Breaking news: P2P lender LendingClub, which had been gaining ground rapidly on industry leader Prosper (post here), stopped accepting new money for lending through its platform. The company says it will continue to accept loan applications, funding them out of its own account. There is no indication whether the company has secured additional funding to maintain or grow its current $4 million per month origination pace. It's feasible that a bank and/or private investors could step in to fill the void. Some speculation here, here, and here (includes reprint of the email sent to lenders from the company).
I logged into my LendingClub account, which has a small cash balance, and found that the lending function has been disabled. I could browse loans and withdraw my money, but I could not bid on loans or add new funds. A message appears on most screens telling users they cannot make new loans at this time (see screenshot below).
The company's blog entry dated 7 April (see below) from founder Renaud Laplanche, offers few details, saying the company has:
…started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold … through our site in the future.
Furthermore, due to the registration period:
….the company will undergo a quiet period, and will not be able to respond to press and other inquiries…
Depending on how the promissory notes are structured, they may or may not be a departure from the P2P lending model currently employed. We'll update this post when we get more information.
For more information on the person-to-person lending market, see our recent Online Banking Report.
Update 8 April, 11 AM Pacific: Prosper's statement:
Person-to-person lending is an increasingly popular way for individuals to borrow and lend money at attractive interest rates. Understandably, it must be done in a secure and trusted way. While we’re not in a position to comment on another company’s regulatory stance, Prosper believes that the way we have structured the Prosper marketplace is in compliance with applicable state and federal laws. Currently Prosper has over 650,000 members, and more than $130 million in loans have funded through the Prosper marketplace.