Prosper is setting up a private fund to purchase consumer loans arranged through its online platform. The fund won't use leverage or charge investors performance or management fees, though loans in the portfolio will be subject to Prosper's origination and servicing fees.
The pressure mounted in May with the surprise resignation of LendingClub Corp.’s founder and leader, Renaud Laplanche, amid an internal investigation into a botched loan sale. He had pioneered the industry, building his firm into the largest online marketplace for U.S. consumer loans. The scandal has complicated online lenders’ years-long effort to make their loans appeal to a broader swath of investors. They’ve packaged loans into securities with the help of Wall Street, forged partnerships with banks that want to buy the debts and created funds that purchase loans. LendingClub, for instance, has run investment vehicles for several years similar to the one being started by Prosper. And Social Finance Inc., an online lender that gained popularity by refinancing student debt, started a hedge fund this year to buy its loans and potentially those of competitors.