Magazine article American Banker

A Timing Issue for Quiet Periods in Peer Lending

Magazine article American Banker

A Timing Issue for Quiet Periods in Peer Lending

Article excerpt

Byline: Daniel Wolfe

Observers say the U.S. peer-to-peer lending market could have killed its momentum if two of the major providers had overlapping quiet periods - as nearly happened last week.

Prosper Marketplace Inc., the leading player in the U.S. market, stopped accepting loan applications Oct. 15 as it entered a voluntary quiet period, which it said was necessary as part of its effort to develop a secondary market.

A day earlier Lending Club Corp. emerged from the same kind of hibernation and launched its own secondary market. Lending Club had been quiet for about six months, and Prosper has not said when it expects to start taking applications again.

Renaud Laplanche, Lending Club's chief executive, said in an interview last week that even though the two companies did not coordinate the timing, he was glad there was no period when they were both down. "It's probably better to have at least one site operating at full speed at any point in time," he said.

Analysts said that if both their Web sites, which facilitate loans between individuals, were unavailable, consumers might have lost interest in the concept of peer-to-peer lending.

"These are momentum-oriented offerings," and an overlapping blackout would have caused user interest to deteriorate quickly, said Edward Woods, a senior analyst for Celent, the Boston financial research arm of Marsh & McLennan Cos. "You can't have both bigs disappear. ... You definitely needed to have one of these guys running."

Prosper and Lending Club are not the only peer-to-peer lending firms, but they are generally seen as the most significant ones in the U.S. market. They facilitate unsecured loans for any purpose

Other companies offer niche services; Fynanz Inc. and GreenNote Inc. offer student loans, while Loanio Inc. …

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