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[Mark12547]

Prosper.com is still in the news: 'Peer Lender' Asks to Be Regulated as a Bank to Escape SEC

The Securities and Exchange Commission saw it differently, contending that Prosper is an investment firm in disguise.

Article has more info on where the SEC and Larsen disagreed.

[Beerbud1]

30 Employees?? that's down from 41 (IIRC).

[xraider]

"This is as simple a version of banking as you can get," said Larsen. The SEC "is putting a round peg into a square hole."

Uh, no.  If I put money in the bank, the FDIC guarantees it.  If I put money in Prosper, I have no idea who I'm lending to, there's no guaranteed return, and I don't even have any assurance there will be collection efforts.  It's about the furthest thing from bank's safe return I could conceive of.

The SEC's actions are driven by its duty to protect the public, said agency spokesman John Nester.

A duty Prosper does not believe it needs to satisfy.....

Prosper restarted the business last year and the company began to grow again. Borrowers included Priscilla Edwards, 62, who wanted to publish a children's book about a tugboat on San Francisco Bay.

Edwards, who wrote her book under the pseudonym Una King, "spent every last dime" of her $80,000 in savings before a printing error almost derailed the effort. She found the Prosper website and borrowed $10,000 from 141 people at a 13.9 percent interest rate.

Publicity about a borrower.  Edwards was just transformed from a paying loan to an almost certain default.  

And the best part: 

Failing to persuade the SEC, Prosper turned to Washington lobbyist Israel Klein of the Podesta Group. He got a provision into the House-passed version of the financial-overhaul legislation that would place the peer-to-peer lending industry under the jurisdiction of the new consumer financial protection agency. The SEC, after getting wind of the campaign, urged lawmakers to block a similar measure in the Senate.

Representative Jackie Speier, a California Democrat who sponsored the peer-to-peer amendment, said government regulation should strive to encourage new lending models, rather than choke them off.

Prosper hired itself a lobbyist to get out from under the supervision of the SEC.   

[Mtnchick]

Nominate for Lobby

[DCS]

seconded

[ira01]

"This is as simple a version of banking as you can get," said Larsen. The SEC "is putting a round peg into a square hole."

Uh, no.  If I put money in the bank, the FDIC guarantees it.  If I put money in Prosper, I have no idea who I'm lending to, there's no guaranteed return, and I don't even have any assurance there will be collection efforts.  It's about the furthest thing from bank's safe return I could conceive of.

To say nothing of the fact that when a bank says your return is x%, your return really is x%.  Unlike Prosper, with its highly misleading, if not downright fraudulent, claims regarding default rates and returns.  I've never seen a bank advertise "earn 6-14%," or "beat the S&P 500."

[wftrust]

Lender protections should take precedence in this case since that is where the flow of funds comes from. The “investors” need to be protected from incorrect behaviors by both Prosper and from the end borrowers. The SEC would continue to accomplish more of that (although still weaker than it should be). Any other governmental group would put the emphasis on the borrower (read that consumer) and leave the lender hanging out to dry. Which appears to be what Prosper wants.

So the regulation should remain with the SEC. I did not see anyplace in the article where I could write to my representative and try to encourage a vote one way or another. Anyone have that info?

[112233]

The SEC's scrutiny increased in 2008. Larsen, who said he was a bit surprised by the attention to his small firm at a time when the financial crisis was in full bloom, decided to stop facilitating new loans and register with the SEC in October 2008. Even though the company was closed, the regulator imposed a cease-and-desist order on Nov. 24, 2008.

so closing the doors was all prosper's doing and the C&D was some sort of coincidence?  


I seem to remember some sort of proverbial middle finger with regard to the C&D. That doesnt coincide with a decision to proactively close shop to make nice nice with the SEC

[112233]

In the midst of all the self-pity, prosper failed to mention anything about the actual bagholders, the reason the SEC cares about prosper in the first place




"I'd really like to see Mary Schapiro out at Stanford, at Harvard, encouraging start-ups," Larsen said


"The worst kind of regulation is regulation that puts up huge barriers, kills the technology promise and at the end of the day didn't protect either side," Larsen said.


Posting the disclosures on the SEC's website also raises privacy concerns, the company said.


Such regulatory confusion, Larsen contends, is symptomatic of a deep divide between Washington regulators and Silicon Valley businesspeople. A lack of understanding of technology- related firms has discouraged innovation in the financial industry at a time when it may be needed most, he said.

[TotoMMB]

"The worst kind of regulation is regulation that puts up huge barriers, kills the technology promise and at the end of the day didn't protect either side," Larsen said.

I had to drink some water just to spit it out...Technology promise? The same technology that has lengthened the time to receive funds by 40% and botched manual payments??

[pacino58]

From the original Bloomberg story which was not published in the SFGate, in case anyone wants to provide them with the lending side of Prosper   

To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

[Capital_Finance_Group]

I really do not understand the argument that Prosper is a Bank.
Banks take deposits and make loans or investments.
While the Borrower side may have Bank appearances the Lender side mostly appears to be the sale of an investment.
Perhaps Prosper needs to be regulated by both the Banking Regulators and the SEC.

[112233]

I really do not understand the argument that Prosper is a Bank.
Banks take deposits and make loans or investments.
While the Borrower side may have Bank appearances the Lender side mostly appears to be the sale of an investment.
Perhaps Prosper needs to be regulated by both the Banking Regulators and the SEC.

it gets really interesting when rates of return are compared as if the risk is the same between prosper and a bank

As Chris Larsen, CEO and Co-founder of Prosper, says "Prosper is a new way of banking. Instead of working with a bank where they offer depositors around 1% and then turn around and lend that same money out to borrowers for much higher rates, Prosper lets lenders see larger returns on their investments and offer their peers a lower rate as well."

http://www.associatedcontent.com/article/2503045/prosper_the_loans_marketplace.html

[nonattender]

Perhaps Prosper needs to be regulated by both the Banking Regulators and the SEC.

Yup...  That really is the whole point.

No existing regulatory entity can sufficiently regulate both sides of a peer to peer lending company, ergo,
Prosper's lobbying to regulated by an entity which can deal with the "hybrid" nature of P2P loan platforms.

Net, they're asking for more regulation, in the sense that they want the borrowing side regulated, as well,
and, with a regulatory entity that has power over both sides, we might even see some meaningful rules...

-t

[Urbi_et_Orbi]

As someone mentioned over at The Hill, I am not yet convinced it is regulation that is stifling Prosper's growth.  LendingClub seems to be growing just fine, subject to the same regulatory oversight.