the heart-wrenching story is just the sales pitch to a cold, hard investment vehicle. If you really wanted to offer Jose (at right) the $280 that he needs, the best you can do is offer it to his MFI and hope that he gets a portion of it.
On the plus side, MicroPlace securities pay 1-3% interest, depending on the MFI. Although this is less that you’d earn on a CD or money market fund, it’s more than you’ll make on Kiva, where lenders don’t earn interest at all.
My feelings on this site are split. On one hand, it’s hard to get excited about microfinance if you don’t know who is getting your money (there’s a reason Sally Struthers always sent you a picture of the poor child you were sponsoring). On the other hand, interest is never a bad thing. It’s nice to feel like you’re doing well (or at least doing something) by doing good.
Kevin at RateLadder has set up an account and invested some money, and seems to have had a good experience.
Nearly three years after starting to build out what they hoped would be the first social lending company in Canada, CommunityLend has finally launched for borrowers and lenders in the Canadian province of Ontario. Despite having a lot of the technical pieces in place for years, CommunityLend’s launch was continually delayed for regulatory reasons. Now that CommunityLend is licensed and registered in Ontario as a Portfolio Manager and Exempt Market Dealer, the site is available for borrowing and lending.
After nine months of downtime, 
Possibly one of the most visible (and puzzling) changes on the new Prosper site is a re-branding towards the name “Prosper Loans Marketplace”. The name is used in the site’s new logo and in a few other places, although the name of the company remains (according to the copyright) “Prosper Marketplace, Inc.” Few companies have been known to lengthen their company’s name, but Prosper seems to think that the 
At the moment, there are only open market loans available from 
In a 
