Lending Club shuts down P2P loans

Lending Club shuts down P2P loans

US person-to-person (P2P) network Lending Club has stopped accepting new loans and lender registrations on its platform as it looks to register its business with securities authorities.

In a statement on its Web site, California-based Lending Club says it has "started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future".

Lending Club, which started off as a Facebook application, launched in the US market in 2007. Borrowers can use the service apply for personal loans and can be funded by one or many individual lenders. However it is thought that these borrowing practices could be interpreted as a sale of securities, which requires a licence from the Securities and Exchange Commission (SEC).

The company says it will "undergo a quiet period" until the registration process is completed.

"We will not accept new lender registrations or allow new commitments from existing lenders," says the statement.

The company says borrowers will still be able to apply for loans, although any new loans will be funded and held only by Lending Club.

The move by Lending Club to register its lending operations has prompted speculation that other social lending networks - such as market leader Prosper - will look to do the same.

However Prosper has reportedly stated that it P2P marketplace already complies with state and federal laws.

In a SEC filing last year, Prosper says it business is in "full compliance with all applicable federal, state and local laws, including without limitation federal and state laws governing business practices and debt collection practices".

Last month IOU Central - which was billed as Canada's first online person-to-person (P2P) lending network - was forced to halt operations less than a month after launching after regulators in Quebec ordered the unit to close down.

According to reports, officials from Quebec's financial markets authority believe that IOU Central's officers and directors should register to deal in investments and have ordered the unit to freeze its operations. The business is still operating a limited service.

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