Prosper, the people-to-people lending service that launched way back in May 2006, has found itself on a rocky road so far. Last October, Prosper suspended new lending in order to register with the Securities and Exchange Commission to create a secondary marketplace for the loans on its site (the SEC wanted to evaluate whether the company should register as a securities broker, as evidenced later when it formally issued its cease-and-desist letter).
But now Prosper is back despite the fact that the SEC hasn’t yet approved its operations, and while they have respected the requested silence up during the six-month hiatus, they haven’t exactly stalled development of the service. The company relaunched its lending services yesterday for the State of California (borrowing can be done throughout the U.S.), and is hoping to take the whole thing nationwide soon.
There are new features, too. Prosper announced its Open Market initiative, which will allow other financial institutions (e.g. auto lenders, small business lenders and community development lenders) to place their already funded loans the Prosper website for auction. The company will vet lenders and require three payments to have already been made on any loan up for sale.
Prosper has raised $40 million in capital to date from Accel Partners and Benchmark Capital, among others. It’s up against well-funded competitors such as Zopa and Lending Club.
Hmmm, how does this work? Do they still need to be quiet under the SEC mandate, but not in California?
Also, I hope this new initiative does not become the second version of Prosper 1.0, which was a hotbed of crooks and deadbeats taking money from lenders and defaulting on them. It seems this second version is a chance for banks to get rid of loans they think will be going bad anyway: good for banks, bad for people.
It looks like they’ve only opened back up to users in CA. Not other states. Maybe they received some type of conditional approval.
they should loan out some of that 40 million they’ve been squatting on.
p2person.com – personal matters
They aren’t really up against Zopa. Zopa closed US operations a few months ago. The two p2p lending companies registered with the SEC are Lending Club and Pertuity Direct.
Yes, found it…Zopa closed in October 2008.
Prosper, Lending Club, and Pertuity Direct all gave great presentations at FinovateStartup yesterday in San Fransisco.
Crooks and deadbeats – LaraGal has got that one right! One guy I loaned to – claimed to need $25K to fix his truck so he could work. He made ONE payment and disappeared. Probably off to Mexico. Not all are bad but a good number of them just pulled our leg with sad stories, took our money and gone. I hope to just recoup my investment, already lost $1K – no profit.
Suggestion – stay away from Prosper, their collection service is a joke!
To a certain extent, I agree. Loaned a few hundred dollars to test the water. Even “A” candidates ran off with the cash – so it makes me think that there aren’t really a whole lot of honest people asking for money.
On the flip side, many were paid off quite quickly. I suppose you need to conduct some due diligence, but its hard on a public website…
In this economy lending can be much more than someone with money and one without money. How do these guys prevent fraud?
There is nothing “peer-to-peer” about finance-companies dumping their questionable loans (in a rather non-transparent manner” onto regular people.
Prosper, by it’s very nature and systemic impotency cannot become anything but a hotbed of crookedness.
I’m one of the early adopters of Prosper Lending (started in 2006), and I still think the concept is great, even though they have had their fair share of issues.
I still believe this model can be good for both borrowers and lenders. In the early days of Prosper fraud was a bigger problem, I anticipate that will improve over time.
Good to see the team back in the lending saddle.
Loan volume at Lending Club has been growing slowly since they restarted operations. And that’s with significantly reduced competition and an environment that should be quite robust for social lending. Will be interesting to see if/how long it takes for the former market leader to rebound.
$50 at a time, I ended up loaning over $12k within the Prosper playground. Most of the money was loaned out at interest rates north of 10%. Lots of defaults. I conservatively calculate the rate of return at just about 0%. The number of defaults lately has greatly dropped off (because those have already run off with my money, and those left are largely making their payments).
Last summer, I thought this experiment was an unqualified disaster. Now, given that the rest of my portfolio is down 30% TTM, my zero return looks…rosy.
Regards,
This is a good point.
If I look at my investments, I have almost the same result. I think I am negative 1% return for my Prosper investment in 2008, compared to negative 30% for the rest of my portfolio.
Of course, I’ll never recover the timesuck of selecting all those $50 loans…
There are tax laws pertaining to loaning out money. If you make money from the interest, the interest is your income. Your principle if you lose money, can be subtracted from your annual income and it would reduce your income tax liability.
We have a tax law in place to provide insurance to the economy in case …