Apr 18 2008

Peer-to-Peer Lending Update and Regulatory Considerations

Report  
Number  
154

This report provides an updated look at the budding peer-to-peer lending industry and its impact on financial services.

Andrew Verstein
Yale Law School
Report Number 154

Executive Summary

In 2006, the Filene Research Institute released a special report entitled “Peer-to-Peer Lending: Back to the Future.” This brief report introduced an emerging trend whereby individuals lend money to other individuals outside the traditional banking system. We urged credit unions to familiarize themselves with this disruptive innovation, and to experiment where possible with the concept of peer-to-peer (P2P) lending.

Since 2006, a variety of exciting developments have occurred in the P2P marketplace, including the U.S. launch of Zopa (a P2P lender) in partnership with six U.S. credit unions, and Virgin’s purchase of CircleLending. Both developments prove that P2P lending is here to stay. As the excitement (and interest) surrounding this trend grew, Filene Research Institute wanted to provide a more in-depth and updated view on P2P lending.

What is the research about?

In this report, Andrew Verstein, a juris doctorate (JD) candidate at Yale Law School explores the P2P lending market’s major players and describes the transactions offered by the industry’s current and future leaders. Next, Verstein explains the economic and consumer value of P2P lending services. Finally, he describes the legal issues with which a P2P lending service must contend.

    What are the Credit Union Implications?

    As we stated in our original report on this topic, credit unions can view P2P lending as either a threat or an opportunity. The data and ideas presented in this report will help you determine which view your credit union should take. Our hope is that at the very least, it will make you aware of an emerging trend that has the potential to impact the way you and your members deliver financial services.