I am doing some research on the peer-to-peer business model.
When looking at Lending Club, I was wondering what the legal framework model is for them.
To be more specific, how are they set up as a company? How do they manage the lenders' money and how do they interact for loan repayment, commissions, etc...? How is the lender's money transferred to the borrower? I guess not through the Lending Club company, for reasons of risk.
This is all answered in the prospectus.
The money not yet invested (available/committed to a note but not yet funded) is held in pooled trust account insured by FDIC.
Money funded is delivered to the borrower.
Lending Club service their notes themselves.
Read also my reviews on Lending Club.
The best description of P2P lending process I saw comes from the SEC proceedings. They are very careful about naming things that are happening in the process.
Prosper got back to business after this order, but the paper describes succinctly how Prosper worked when its notes haven't yet been registered by the SEC.
These materials contain a lot of responsible comments on how crowdfunding, including P2P lending, works.
