Peer-to-peer loan arranger Lending Loop, in talks with regulators, halts new loan requests

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Financial Post | Barbara Shecter | March 1, 2016

Lending Loop - A smarter way to lendLending Loop, a Canadian fintech firm that was extending U.S.-style peer-to-peer crowdsourced loans to small businesses, has stopped posting new loan requests on its website while it meets with regulators to ensure its model “complies with all applicable laws.”

A notice to that effect was posted on the company’s website Tuesday.

Notice: Loan Requests March 1, 2016

Lending Loop is currently engaged in discussions with the appropriate securities regulatory authorities to ensure that its model complies with applicable laws. As an act of good faith, we have decided to voluntarily and temporarily halt the posting of new loan requests on our website during this period. Lending Loop will, however, continue to fund loans with its own financial capital and/or the financial capital of investors of Loop Financial Inc. Additionally, Lending Loop will continue to service all funded loans during this period and all existing lending partners will be able to access their Lending Loop accounts, and withdraw available funds at no cost.

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The halt in the posting of new loan requests by the marketplace lender was characterized as “voluntary and temporary” and “an act of good faith.”

The notice did not name the regulatory authorities Lending Loop is in discussions with, but the Ontario Securities Commission issued a public notice to all marketplace lenders last year, urging them to seek legal and regulatory advice to ensure their operations were complying with securities law or relying on appropriate exemptions.

Lending Loop launched in October and the founders were coy about how the firm was able to offer U.S.-style peer-to-peer lending. The model allows anyone with $50 to pool their money in larger loans that are extended to small businesses.

Other marketplace lenders such as Borrowell and Grouplend, which is now called Grow, opted to tap only  institutional and well-heeled “accredited” investors to back loans in order to ensure they are onside with regulators.

Cato Pastoll, one of the founders of Lending Loop, said his firm’s peer-to-peer model was popular among those who don’t meet the income and asset thresholds to be considered accredited investors. After launch, Lending Loop quickly attracted interest from 450 individual lenders, with 100 becoming active participants, Pastoll told the Financial Post in November.

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