Peer-to-Peer Lending Falters
By Anna Johnson on October 20th, 2008In the wake of the credit crunch gripping the world, peer-to-peer lending startups are displaying signs of trouble.
Developed to broker lending between regular people like you and I, such companies as Prosper, Lending Club, Zopa and Loanio were on track to broker around $150 million in loans in 2008, 50 percent more than in 2007. But while some considered peer-to-peer lending to prosper in the current economic climate, it appears this nascent industry is not immune from the financial crisis after all.
According to The New York Times, Prosper, the largest peer-to-peer lending site in the U.S., recently stopped allowing lenders to make new loans. Apparently it’s waiting for the Securities and Exchange Commission to evaluate its regulatory filings. This follows a decline in monthly loan volumes that began in the first quarter.
Since Prosper has never been profitable – it’s lifeline being $40 million in venture capital – its future remains uncertain. Meanwhile, another peer-to-peer lender, Zopa, shut down its U.S. website due to “extremely difficult consumer credit circumstances.” It’s still operating in Britain, Italy and Japan.
Source: Brad Stone, “Lending Alternative Hits Hurdle”, The New York Times, October 15, 2008
