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[havastat]

From time to time there's been discussion of congressional legislation to regulate peer-to-peer lending -- create a uniform registration process rather than different rules for every state, assign an agency to handle it rather than the hodgepodge of banking and SEC regulators, and so forth.

Most of the impetus has come from folks like Chris Larsen. And from a peer to peer platform like Prosper or Lending Club, the current swath of regulations does seem patchy and disorganized.

I suspect that the push for regulation has died down once people realized that p2p lending wasn't going to be a multitrillion dollar industry within three years of starting up. It's still a tiny industry -- probably not worth spending a lot of legislative thought on.

At the same time, there are a few simple things Congress could do that would give investors a lot of protection bang for the legislative buck. One very simple requirement would be a rule that investors' claims on the stream of income coming in from borrowers are superior to other creditors and can't be subordinated to the platforms' other other creditors (with perhaps a few exceptions like collection agency fees.)

This rule would help investors recover from an important source of risk coming from the SEC regime -- the regime has resulted in a legal structure in which nvestors are simply ordinary creditors of the lending platform and have no priority claim over other creditors to the stream of money coming in from borrowers.

The industry may well grow to big enough levels to warrant more government attention eventually. And when it does, investors should be represented.

[justlendnlearn]

I agree 100% with your viewpoint/stance on this front. I would think this would first and foremost be a must for institutional lenders too. These big players also now fund somewhere around 50% of all loans on Prosper/Lending Club. Unfortunately for the rest (small individual/hobby lenders) I’m afraid many don’t even know they’d have little claim to their notes in a BK scenario. How could lenders organize a grass roots effort to push for such protective measures??

If anyone has an idea count me in for support.

[xraider]

Unfortunately, at least so far, individual lenders have had little success with Prosper or with potential regulators.

I was interviewed at length by someone who said he was working with the Senate, who was considering regulation of peer to peer lending.  I gave him documentation of Prosper's failure to protect lenders.  I also emailed my senators after, to encourage them to heavily regulate peer to peer lending in light of Prosper's documented abuses.  Nothing came of any of it.

Because Prosper's business model permits it to do whatever it wants whenever it wants, including unilateral retroactive contract changes and unilateral repayment changes (including outright theft now, apparently, if payments are made after the due date) I do believe we need regulation.  As you point out, justlendnlearn, most lenders don't read the fine print and will be screwed.  The fine print didn't exist when most of us here started lending, so Prosper added it and used it to retroactively screw us.

[God-Father]

Hmmmmm.  

P2p lending is bad is bad for banks.  Banks are big lobbist.  Doubt if grassroot is going to carry much weight until there is a lot more grass.  Won't be a lot more grass until there is legislation.  P2p lending is bad is bad for banks.  Banks are big lobbist.  Doubt if grassroot is going to carry much weight until there is a lot more grass.  Won't be a lot more grass until there is legislation.  P2p lending is bad is bad for banks.  Banks are big lobbist.  Doubt if grassroot is going to carry much weight until there is a lot more grass.  Won't be a lot more grass until there is legislation. P2p lending is bad is bad for banks.  Banks are big lobbist.  Doubt if grassroot is going to carry much weight until there is a lot more grass.  Won't be a lot more grass until there is legislation...................

And on we go.

[God-Father]

The fine print didn't exist when most of us here started lending, so Prosper added it and used it to retroactively screw us.

And on we go.........

[xraider]

God-Father, The depths to which Prosper is willing to sink never cease to amaze me.

I don't know if you've followed my saga about Prosper failing to file a claim in bankruptcy on one of my notes?  In case you haven't, Prosper failed to file a claim.  About a year or two after the note went into bk, and nothing had changed, I asked Prosper about the status.  The person I contacted did some research and reported that Prosper had not filed a claim, but because the bankrupt borrower was on a five-year schedule to repay 100% of her debts, Prosper would pay the lenders on that extended schedule.

Over the past 15 months, I've had to remind Prosper to pay the note at least half a dozen times.  Most recently, JUST THIS MONTH, Prosper told me it wasn't going to pay on the note any more, and I should just file a claim in bankruptcy myself.  (How can I do that, when the time to file claims was MISSED BY PROSPER years ago, and when I don't know the borrower's name?) 

It took emailing my correspondence with Chris Larsen to Prosper to get Prosper to make this month's payment, and the payment has got to be less than $300/month.  I've asked Prosper time and again just to pay this off, but I guess they're hurting enough that they're hoping they won't need to do so. So, I'll continue to watch for my payment on this loan every month, and will continue to email Prosper when it misses payments in the future.

So yes, I unfortunately have to continue dealing with Prosper, and unfortunately its business ethics have not improved one bit.

[Urbi_et_Orbi]

Nominate for lobby.

[God-Father]

Second

[Mark12547]

Any objections to moving this thread to the Lobby?

[xraider]

Ok with me. 

[God-Father]

Nope

[havastat]

Unfortunately we're getting this sort of fine print from Lending Club, which in the past has run a tighter ship.

[msava]

God-Father, The depths to which Prosper is willing to sink never cease to amaze me.

I don't know if you've followed my saga about Prosper failing to file a claim in bankruptcy on one of my notes?  In case you haven't, Prosper failed to file a claim.  About a year or two after the note went into bk, and nothing had changed, I asked Prosper about the status.  The person I contacted did some research and reported that Prosper had not filed a claim, but because the bankrupt borrower was on a five-year schedule to repay 100% of her debts, Prosper would pay the lenders on that extended schedule.

Over the past 15 months, I've had to remind Prosper to pay the note at least half a dozen times.  Most recently, JUST THIS MONTH, Prosper told me it wasn't going to pay on the note any more, and I should just file a claim in bankruptcy myself.  (How can I do that, when the time to file claims was MISSED BY PROSPER years ago, and when I don't know the borrower's name?) 

It took emailing my correspondence with Chris Larsen to Prosper to get Prosper to make this month's payment, and the payment has got to be less than $300/month.  I've asked Prosper time and again just to pay this off, but I guess they're hurting enough that they're hoping they won't need to do so. So, I'll continue to watch for my payment on this loan every month, and will continue to email Prosper when it misses payments in the future.

So yes, I unfortunately have to continue dealing with Prosper, and unfortunately its business ethics have not improved one bit.

Being a lawyer you are able correspond with Prosper in a way, most of us older lender cant, and still you're stiffed.

The class-action is becoming so costly, only the lawyers and a few heavy players will ever see a penny, IMHO.