There was an earlier thread on this -- http://www.prospers.org/forum/important_news_for_pennsylvania_lenders-t9429.0.html. As I stated there:
Very interesting. I think this strongly suggests that Prosper was lying when it blamed its same decision regarding South Dakota lenders on the fact the since Prosper couldn't have South Dakota borrowers, it made a business decision that it wasn't worth it to deal with the compliance issues for SD lenders. To me, this shows that states are taking a look at Prosper and saying "no thank you" -- perhaps due to Prosper's various shortcommings that we all know well.
http://www.prospers.org/forum/any_ideas_why_prosper_recently_stopped_allowing_lenders_from_south_dakota-t9177.0.html
I haven't looked at the Pennsylvania situation, but I perused the South Dakota statutes a while back (for one of those blog posts I never got around to writing).
It seems rather clear that South Dakota's lender licensing requirement applies to loan purchasers (e.g. Prosper "lenders") as well as to loan originators (e.g. Prosper). Obviously, requiring each Prosper "lender" to obtain his or her own lending license would be unworkable; enabling Prosper "lenders" to avoid state licensing requirements is an essential element of the P2P lending model.
Presumably, Prosper originally interpreted this licensing requirement to apply only to loans which are made to South Dakota borrowers. Under this view, Prosper "lenders" could avoid the licensing requirement if Prosper did not lend to South Dakota residents.
I suspect that the change in policy means that Prosper now interprets the statute to mean that all loan purchasers (Prosper "lenders") in South Dakota must be licensed, regardless of the borrower's state of residence. Under this interpretation, Prosper would have no practical option other than to ban South Dakota residents from "lending".
A while back, bamalucky pointed out a similar statute in Alabama, which (IIRC) requires any Alabama resident who purchases more than 25 loans to obtain a state license. (Prosper itself did not have to be licensed, because it did not have a physical presence in the state.) It is not clear to me whether Alabama interprets this law to mean "25 loans to Alabama borrowers" or "25 loans altogether." If the former, it's possible that no Alabama lenders have exceeded their quota. If the latter, expect Alabama to be added to the lender ban sooner or later.
