During the month of August 2009, Lending Club.com originated a total of $4.3 million in loans and its older brother Prosper.com only originated $905 thousand.
Prosper.com pioneered the peer-to-peer lending industry in the United States in 2006, along with Zopa, which is no longer operating in the United States. It first brought forth the idea that consumers could lend each other money through the internet without the bank acting as a middle man.
For a while, Prosper.com was the behemoth in the peer-to-peer lending industry, originating up to $2 million in loans per month, but now it’s been dwarfed by a newer competitor to the market, Lending Club. Lending Club has issued over $23 million in loans during 2009 through the month of August, and Prosper.com has issued only $988 thousand.
Prosper.com was out of operation for a significant majority of the year to date due to legal issues with the SEC which were finally resolved during the month of July, but Lending Club is still originating loans at a rate 5 times that of what Prosper.com is providing.
Prosper is hoping to gain back some of its former glory and has launched a new web-based ad campaign in hopes of gaining some new customers. Prosper may have a difficult time attracting new lenders as many of them have been burned by a lack of collections efforts by Prosper in the past and have generally been disappointed with the high-levels of default that have become common on the site.
According to Prosper.com’s own statistics, its borrowers have lost $38 million in charge-offs, which represents 21% of all loans that have been originated on the site. Lending Club has had a charge off rate of approximately 7.3% since June 2007. Since January of 2009, Lending Club has revamped some of its borrower qualifications and has decrease the charge-off rate to a fraction of 1%
Prosper will need to significantly improve its default rates and develop better collections practices before many lenders give Prosper a second look. To Prosper’s credit, the loans that it has originated since it re-launched a couple of months ago have been performing much better. Since very few loans have been originated with Prosper in the last couple of months, there’s not enough data to determine if Prosper has gotten their act together.