Ever wondered how p2p lending is regulated in the US in detail? The new GAO report ‘Person-To-Person Lending: New Regulatory Challenges Could Emerge as the Industry Grows‘ has all the details and covers the situation of Prosper, Lending Club and Kiva. It also reviews possible regulatory changes.
A petition (‘Petition for Rulemaking: Exempt securities offerings up to 100,000 with 100 maximum per investor from registration‘) submitted last July by the Sustainable Economies Law Center to the SEC, aims to exempt securities offerings of up to 100,000 US$ with a limit of 100 US$ per investor. If a new rule granting exemption would be issued by the SEC, this could substantially lower the hurdles for peer-to-peer equity platforms in the US.
The petition 4-605 is online here.
Comments and supporters that joined after the filing are listed here.
The House of Representatives yesterday passed a bill that will move regulation of p2p lending services from the SEC to the newly created Consumer Financial Protection Agency (CFPA) in Spring 2010, provided the Senate and President Obama approve the new legislation.
Oversight by the SEC meant that Prosper, Lending Club and other p2p lending companies in the US had to go through an arduous registration process in the past, which forced them to close for new business for several months. Zopa even decided to exit the US market.
Prosper CEO Chris Larsen welcomed this development, saying: “In terms of how the Bill relates to peer-to-peer lending, we’ve always believed that the industry should be regulated as a bank-like sector by a strong, holistic regulator focused on providing robust protections for both lenders and borrowers…”.
Loanio has filed a S-1 registration with the SEC. P2P lending service Loanio had been briefly active in October and November last year before voluntarily closing to new users in order to seek SEC registration approval.
In the new SEC filing Loanio wants approval for offering 50 million US$ in notes based on peer to peer loans via their website Loanio.com. The filing includes the outlook for a secondary market (loan trading platform via a broker) and the plan that Loanio might partner with a “national financial institution”. Should that be achieved, borrower loans could be originated through this lending institution and then sold and assigned to Loanio. This would allow Loanio to offer loans to borrowers in more than the 22 states it has individual state lending licenses for now, and would eliminate (some) state interest caps.
The filing also gives insights into the company structure and expenses since foundation. Founder Michael Solomon hold 97% of the company shares.
Under the requirement to file with the SEC, starting a peer-to-peer lending company in the US market takes an unusual long pre-launch phase compared to other internet based business models.