Prosper Marketplace CEO Chris Larsen told Business Week that he hopes Congress will re-regulate the peer-to-peer lending industry so that his company will be regulated by another body than the Securities and Exchange Commission.
In 2008, the Securities and Exchange commission came down on Prosper and its competitor Lending Club saying that the two companies were selling securities. Both companies now fall under the guidance of the SEC. Prosper had to shut-down for nine months and spent $4 millino to comply with SEC rules.
“This is as simple a version of banking as you can get,” said Larsen. The SEC “is putting a round peg into a square hole.”
Prosper has turned to Congress and has asked to be regulated more like a bank than an investment outfit as part of the financial regulation overhaul. The company has hired Washington lobbyist Israel Klein of the Podesta Group, who got a provision placed in the House version of financial-reform which would place the peer-to-peer lending industry under the jurisdiction of the new consumer financial protection agency. The SEC urged lawmakers to block a similar measuer in the senate.
Rep. Jackie Speier, a California Democrat who sponsored the peer-to-peer amendment, said government regulation should strive to encourage new lending models, rather than choke them off. “It is more important than ever to protect consumers and harness the power of technology in helping to shore up our recovering economy and financial industry,” she said.
