CommunityLend blog

  It’s been a strange month for the financial services industry as a whole and the burgeoning industry of Social Lending is no exception.

These last few weeks have seen  a number of major announcements in the Social Lending space including the following:

- Zopa US announced that it has restructured its operation in the US in collaboration  with their credit union partners.
- LendingClub announced it is reopening its US business following its successful registration with the SEC and with the innovative addition of a secondary trading market for their loans.
- Prosper announced that it is closing to new Lenders in order to register promissory notes with the SEC similar to the process just undertaken by LendingClub.
- Zopa UK announced their best month ever, with borrower volumes more than doubling as a result of the credit crunch.

So, how does one sort out all of these announcements?  Is it, as TechCrunch and the New York Times have recently suggested, that the international “credit crunch” is adversely affecting social lending platforms in the same way as it is adversely affecting more traditional lending?  If this was true, then the Zopa UK announcement of drastically increased volume and the LendingClub announcement of asuccessful registration with  the SEC would seem quite out of place.

As insiders in the new, exciting and entirely human industry of social lending, we at CommunityLend see these announcements in a very positive light.  We see them as a sign of the maturation of this young industry.  In social lending’s early days a few years ago, most of the companies who launched their services had very little, if any, regulatory approval by the traditional financial services or securities regulators.  And yet, the core of the business is to create a new asset class for investors and a new lending channel for borrowers.  As time has progressed and these services have shown a significant and expanding audience of folks interested in using them, the appropriateness of regulation has been accepted.  We embarked on regulatory consultation early and understand the need very directly.

The result is what we are seeing with the Prosper and LendingClub announcements and, to a certain degree, what we are seeing with the Zopa US announcement. (As we interpret it,  the Zopa US model was really a compromise market entry by Zopa due specifically to their attempts to deal proactively with the relevant US regulations.)

We at CommunityLend believe that this phase of traditional regulatory compliance is a necessary evolution for the social lending industry in these troubled economic times.  We also believe that it will make us even stronger and more appealing to customers by making us more disciplined in our approach to the very serious business of managing people’s money and of helping people to get access to much needed capital at a reasonable price.

Michael