Comments Elsewhere

Kevin,

Zopa did shut down their U.S. operations back in October, but they apparently made the decision because of economic conditions, not because of regulatory pressure. Unlike Zopa’s U.K. site, the U.S. operation wasn’t a true peer-to-peer lending site; when they paired up a saver and a borrower, what actually happened was that one of Zopa’s credit union partners issued a CD to the saver and a consumer loan to the borrower, with the interest rate on the borrower’s loan reduced proportionally to the amount of the CD. (The saver could also choose to receive a lower rate of return on the CD, in order to further reduce the interest rate on the borrower’s loan.) Since the loans were all mediated by regulated and insured securities issued by an established credit union, the credit union rather than the saver bears the risk of default, but, correspondingly, the return for the savers wasn’t much above the market average for CDs. (And would be less, if you chose to “help” your partner by lowering the interest rate on their loan.)

The case that you’re more likely thinking of is Prosper.com, which the S.E.C. did force to shut down back in October. (With several state regulatory agencies nipping at their heels.) The charge was that they were selling unregulated securities, while Prosper maintained that they were just acting as a broker between individual lenders and borrowers.

Interestingly, I was pleasantly surprised to see that they came back online just last week, and are apparently resuming at least some of their operations, even though the S.E.C. is still hanging the sword of Damocles over their heads. (Right now they are apparently using an agreement with California regulators to raise money within the state of California, and then loan it out to wherever someone is willing to borrow.)