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

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 ensure its model “complies with all of applicable laws.” 

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

The halt within the posting of recent applications through the marketplace lender was characterized as “voluntary and temporary” and “an act of excellent faith.”

The notice did not name the regulatory authorities Lending Loop is within discussions with, however the Ontario Securities Commission issued a public notice to all marketplace lenders this past year, urging these to seek legal and regulatory advice to make sure their operations were adhering to securities law or relying on appropriate exemptions.

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

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

Cato Pastoll, one of the founders of Lending Loop, said his firm’s peer-to-peer model was well-liked by people 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.

In an email Tuesday, he explained he was not able to comment around the regulatory discussions.

Lending Loop’s website notice indicates the upstart will continue to fund 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 at no cost,” the notice says.