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[Cushie]

http://www.nytimes.com/2008/10/16/technology/start-ups/16peer.html?_r=1&ref=business&oref=slogin

On Wednesday, the nation’s largest peer-to-peer lending site, San Francisco-based Prosper, stopped allowing lenders to make new loans, saying it needed to wait while the Securities and Exchange Commission evaluated its regulatory filings.

Monthly loan volumes at the company have been declining since the credit crisis worsened this spring. Prosper, which is unprofitable after raising $40 million in venture capital, now faces the damaging possibility that lenders may take their money off the site instead of waiting for the S.E.C. to allow lending to resume. That could take several months.

(more in article)

[bamalucky]

Now reporters are starting to publish a little truth.

[Cushie]

Okay, I'm just gonna quote this part because it's good.

Even before lending on Prosper was halted, the much-hyped start-up appeared to be encountering some problems. Though the company says 7.9 percent more money has been lent on the site this year than last year at this time, the monthly total actually peaked in May and has been steadily declining ever since. The average loan amount on Prosper has also fallen 13 percent from last year, as lenders have become nervous about whether borrowers will repay the loan.

Francis A. Vasquez, a 44-year-old lawyer in Vienna, Va., who has lent more than $186,000 on the site since January 2007, says one reason for those jitters is the high default rates on the site.

In his first four months on the site last year, for example, Mr. Vasquez said nearly 30 percent of his loans were in default or were four months late, costing him a 1.2 percent loss on his investment. “I don’t think there is a whole lot of trust on the site,” he said, citing borrowers who never had any intention of paying back loans in the first place.

Many lenders, including Mr. Vasquez, have responded by seeking out more reliable kinds of borrowers in the top credit-score categories.

[GLeaderAccountantsChoice]

This is the part that answers a few questions regarding the QP:

According to Renaud Laplanche, the founder and chief executive of Lending Club, the S.E.C. surprised the company by asking whether it should have registered as a seller of securities before it started to broker loans. In response to those discussions, Lending Club stopped all new lending on its site for six months, frustrating its lenders, many of whom withdrew their cash.

“If we had a clean situation to start with, we probably could have registered the new offering while our current marketplace continued on,” Mr. Laplanche said. On Tuesday, the S.E.C. accredited Lending Club, and the site reopened.

[DCS]

Francis A. Vasquez, a 44-year-old lawyer in Vienna, Va., who has lent more than $186,000 on the site since January 2007, says one reason for those jitters is the high default rates on the site.

In his first four months on the site last year, for example, Mr. Vasquez said nearly 30 percent of his loans were in default or were four months late, costing him a 1.2 percent loss on his investment. “I don’t think there is a whole lot of trust on the site,” he said, citing borrowers who never had any intention of paying back loans in the first place.

I'll take a guess that Mr. Vasquez is Dragline:
http://www.ericscc.com/lenders/Dragline

[Senator]

Prosper now faces the damaging possibility that lenders may take their money off the site instead of waiting for the S.E.C. to allow lending to resume. That could take several months.

If you can't bid and you're not earning any interest, why wouldn't all lenders take their money elsewhere?

[zcommodore]

Hmm, another loan site coming soon... (from the NYT article)

Another company, Pertuity Direct, based in Washington, said that when it introduces its site in November it will target only respectable prime borrowers.

[Tokyo Joe]

Hmm, another loan site coming soon... (from the NYT article)

Another company, Pertuity Direct, based in Washington, said that when it introduces its site in November it will target only respectable prime borrowers.

It'll only target "respectable" prime borrowers??

So degenerate prime borrowers will be booted?  Sweet!

[ira01]

This is the part that answers a few questions regarding the QP:

According to Renaud Laplanche, the founder and chief executive of Lending Club, the S.E.C. surprised the company by asking whether it should have registered as a seller of securities before it started to broker loans. In response to those discussions, Lending Club stopped all new lending on its site for six months, frustrating its lenders, many of whom withdrew their cash.

“If we had a clean situation to start with, we probably could have registered the new offering while our current marketplace continued on,” Mr. Laplanche said. On Tuesday, the S.E.C. accredited Lending Club, and the site reopened.

Yeah, as I've posted in other threads, the quiet period is nothing more than Prosper's cover for ceasing operations, which was probably due to the SEC telling Prosper that it has been violating the securities laws all along.  Rather than say that is why Prosper is closing for now, it made the ridiculous claim that it was due to the quiet period.

[bamalucky]

Kinda blows nonattender's argument that we are being silly saying they are unregistered securities out of the water.

[DakotahFury]

That was a good piece...well worth the read.
I think this is lobby-worthy.

[phreddy148]

That was a good piece...well worth the read.
I think this is lobby-worthy.

ditto.