P2P-Lender, Prosper Marketplace, Passes Colorado Regulatory Exam

P2P Lending Giant, Prosper.com, announced that it has cleared a significant hurdle that will allow it begin operating soon in the state of Colorado.

Prosper received the results of a regulatory exam done by Colorado’s Office of the Attorney General, the agency that manages consumer lending laws in the state. State regulators gave Prosper an “all clear” and gave Prosper a ranking of no deficiencies or exceptions.

Prosper.com and Lending Club, the two major P2P lending companies, have to work with each state’s consumer regulatory agencies to make sure that they are following state law and meeting the state’s regulatory requirements for each state. For this reason, there are still several states that each company does not do business in because they have not yet met those regulatory standards.

In some states, such as Colorado, state regulatory agencies that administer consumer lending licenses have the ability and authority to conduct audits and examinations of their licensees. These organizations study the licensees’ business practices and make sure that they are acting within the bounds of the law. Any irregularities that the agency finds will be marked as a “deficiency” and if a firm has enough deficiencies, their license could be revoked and the firm could be prevented in doing business in that state.

The exam by the Colorado AG’s office requested a list of all borrowers from the state since August of 2006 and asked for copies of 42 loan files. The examiners reviewed all of the documentation to ensure that all required disclosures were provided and that the promissory note terms were in line with Colorado’s state law. Colorado also checked to make sure that the rates being charged were within legal limits.

Prosper.com’s passing grade in its recent Colorado exam demonstrates that they are now operating well within the bounds of the law, something that many of its lenders will be happy to hear now that Prosper and Lending Club have finally cleared up its issues with the Securities and Exchange Commission.