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Roundup of Social Lending News – December 3, 2011

by Peter Renton on December 3, 2011

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

The big news this week was another record month for Lending Club and Prosper, the growth just keeps coming. And the folks at Lending Club have to be doubly pleased this week. Not only did they have a record month of over $28 million in new loans issued they were also included in Forbes magazine’s list of America’s most promising companies. You can read the press release about it below. Enjoy your weekend.

Smart Peer Lending – Lending Club Loan Recommendations

Lending Club (Press Release) - Lending Club Named to Forbes’ America’s Most Promising Companies List

Medill News Service - Legislation would ease restrictions on peer-to-peer lending

Nickel Steamroller - Lending Club Declined Applications

The White Coat Investor - Peer to Peer Lending and State Residency

Technology Spectator (Australia) - Social lending’s regulatory killswitch

P2P Lending News - Prosper and Lending Club Issued $37.4 Million in Loans in November

Prosper (Press Release) - Prosper Announces Support of UK Peer-to-Peer Finance Association

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{ 13 comments… read them below or add one }

Dan B December 4, 2011 at 4:12 am

Meanwhile in the more mainstream press………there is a short write up on Prosper in the Jan 2012 Kiplingers magazine. I didn’t really read it, but it’s within a small article that’s titled “Be the Banker” or something to that effect. Just FYI.

PS……..Glenn from Prosper. Don’t say I never did anything for you guys. :)


Peter Renton December 4, 2011 at 1:32 pm

@Dan, Thanks for sharing, I am sure Glenn will be impressed. It’s funny, I get Kiplingers but I hadn’t opened the January issue yet.

Here is a link to the short piece that Dan was referring to:


312-lender December 4, 2011 at 5:47 pm

Lets assume prosper is going to survive financially for a moment. My question is: how will prosper cater to the demands of, and try to find common ground between, large institutional investors and small individual investors. On the one hand, the large investors arguably played a major role is keeping Prosper afloat, while, on the other hand, small individual investors were the backbone of p2p in its early years.

A cynical, or perhaps common sense, approach, would be to argue that since Prosper doesn’t need the support of small individual lenders anymore to survive, it will easily fold to the demands of large institutional investors. This could be especially true if some large investors sit on Prosper’s BOD.

Perhaps a more important question is: how different are the interests of large investors to small investors. At the end of the day, aren’t we all just looking to make a good return?


Peter Renton December 5, 2011 at 7:22 am

@312-lender, Well I think you answered your own question there. The interests of large investors and small investors are aligned. We both want large numbers of highly qualified borrowers on the platform. I think Prosper and Lending Club are both doing a decent job right now of catering to both kinds of investors. Who knows what direction this will take in the future but right now I don’t see much that cause concern.


Louis Lamoureux December 5, 2011 at 10:10 am

Peter, didn’t I read on one of your earlier posts that the big investors on Prosper were gobbling up loans in huge chunks, sometimes taking the whole loan for themselves? What happens when a large investor, with lots of resources (meaning the money to buy a statistics guy and analysis software) comes in and grabs all the really good loans and leaves the lesser quality loans to the small investors? I think that might have been the question 312-Lender was asking.
I think with Lending Club, you have a much bigger inventory, so it would be hard for a large investor to “corner the market” so to speak, but Prosper is a much smaller playground. Didn’t Worth-Blanket2 fund almost 30% of Prosper’s loans last month.


Peter Renton December 5, 2011 at 10:25 am

@Lou, Good questions. Yes, I did a post a couple of months ago that mentioned institutional investors on Prosper were gobbling up a large chunk of some loans. But that was before Automatic Quick Invest. This levels the playing field. As soon as new loans hit the platform the system runs every investor’s Quick Invest searches with institutional and individual investors being treated equally. So now, the big guys can’t gobble up the loans before investors like you and I get a turn.

And yes, for the record Worth-blanket2 was responsible for around 27% of Prosper’s loan volume last month.


Dan B December 5, 2011 at 11:45 am

Prosper in terms of the number of borrowers, is a smaller playground, but not that much smaller. What exacerbates the problem is that these fewer borrowers also borrow a lot fewer dollars on average. So one of the many challenges Prosper faces going forward is how to increase the number of borrowers quickly & increase the amount each of them borrow while keeping defaults under some liberal definition of “control”. One easy approach would be to increase the number of 5 year loans, because that would almost surely increase average loan size. Why haven’t they done it already? I could speculate, but………………….


Peter Renton December 6, 2011 at 5:30 pm

I have had many conversations with Prosper’s head of risk management and they believe that the 5-year loans are inherently more risky. So they don’t want to issue more than just a small portion of loans for that term. One thing I suggested was increasing the limits a little on some other of the higher loan grades. He said that is a possibility one day but right now they are happy with their formula.

As you point out this does mean they need to originate a lot more loans than Lending Club for the same dollar loan volume.


Charlie h December 7, 2011 at 10:32 am

Well it is not like the prosper loans are micro loans or anything, they are significantly smaller then the average LC loan size.


Dan B December 7, 2011 at 11:59 am

Charlie…………..No one is suggesting they are micro loans. But my point is that this entire conversation about institutional appetites for loans etc etc. is occurring not so much because Prosper is a smaller playground……………but because the individual loans on average are of a smaller size. Therefore it is far more of a normal scenario for a larger or institutional investor to see a $4k or $5k loan & proceed to take a large bite out of it……………or see a new $5k loan with say $4200 left to be funded & just take it all. With the average loan size in the $6-7k range it’s hardly a stretch to suggest this scenario.

Peter…………I agree that 5 year loans are riskier, everything else being equal. But then why does it have to be equal?


Bilgefisher December 7, 2011 at 4:12 pm

We all want to see the lending platforms continually improve. I guess I’m not sure why we are worrying about the platforms performance when they have had incredible growth in the last year. Neither has shown any indication of abandoning large or small investors. Both need institutional and individual investors. They will cater to both crowds. I highly doubt either group will be tossed aside.



Peter Renton December 7, 2011 at 4:24 pm

I am with Jason on this one. I think there is no evidence to suggest that Lending Club or Prosper are favoring institutional over retail investors. With the Automated Quick Invest feature on Prosper and the commitment that Lending Club has to balancing the two (their LC Advisor fund can only invest in loans that have been on the platform for a week) there is an in-built balance between the two groups of investors today.


Dan B December 7, 2011 at 5:05 pm

Actually no one has suggested that any of this has anything to do with LC, so I don’t see why anyone would imply otherwise or even bring them into the conversation. The potential conflict in question, if there even is one, is pretty much a Prosper one.


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