Prosper Filing Registration Statement; Enters Quiet Period

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. 

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account. 

If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective. 

A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we're required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective. 

We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.

The Street.com

This week I'm giving my $1,000 to a complete stranger on the Internet.

No, I'm not answering one of the few dozen Nigerian money transfer pleas I receive each week in my Spam inbox. Instead, I'm heading to a peer-to-peer (or "P2P") lending Website -- like Prosper (prosper.com), Lending Club (lendingclub.com) or Zopa (zopa.com) -- where I understand folks can earn much more on their investments than the current average of three percent that banks are offering on various savings vehicles, such as CDs and savings accounts.

P2P finance connects individual borrowers -- of variouscredit standings -- seeking everyday loans, without the pricey interest rates at traditional banks with borrowers looking to get more bang for their investible buck.

Emerging Opportunities

As the credit market continues to tighten and theInternet becomes more of an accepted platform for financial transactions, the P2P lending industry is expected to flourish over the next few years. Research firm Celent expects the overall P2P market to gallop 800% from now through 2010, reaching $5.8 billion in peer-to-peer loans.

Take established San Francisco-based Prosper.com, the country's biggest P2P lending site, which recorded $28.9 million in funded loans year-to-date (YTD). That's up slightly from $28.3 million YTD 2007. The number of loans is also higher, growing from 4,145 YTD 2007 to 4,379 YTD 2008. "With the Fed lowering rates it is now pretty straightforward [to use P2P lending]. With portfolio planning you can expect a five to 10 percent return ," says Chris Larsen, the CEO and founder of Prosper.

FDIC Coverage for account funds from WELLS FARGO Bank

It’s not surprising that lenders have recently been calling and emailing us to find out if their Prosper cash balances are FDIC insured. We want to take this opportunity to let our lenders know that their cash balances are, in fact, FDIC insured.  Prosper is not a bank, does not take deposits, and is not FDIC insured. But the funds that Prosper lenders place with Prosper to make bids on borrower listings are maintained at Wells Fargo Bank, which is FDIC insured, and those funds get pass-through FDIC coverage up to $100,000 (note that this amount may increase to $250,000 after the passage of recent legislation).

So during these challenging economic times, you can be comfortable knowing that the funds you place with Prosper have this protection.

(CBS) At a time when credit is hard to come by, more Americans are turning to a new source for money: each other. It's called person-to-person lending, and it's expected to rise 800 percent in the next couple of years. 

Justin Brown didn't think he was being extravagant when he borrowed $4,700 to buy his motorcycle. But he already owed $5,000 on his credit card and the interest was crushing, CBS News correspondent John Blackstone reports. 

He was paying 31 percent on his credit card. And now he's paying … 

"Ten percent," Brown said. 

That's not bad in these times of tighter credit. He found a place filled with lenders ready to give money at a good rate. 

"I'm not giving them money, I'm loaning them money," said lender Alex Clemens. 

But the lenders aren't bankers; they're just folks like Clemens. 

"This is a simple way for Americans to figure out, 'hey, I need a couple bucks and I'd rather pay a human being the interest'," Clemens said. 

Those with some money like Clemens, and those who need some like Brown, are now able to get together on Web sites like LendingClub.com andProsper.com. 

Since CBS News first reported on Prosper.com a year ago the credit crisis has made person-to-person lending take off, nearly tripling Prosper's customers to 630,000. 

"The people that really used to have options everywhere," said Chris Larsen, Prosper.com's CEO. "They could get a home-equity loan, they could get zero percent on their credit cards. And that's really changed." 

Those options are off the table. So we're seeing those people turn to other Americans. 

Other Americans who see person-to-person lending as a haven away from the chaos created by the experts on Wall Street. 

"It's certainly more interesting than playing the stock market," said Clemens. "And slightly less heart-wrenching as the Dow goes up and the Dow goes down and the NASDAQ goes sideways." 

And while big financial institutions have been losing billions, even going under, Clemens says so far his person to person loans have been paying off nicely. 

"This is a democratization of the finance market," Clemens said. 

What appeals to lenders and borrowers both is cutting out the big banks. You're essentially cutting out the middle man. 

"Yeah, exactly," Brown said. "And I think that's why you can get better rates. You know, there's less red tape, less bureaucracy." 

Beating the financial giants at their own game. Now that's…priceless.