You're probably right that there was a regulatory issue, though it's also possible that the number of bank drafts grew to the point that there was an economy of scale, or that Prosper now plans to raise all of the rate caps by one percentage point to offset the impact of increased borrower fees in states where the cap is APR-based.
My recollections from the early days (which are sometimes faulty):
In the beginning, the fee/discount was 0.25%, and there were so few bank drafts that someone took time away from his regular job to print them once a week or so. That person had to take the office printer offline, remove the regular ink cartridge and install a magnetic ink cartridge, then print the checks one by one. (And walk them to the bank through a raging snowstorn, barefoot and uphill both ways.)
As this became increasingly burdensome, Prosper increased the fee/discount to 1.00%, as a deterrent.
The agreements provided that any two failed ACH payments would result in permanent loss of the discount and an increased monthly payment, even if the remaining payments were successfully made by ACH. I have no idea if Prosper strictly enforced this policy and, if they did, whether they got complaints about it.
So, if the number of bank drafts reached the level where Prosper could automate the process, and assign a dedicated printer, that might have reduced the burden to the point that Prosper was willing to sacrifice the revenue to help with rate caps.
But, as you suggested, regulatory issues is probably the best bet.
