CBS features Lending Club

CBS featured a Lending Club lender and borrower in a short video this week. Iraq war veteran Rob Ramonas borrowed from Lending Club when he was unable to borrow from banks. He plans to become a lender and "pay it forward" when his loan is paid off. Lending Club lender Howard Rubinstein was intrigued by the opportunity to make more than he could through bank CD's and has invested thousands of dollars. He estimates he is making about 10%.

According to CBS news, p2p lending is on the rise and is expected to grow to $6 billion by 2010.

CBS featured p2p lending in March 2008. Unlike the feature in March, there is no mention of Prosper or Zopa which have closed due to regulatory challenges. Lending Club is registered with the SEC and is experiencing increased loan volume.

Swap-A-Debt seeks regulatory approval

Swap-A-Debt recently became the latest p2p lending company to seek approval from the SEC. They filed on December 9th - four days after Prosper. On December 22nd they updated their registration.

Here are excerpt from the filing which can be read here:

Business Overview

We are a development stage company in the peer-to-peer (P2P) lending space and we have not generated any revenues since 2005 . Our mission is to establish the most efficient Internet non-institutional lending organization with more services than present privately held competitors. Person-to-person lending or peer-to-peer lending or social lending is, in its broadest sense, the name given to a certain breed of financial transactions (primarily lending and borrowing) which occurs directly between individuals (peers) without the intermediation/participation of a traditional financial institution. The biggest enabling technology for person-to- person lending has been the Internet, where person-to-person lending appears in two primary variations: an “online marketplace” model and a “family and friends” model.

We are an on-line site for borrower’s who want to borrow $1,000 to $25,000 and for lenders who can make educated decisions on credit scores, intended use etc., to receive a higher rate of interest than available at traditional financial institutions. This is all facilitated with an Internet website and a highly efficient back office system to completely automate a process that has become ever more cumbersome at brick and mortar banks. Our fully automated Internet website which utilizes16 high level programmers is ninety five percent complete (for further details please refer to page 1 “Our Corporate Information” section). Because of the high automation of its website the personnel requirements for the company are relatively modest. Swap-a-debt will embark on a major marketing campaign to expand its client base. It is in discussions with major marketing companies to execute this program.

Benefits to Borrowers

We created our peer-to-peer lending community to specifically address the needs of small loan borrowers with few alternatives in the current financial market place. Several key advantages to borrowers participating in the company’s online lending program include the following:
  • Access to needed funds in the small loan range of $1,000 to $25,000
  • The ability to pay a comparatively favorable interest rate, typically ranging from an average of 10% to 16+%, relative to the higher rates often charged by alternative sources such as 25+% for cash advances, credit card changes and payday advances, among others
  • The ability to independently source funding from a anonymous third party lender, rather than face the potentially awkward experience of having to approach family and friends for money
  • The convenience of an online “banking-like” experience, whereby the borrower can apply for a loan online and monitor the results of their application and “lender hits” anytime, anywhere online.

Benefits to Lenders

Likewise, we believe our lending program offers several advantages and incentives for lenders to participate in our peer-to-peer community as below.
  • Compared to the estimated return typically earned on cash deposits, which can range from 2.0% and below, we offer lenders the chance to participate in an investment opportunity with average returns as high as 10% to 16+% on loans made
  • As part of the features of the company’s online lending program, lenders are able to diversify their investments in a portfolio of loans by electing to disperse their funds amongst one or several different borrowers. Additionally, a single lender may choose to provide just a fraction of a borrower’s requested amount, with the remainder coming from other participating lenders in the online community. By choosing to practice lending diversification, lenders should better be able to insulate their returns from the default of any one/few borrowers while still earnings superior returns
  • The convenience of an online “investing” experience, whereby the lender can create his/her own portfolio of borrower loans


Competitors are listed as follows:

Prosper was the first on-line peer-to-peer matchmaker which started in February 2006 and has over 600,000 users, over 10,000 deals and loans over $200 million. They were initially funded and founded by Chris Larson who founded E-Loan before Prosper.

In April 2007, Ebay moved into peer-to-peer lending space with the purchase of pre-launch, San Francisco based MicroPlace.

Circle lending started in October 2007 and sold a majority stake in the company to Richard Branson’s Virgin USA, re-branding itself as Virgin money. The site manages more than $200 million in loans between friends and family.

The Online Banking Report predicts that within five years, the total market for P2P lending in the U.S. could surpass 1,000,000 loans annually.

Resources Requirements

The resources and necessary know-how to create a successful online community for the purpose of conducting financial transactions, including the borrowing and lending of funds, are extensive. In addition to technical programming skills, the builder must have a thorough understanding of the complex laws and requirements of United States, on a state by state basis, that regulate the online banking industry and dictate its permissible transactions. Effectively, all code must be written to comply with virtually hundreds of laws at every stage and consideration of the transaction process, including the requirements of the Securities and Exchange Commission, the Department of Homeland Security and federal and state laws, among others. Failure to identify and comply with all of these laws as part of peer-to-peer provider’s business plan can delay, halt or even close down an operator’s efforts.

We have invested many thousands of man-hours, and the expertise equivalent of over one hundred years in the programming industry via 16 high level programmers to complete our fully automated Internet website. These efforts were undertaken to ensure all code comprising our platform is logically written to comply with the laws of United States. Furthermore, while we believe our website provides an easy-to-use platform for users, the actual technical framework behind our site is extremely sophisticated. We believe this level of complexity limits the ability of new players to easily enter the market.

Otherwise, we will utilize the proceeds of the investment to bring on senior management to the company. Because of the high automation of our website the personnel requirements for our company are relatively modest. We will also embark on a major marketing campaign to expand our client base. It is in discussions with major marketing companies to execute this program.

Potential Future Business

We are the only online peer-to-peer lending platform for the underserved, small loan market of sub-$25,000 that offers an array of additional credit and financing services to potential borrowers. At present, we do not use any of it own funds for making loans to would-be borrowers, rather the entire amount of funds invested in loans is sourced from other lender participants in the company’s online platform. Going forward, we may choose to pursue a “hybrid model” whereby loans to individual borrowers are sourced in part from the peer-to-peer lending community and in part directly from our own corporate funds.

We believe this hybrid model would be unique to the industry as, at present, the industry of online lending is comprised of players participating either solely as a banking organizations with the deployment of their own funds/customer deposits, or as a peer-to-peer operation where no “house” funds are involved.

Additionally, going forward, we envision extending our lending services small businesses seeking up to approximately $10 million in funding.


As of December 8 , 2008, we have two full-time employees, Marco Garibaldi and Edward DeFeudis. Marco Garibaldi is the CEO and Co-Founder, and Edward DeFeudis is the President and Co-Founder. Mr. Garibaldi and Mr. DeFeudis each spend in excess of 50 hours per working on behalf of the company. As we launch and begin to generate revenue, we will look to raise capital and hire 9 additional staff members over the next 12 months.

Read the rest of the filing here. In October Lending Club became the first p2p lending company to receive SEC approval. Prosper filed with the SEC on December 5th.

Last minute gift certificate idea and $25 for you

Merry Christmas from Prosper Lending Review and thanks for a great year! As thanks, I want to give away a $25 gift certificate to one of our readers. Read to the bottom of this post for more details. (This post has nothing to do with p2p lending, by the way.)

Like many, I often procrastinate my Christmas shopping until the last minute. If you are shopping today, skip the crowds and order a gift certificate online. Let the recipient pick what they want even if you don't know what it is.

I just purchased several gift certificates for friends and family from Yard & Pool Company. This is an online store that rocks. They have real customer service which is, quite frankly, usually lacking from online stores. I'm not getting paid to say this. I like the store and want to help promote their business. They sell quite a variety of stuff. Here's a quick overview of what you can find there:

Grilling and smoking - You can find all kinds of grills, smokers, turkey fryers, BBQ sauces and pretty much anything else you might need for grilling. Their hottest selling item is the Bradley Smoker and they offer 10% off a Bradley Smoker starter kit.
Swimming pools - For most of the U.S. it is out of season, but they have a great selection and great prices on above-ground pools and everything else you might need for your pool like pool lights, ladders and pool toys.
Spas and hot tubs - Stuff like spa chemicals, toys and accessories, fragrances and more.
Backyard and patio - My favorite category includes things like patio furniture, Gorilla playsets, patio heaters (I wish I had one of those now!), fireplaces and more.
Game, bar and rec room - Billiard tables, dart boards, ping pong tables, wall decor and everything else to deck out your basement.
Finally, you can also find Christmas stuff and some sweet end of year clearance deals.

As you guessed by now, I'm a big fan of Yard & Pool Company. And I'm a big fan of my readers. So, I am giving away a $25 gift certificate to one of you. Just leave a comment and link to the item on Yard & Pool that you would buy if I gave you a gift certificate. I have to be able to send you the gift certificate, so leave your email or send it to me at

As an extra Christmas incentive to purchase at Yard & Pool, they are also running a special where for every $25 gift certificate purchase you get $5 towards a future purchase.

So, thanks Yard & Pool for allowing me to procrastinate my Christmas shopping and get my family and friends what they want even if I don't know what it is.

Have a great Christmas and I promise I'll be back to writing about p2p lending in moments.

Pertuity Direct to launch 'immediately after the New Year'

Pertuity Direct is preparing to launch "immediately after the New Year" according to an email they just sent to interested members. They originally planned to launch a couple months ago at FINOVATE but delayed to ensure they met regulatory requirements.

Here is the full text of the email:

As we wrap up 2008, we thought it would be a good time to check in with you and share the great progress we have made as a company.

If you have been keeping tabs on the space, you know that the social lending industry has been pretty interesting over the last two to three months. The guidance that regulators have given with regard to the segment, combined with the fact that consumer loans are still hard to come by, fits perfectly with what we are bringing to market. There is a real need for alternative sources of capital for consumers, as well as new and better investing options. Social lending is a great answer to the problem - and Pertuity Direct is poised to bring it to the mass market.

We are in final preparations to launch immediately after the New Year. All of the pieces are finally in place and we are revving up for Day 1.

We're excited about 2009 and are looking forward to reaching out to you very shortly as we open for business. Until then, we wish you all much joy and happiness with friends and family this holiday season.

Lending Club opens to lenders from Virginia

Despite the regulatory troubles of all other p2p lending platforms (and perhaps partly because of it), Lending Club is doing very well. They are open for borrowers from all states and continues to add lending on a state-by-state basis. Today they added Virginia. Here is the latest map showing the states who are eligible to lend on Lending Club.

Prosper fined $1 million; faces class action lawsuit from lenders

Prosper has agreed to pay state regulators $1 million for selling unregistered securities. In October Prosper stopped making loans and last week the SEC filed cease and desist proceedings against the company. According to a press release from North American Securities Administrators Association (NASAA):

"Under terms of the settlement, San Francisco-based Prosper agreed not to offer or sell any securities in any jurisdiction until it is in compliance with that jurisdiction’s securities registration laws. Prosper also agreed to pay a fine totaling $1 million to the states. In consideration of the settlement, the states will terminate their investigation of Prosper’s activities related to the sale of securities before November 24, 2008."

Although Prosper has settled with state regulators, they still face potential legal trouble from lenders. Phillip Kim, an attorney with The Rosen Law Firm posted the following message on

"We are investigating a potential civil securities class action against Prosper on behalf of any person or entity that has lost money in offering loans using the Prosper platform since Prosper's inception in January 2006. Such persons and entities may be able to recover their losses from their loans because the loans may have resulted from unregistered securities."

Based on the legal quandary of p2p lending, Zopa and Loanio have both closed their doors. Lending Club, on the other hand, has registered with the SEC and has seen increased business due to the failure of other platforms and the current economic difficulties.