Lending Loop, a Canadian fintech firm which was extending U.S.-style peer-to-peer crowdsourced loans to small businesses, has stopped posting new loan requests on its website although it meets regulators to make sure its model “complies with all applicable laws.”
A notice to that effect was posted on the company’s website Tuesday.
The halt in the posting of new applications through the marketplace lender was characterized as “voluntary and temporary” and “an act of good faith.”
The notice didn’t name the regulatory authorities Lending Loop is within discussions with, however the Ontario Securities Commission issued a public notice to all marketplace lenders last year, urging these to seek legal and regulatory advice to make sure their operations were complying with securities law or counting 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 a person with $50 to pool their cash in larger loans which are extended to small businesses.
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Other marketplace lenders for example Borrowell and Grouplend, that is now called Grow, opted to tap only institutional and well-heeled “accredited” investors to back loans to guarantee they’re onside with regulators.
Cato Pastoll, one of the founders of Lending Loop, said his firm’s peer-to-peer model was popular among people who don’t satisfy 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.
In an email Tuesday, he said he was unable to comment on the regulatory discussions.
Lending Loop’s website notice indicates the upstart continues to finance new loans with capital that is separate from its lending platform although it continues talks with regulators.
“Additionally, Lending Loop continues to service all funded loans, and all sorts of existing lending partners will be able to access their Lending Loop accounts and withdraw available funds free of charge,” the notice says.
