CommunityLend is most like its American cousin Prosper in that borrowers create loan listings for $1,000 to $25,000 Canadian, set a starting interest rate (which must be above a minimum rate for their credit rating), and add some information about why they need the loan. Lenders bid in a competitive auction to determine the final interest rate at which a loan will be issued. CommunityLend provides the borrower’s credit rating (AA, A, B, or C), along with an “affordability rating”  and a “stability rating” (both 1-5), which indicate the borrower’s ability to afford the loan, and the relative stability of the borrower, in terms of employment, residence, and marital status. With these three simple ratings, CommunityLend has provided useful and easily understood metrics that should help lenders make decisions commensurate with their appetite for risk.

Interestingly, CommunityLend has chosen to mirror Prosper by offering their own take on Prosper’s “Groups” concept, which they appropriately call “Communities“. The idea is that communities of like-minded borrowers (quilting circles, book clubs, hockey teams) will exhibit higher responsibility in loan repayment than unaffiliated borrowers. Prosper’s implementation of this structure (which differed in that cash incentives were offered to group leaders) was eventually cut drastically and all but removed from the web site.

On the lending side, CommunityLend is open to both individual and institutional accredited investors living in the province of Ontario. The minimum bid amount is C$100, and bids must be made in C$100-increments. Individuals are also prevented from bidding more than 10% of the loan amount, which seems like a ham-handed way of encouraging diversification.

Borrowers pay a loan closing fee of 1% to 2.5%, depending on their credit grade, with a minimum fee of $75. Lenders pay an annual administration fee of 1% of the outstanding principal balance of all loans held; this fee is extracted on a monthly basis.

Congratulations to the CommunityLend team for receiving regulatory approval, launching their site, and being the first properly regulated peer-to-peer lending site in Canada.

Related posts:

1. Pertuity Direct Launches Mutual Fund-like P2P Lending
2. IOU Central Suspends Lending Activity in Canada
3. LendingClub launches social P2P lending site on Facebook

The site  won’t launch until September (see my previous note about Italians doing anything productive in August), but it’s not just the launch date that’s culturally sensitive. Carozzi & co. hope to bring a distinctly Italian character to the site. Unlike their competition at Zopa Italy and Boober Italy, which were both started in other countries (the U.K. and the Netherlands, respectively), Prestiamoci hopes to capture the community spirit that Italians recognize in their daily lives and bring it to “prestiti P2P” (P2P lending). They acknowledge that Italians are less open with each other about financial matters, and will tailor the site to capture these issues in their marketplace.

From a regulatory perspective, however, Prestiamoci has applied for and received the same lending license that Zopa and Boober have: they are now included in the “Albo degli intermediari finanziari” (list of regulated financial entities) at the Bank of Italy. Presumably the Banco d’Italia has improved their screening of peer lending outfits since being indian givers with Zopa’s license.

Prestiamoci is unique from its competitors in that they have built their own technology platform, and are working on improvements to traditional credit scoring. Prestiamoci will use credit scoring from CRIF Perform, but hopes to improve lender underwriting through the integration of other (yet unnamed) factors.

On a “Countdown” section of the site (which, according to the URL, may have originally been named “Manifesto”), Prestiamoci volcalizes their frustrations with traditional banking and credit. This includes the complexity of credit data, the recent crisis of confidence in the world of credit, and even the pitfalls of social networking. On the last point, the site hints at letting borrowers and lenders expose their real names to each other, which would be quite novel (and possibly fraught with danger) in social lending.

Alas, the countdown is only at T minus 6, so we look forward to seeing the full site when it launches in September.

Related posts:

1. Zopa Italy Reaches Agreement with Bank of Italy; Service to Resume in September
2. Corrected: Zopa Italy Relaunch Delayed
3. Zopa Italy’s License Cancelled by the Bank of Italy (Updated)

Other statistics offered by Comunitae were that on average, 50 loan requests are available for bidding from a pool of 780 borrowers. 645 investors are ready to lend, primarily from Madrid (where Comunitae is located), Barcelona, and Valencia. According to Comunitae’s twitter feed, the company just reached the 5,000 user milestone on Friday.

Comunitae, whose name combines “comunidad” (“community” in Spanish) and “TAE” (Spain’s equivalent of APR), is a fairly close facsimile of U.S. peer lender Prosper. Borrowers request loans from their community by creating public loan requests, and lenders place bids to participate and set interest rates. Borrower credit is ranked from A to C, and interest rates are in the 7-12% range.

Another social lending company in Spain called Lubbus has launched a beta site, but it is unclear whether actual peer-to-peer lending is taking place, or just testing.

Related posts:

1. Comunitae’s February Newsletter Promises Launch Soon
2. Lending Club Posts Strong 1H 2009, Loans Growing 7% Per Month
3. Prosper Announces Major Changes to Groups Concept

Now that the quiet period is over, Prosper finally provides some details about what was holding up their S-1 registration with the SEC. Although they had to give up on the “open market” concept, Prosper seems to have gone to the mat and convinced the SEC that an auction pricing model was critical to the marketplace. According to the launch blog post, “the SEC has never permitted Wall Street investment banks or any other institution to run a true auction where investors could make an irrevocable bid that committed funds prior to the establishment of a final rate.” In past auction-priced sales, such as Google’s 2004 IPO, bids could be cancelled at any time before the final price was set. Prosper is hanging its hat on its auction model, which, at this point, is the main differentiator between Prosper and Lending Club.

Although there are not yet any new listings, Prosper’s marketing team has been hard at work, with a new name, “Prosper, The Loans Marketplace” (grammar is so complicated), a matching logo, and a highly-publicized Twitter account @prosperloans (@prosper was taken). Prosper has replaced the press links on the home page (to gushing articles from major media outlets) with links to Facebook, Wikipedia, and most confusingly, Yelp, where Prosper has 3 reviews, 2 of which are 1 star (the lowest rating).

As for the site itself, not many changes are evident since the first re-launch in April. On the borrowing side, borrowers from all states except Iowa, Kansas, Maine, and North Dakota are able to borrow. The minimum credit score for borrowers has been raised from 520 to 640.

On the lending side, lenders may only participate from California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin and Wyoming. If they qualify, lenders are asked to re-sign all six(!) of Prosper’s legal agreements, after which they may be presented with suitability requirements (depending on their state of residence). In California, lenders are required to have a gross income of $85k or a net worth of $200k if they plan to invest more than $2,500 on the site.

Lenders who want to trade notes must sign up as a Folio Investing customer, after which they may sell any notes by putting them up for auction.

Related posts:

1. Prosper Relaunches in California Without SEC Approval
2. Prosper’s Latest SEC Filing Excludes Open Market
3. Prosper’s S-1 Approved by SEC; Re-Launch Expected Tuesday

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.

Other Changes

• Borrower loan closing fees raised from 2-3% to 3% across the board.
• Performance pages no longer include Estimated ROI, but rather emphasize the improved quality of borrowers with credit scores above 640.
• Collections statistics (which were removed before shutdown) are still not available.
• 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?

Related posts:

1. Prosper Relaunches with SEC Approval, Secondary Market
2. Prosper is Quiet Again
3. Prosper’s Latest SEC Filing Excludes Open Market

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.

Related posts:

1. Lending Club and Pertuity Direct Seek Affiliates
2. Pertuity Direct Shuts Down Unexpectedly
3. Pertuity Direct Lends $500K in First Two Months

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.

Watch LendingClub’s presentation at Finovate.

Related posts:

1. Lending Club Reveals $4.1 M in New Funding
2. LendingClub launches social P2P lending site on Facebook
3. eBay MicroPlace Launches

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.

Related posts:

1. IOU Central Suspends Lending Activity in Canada
2. IOU Central Files S-1 with SEC
3. Is IOU Central Planning a US Site?

The data on the site is updated weekly, since LendingClub only releases trading activity on Fridays.

Related posts:

1. LendingClub launches social P2P lending site on Facebook
2. Peer to Peer Lending? Lending Club Funds 24% of Loans
3. LendingClub raises $10.2M Series A

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.

Related posts:

1. MicroPlace Advertising 6% Returns Heavily
2. eBay’s MicroPlace Readies for Launch
3. Kiva Launches Lending to U.S. Borrowers