The macro perspective, the personal credit, and the possible long-term development trend, the financial supervision system should be how to improve the transparency and protect the borrower has become an important issue. Although the industry participants, researchers and policymakers agree that personal borrowing needs policy specification, but in the state and government should play what role on the issue, the parties are still holding different views.

Run

Profit mechanism is connected to consumer credit demand and high return investment demand

Prosper and LendingClub are two of the biggest financing American for consumption and personal business borrowers, and provides the option of Internet platform for the lenders. A share or loans for the purchase of specific loans through the two platform, in order to obtain the repayment of principal and interest.

According to industry officials, researchers and network forum information, through individual profit personal loans lending platform, is the traditional deposit facility for low interest (for example, savings accounts, money market accounts and certificates of deposit) supplement. As of March 31, 2011, the average annual return Prosper borrowers more than 11%, LendingClub all borrowing net average annual return of more than 9%. But the same time savings, money market accounts and certificates of deposit of the annual rate of return is obviously low, not exceeding 3%.

The borrower will be personal lending as a kind of new sources of credit. The loan interest rate is lower than the traditional unsecured bank loans andCreditThe. For example, in March 31, 2011, 3 of Prosper year period loan interest rates as low as 6.3%, LendingClub for a minimum of 6.8%, average annual interest rates when credit card 14.7%. Even so, the interest rate can be as high as 35.6% and 25.4%, depending on the borrower's credit status. In contrast, credit card cash and loan interest rate of 49.9%. For 3 years the loan interest rate, average Prosper of 20.6%, while the average LendingClub is 11.4%.

The amount of funds used platform lenders usually provides relatively small, while the borrowers are usually require only a relatively small loans, use more consolidated debt, housing repair costs, family expenses etc.. Borrowers can invest more loans, can help the whole loan request, a part can only grant loans, the minimum loan can only $25. As of March 31, 2011, Prosper borrower average investment amount is $3700, LendingClub $8640. Both of the borrower's loan request amount is limited, 1000 ~ Prosper range of $25000, the LendingClub limit is $35000, and the average loan amount of Prosper is $5886, $9980 for LendingClub. As of March 31, 2011, the statistical data of Prosper shows, about 25% borrowers for the purpose of consolidated debt or credit card, 4% people use the money to repair the house, 10% of the loans for commercial purposes, 14% of the money for other purposes. While LendingClub data: 57% of borrowers to repay, 7% to repair the house, 10% to finance or consumption, 5% of commercial uses.

Mode of operation profit mechanism

The two platform lending patterns, as between borrower and lender media. Whether through the platform of borrowing or lending, everyone must be registered on the site (real name can be anonymous), and provide basic information to ensure the legitimate lending behavior. Each borrower must submit a loan application, so as to determine the degree of credit. For example, the borrower must have a platform for the minimum credit score, Prosper requires at least 640, while the LendingClub requires at least 660. The site then platform according to the credit scores, credit history and other factors (e.g., request the loan amount and the past default records) are specialized rating for each loan, credit degree so as to help borrowers identify borrowers. But, on the other hand, borrowers do not need to do credit evaluation. In addition to the basic requirements, such as identity verification, lenders have only that can meet the requirements of the state securities regulatory departments of the lowest income or assets level. In general, Prosper borrowers can borrow up to $5000000 in loans, while LendingClub borrowers can loan does not exceed 1/10 of its total net assets.

The platform will release has been approved loan request on the site, including the loan amount, interest rate level and the resultant rating, for lenders to view and select. Through the examination of the request for a loan interest rates are fixed unsecured, (Prosper for a period of 1 years, 3 years and 5 years, LendingClub for a period of 3 years and 5 years) loans, interest rate level is adjusted according to the borrower's credit rating. Borrowers can view the borrower's income level, purpose of loan and other information, can also browse a list of loans to determine investment projects, or build a portfolio according to their own preferences. Borrowers can also automatically generate portfolio the use of web tools, search by some standards, such as credit quality, the average annual interest rate, to determine the combination of project investment.

In the two platform, borrowers are not directly related to the borrower transactions, but to buy the loan notes (payment-dependent note). Once borrowers selected to investment loan project, WebBank (a America Federal Deposit Insurance Company guarantee Utah chartered Industrial Bank) will accordingly approval, investment and allocation of funds to the borrower. WebBank then the sale and distribution of these loans to the platform, in exchange for the platform through the sale of a principal. WebBank managers say, long-term ownership banks do not hold the loans, so there is no risk of default. But they also pointed out that, due to the platform the nature, the risk of default will be passed on to borrowers.

Prosper and LendingClub have a responsibility to serve the loan project, will collect loans by electronic transfer system of repayment. Deducted 1% service fee and other expenses, the platform will share of funds in its borrowers credit account. At the same time, if the loan default, the platform will take measures to make up, even have the right to the project will be entrusted to the third party institutions collecting arrears.

Non profit organizations provide a platform to support microfinance borrowers

Kiva was founded in 2005 November, is the main USA non-profit platform provides support entrepreneurial opportunities for lenders. In order to solve the problem of poverty through borrowing, Kiva to collect interest free funds from lenders, financing for the world more than 130 microfinance institutions, developing business opportunities into non interest bearing capital. Kiva in its platform inspection, rating and supervision of each small credit institutions, and provide risk rating, as a reference for investors. As of March 31, 2011, the Kiva platform has 570000 loan user funded 273000 pen microfinance in 59 countries, a total of about $200000000.

Similar to the two big profit institutions, the establishment of Kiva is to provide investors with an online account can be used to select projects and loans to borrowers. These borrowers in developing countries, are in urgent need of funds to support their small business operation. Understand according to the reporter, Kiva model of lending and profits are very different. Kiva does not directly and borrowers transaction, but gather funds from lenders there, direct transfer of funds to the microfinance institutions, which is responsible for loans to borrowers and the repayment again to Kiva, finally Kiva according to the repayment allocated shares will receive for all borrowers.

Only need to provide the name and email address and other basic information, the individual can become Kiva legitimate borrowers. Once borrowers successfully registered, automatically generate a profile page Kiva will be, but the lender can choose to remain anonymous. Through the platform, the lender can see all kinds of loan request, and can select the items of interest for investment. Borrowers can project funded by the loan, and can only invest $25. The amount of the loan request also vary, from $1200, to $10000. Relying on local Kiva microfinance institutions to review and evaluate the quality and distribution of borrowers loan amount and duration. Accordingly, the cooperation of microfinance institutions and borrowing local, collect business data, pictures, loan information, and then uploaded to the Kiva web site, so that potential investors view.

When borrowers choose to invest in the project on the platform, they do not directly contact with the borrower. Money first enrich microfinance institutions, usually before the loan information uploaded to the website, the funds have been allocated to the borrower. Although Kiva borrowers loans are interest free, but microfinance institutions may charge certain interest to borrowers, to compensate for the mechanism of operating costs. As of 2011 February, partner microfinance institutions Kiva average rate of return is 37%. Microfinance institutions to collect the borrower repayment, and keep the interest income and other income to make up for the cost of operating costs, then the principal to the Kiva, Kiva and the corresponding share of capital credit borrowers in their accounts. If a borrower fails to repay on time, microfinance institutions will remind Kiva, and lenders might be late to receive back the principal, may also receive only part of the principal, or even losses. But, according to Kiva statistics, as of March 31, 2011, the repayment of the proportion accounted for all of the loan project 99%.

According to Kiva's managers and online forum information, many lenders that they participate in Kiva lending because they want to help people in developing countries to get rid of poverty, improve the standard of living. As of March 31, 2011, the statistical data of Kiva shows, each borrower average funded 11 projects, each project is about $380. Kiva manager also said, most of the borrowers that they can spend money and help others improve life through Kiva, they will continue to receive repayment again other investment venture project.

Laws and regulations

To ensure that consumers have adequate protection

To ensure that consumers have adequate protection, is one of the main objectives of financial supervision America system. America regulators to take measures to solve the borrowers and investors face the information disadvantage, make sure that they have enough information to make the right decisions, and supervision of commercial operations and sales practices to prevent fraud and abuse.

The shared responsibility of the different state and federal regulators and many self-discipline organization. Depending on these regulators in Congress on the financial industry in different parts of the regulations. For example:

●Federal bank regulators require depository institutions (banks) to comply with the comprehensive regulation and inspection, to ensure the security and credibility. Until 2011 July, bank regulators have been consumer protection is important to people and supervisors. These regulators include: America Office of the Comptroller of the currency management of state-owned banks (OCC); the operation and management of foreign banks and the non federal system of government chartered bank American Federal Reserve (Federal Reserve); non fed system management secured government chartered bank American Federal Deposit Insurance Company (FDIC); the National Credit Union Administration Federal Credit Cooperatives (NCUA); management of the Federal Reserve, American Federal Office of thrift supervision.

●USA Federal Trade Commission (FTC) is responsible for the enforcement of federal consumer protection law. Until July 21, 2011, the Federal Trade Commission is the main mechanism of non bank financial service providers implement the federal consumer financial law. After that, the Federal Trade Commission and the Consumer Financial Protection Agency (CFPB) jointly exercise the duties. In addition, the Federal Trade Commission will investigate alleged unfair or fraudulent behavior of non bank financial service providers, and take enforcement measures. Because it is not a regulatory body, but a law enforcement agencies, so it does not regularly check the service provider, but pay attention to law enforcement.

●America securities and Exchange Commission (SEC) is the primary federal agency responsible for the protection of investors. Like American Federal Trade Commission, it is not comprehensive supervision and inspection companies issuing securities, but through the audit disclosure and provisions of anti fraud to prevent companies providing false or misleading investors information, so as to protect the specific securities investors. The North American Securities Management Association (NASAA) as the representative of the state securities regulators responsible for specific securities registration and securities fraud investigation.

Dodd Frank (Dodd-Frank Act) authorization bill to create a consumer financial protection agency, and the gradual integration of federal regulation for consumers of financial products and services. Consumer Financial Protection Agency will become the main federal regulators, banks and other financial institutions, and became one of the federal consumer protection law enforcement. In addition, a consumer financial protection agency has the following functions:

●The legislative power for consumer finance law originally belonging to several federal agencies, and undertake the legislative bill Dodd Frank new creation;

●Regulation of non deposit financial services institutions specific, including residential mortgages, student private loans, payday loans;

●Supervision of more than $10000000000 in total assets of banks and Affiliated Companies;

●Research, monitoring and reflect consumer financial products and services market development, so as to identify risks to consumers.

The Dodd Frank act also established American Financial Stability Oversight Council (FSOC), to identify the set of risk in the financial regulators, and respond to the face America threat to financial stability. Finance minister as chairman of the Financial Stability Oversight Council, whose members include a consumer financial protection agency, Federal Deposit Insurance Company and the securities and Exchange Commission leaders, and state bank regulators and state securities commission. The main duties of Financial Stability Oversight Council is:

●Monitoring of the financial services market, the potential threat identification USA financial stability;

●Information sharing, and coordinated action, state financial regulatory agencies and the federal financial regulatory agencies in the development of policies and regulations;

●Recognition may threaten financial stability USA loophole;

●To provide a forum for discussion and analysis of the emerging market development and financial regulations issued.