Which States are Open to Lending Club and Prosper Investors

This is a question I see a lot. Currently, there are many states that are simply not open to people who want to invest in peer to peer lending. Is your state one of them? Both Lending Club and Prosper have a different set of investor eligible states, which I will detail here.

Lending Club

Lending Club allows direct investment from 28 states: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kentucky, Louisiana, Maine, Minnesota, Missouri, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming.

If you don’t live in these states you may still be allowed to invest in Lending Club, although not directly. But you can open an account with Foliofn, their trading platform. Here you can buy notes held by other investors. There are many states available for investing via the trading platform that are not available for direct investment: Alabama, Alaska, Arizona, Arkansas, Indiana, Iowa, Massachusetts, Michigan, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Oklahoma, Pennsylvania, Tennessee, and Texas.

To make it easier for you I have displayed everything on a map below.

States Open to Lending Club Investors

Prosper

Prosper handles things a little differently. Basically, if you can’t invest in Prosper directly then you cannot invest at all. There is no additional list of states that are available to investors on the trading platform.

Prosper allows investors in the following 29 states: Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin and Wyoming.

States open to investors in Prosper

Both companies are working on adding new states so this list could change at any time. For an up to date list and to look at additional investor requirements you should check the investor help pages at Lending Club and Prosper.

Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech.

LendIt Fintech conducts three conferences a year for the leading fintech markets of the USA, Europe, and Latin America. LendIt also provides cutting-edge content all year long via audio, video, and written channels.

Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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Matthew Paulson (P2P Lending News)
May. 11, 2011 9:30 pm

Great maps. I’m glad I live in South Dakota – We can invest in about anything without the state getting involved 🙂

Dan B
Dan B
May. 11, 2011 10:58 pm

So what is the rationale behind certain states not allowing p2p investments & yet allowing the purchase of these same investments on the secondary market?

Adam M
Adam M
May. 12, 2011 12:32 pm

: Any chance of getting Rob, or another one of your contacts at Lending Club to make a statement or two regarding the current status and plans for expansion into the remaining states? For example, Maryland, Ohio, Kansas, Vermont and Oregon are all completely out of the loop; what might the state’s reasons be?

With Lending Club, and Prosper for that matter, well past its quiet period (a few years), what is the current hold-up with something approved and “regulated” by the SEC?

Additionally, with the similar business models, why does Oregon and Washington D.C. allow Prosper, yet not Lending Club? For the flip side, South Dakota doesn’t allow Prosper, but allows Lending Club?

At the end of the day, there hasn’t really been significant progress in this arena, and for a potentially transient person, their “eligibility” could be hindered quite severely, thus limiting Lending Club and Prosper’s retention of some quality investors or attraction of new, well-funded investors. I myself have encountered issues with this (moved from Virginia to Pennsylvania to Maryland). Obviously, this has a limiting factor in my desire to continue to invest. Simple loophole is to show your address in another state (which I do, at a family member’s home), but that seems to be a bit much for someone to invest in a legitimate and regulated environment.

Side note: Louisiana and Kentucky appear to be miscolored on the LC map.

William G
William G
Mar. 2, 2014 11:37 am
Reply to  Adam M

Hi Adam,

Have you had any issues with listing your address at a family members house? I am considering doing the same thing. Also Peter, if you have any thoughts, please share.

Thanks

Scott
Scott
Feb. 20, 2020 12:04 am
Reply to  Peter Renton

I asked them what law restricts this, so I can look it up and talk to someone and they cant answer it. Luckily I use my business as my dads address and when I travel for work (which is how they locked me out) I use a VPN now. yeh its weird how people can do loans for outrageous percents but if you wanna invest, no, “youre too stupid”… it might be an issue of a select few larger investors making sure to keep control of the market? Maybe….

Dan B
Dan B
May. 12, 2011 3:35 pm

@Peter…………Yeah let’s get Rob G. back here. I promise that I’ll lob him some real softball questions that even Larry King will be proud of.

Brian B
Brian B
May. 12, 2011 4:49 pm

Another weird decision by states is that some, for example North Carolina, allow borrowers to receive loans through Lending Club, but they do not allow their residents to be investors.

This seems completely inconsistent. If it’s a legitimate business, both borrowing and investing should be allowed. If they don’t like it, they should both be disallowed.

Why would a state want to send all their money across state lines to give other states the profits? (or do they expect their own residents to default on the loans and only screw over the other states, so they are protecting their own investors from their own untrustworthy borrowers?)

Mike
Mike
May. 12, 2011 5:48 pm

Can residents of states limited to the FolioFN platform ask (or more accurately, select) questions of borrowers on the loan platform? If you move into a state that allows no further investing in loans, do you have to sell your current holdings? I don’t think LC or Prosper really follow up on the residency issue, just like they really don’t confirm your net worth. Kind of like their version of don’t ask, don’t tell.

Chris A
Chris A
May. 12, 2011 6:18 pm

I live in Oklahoma, and opened a Lending Club account before the quiet period. I’ve been investing in new loans despite my state not allowing it. Am I special, or does Lending Club actually restrict investor accounts? And what are the consequences, if any, of me continuing to invest in new loans?

Dan B
Dan B
May. 13, 2011 5:52 am

By making the investment illegal but the investment in the secondary market legal, those states have actually increased the risk level for their residents who choose to invest. On top of everything else these investors that they are “protecting” make investment decisions with less information than the original purchasers & with zero borrower interaction.

I just did a count earlier tonight & though sales have slowed sharply in the last month, I’ve sold over 330 current notes at a 3% premium in the last 6 months (2% net to me after Folio fee). All of these notes had a declining or neutral credit score history. 6 months ago I’d never have imagined that I could do these types of numbers.

I know that some people will disagree with what I’m saying & claim that payment history matter & credit score history matter. They do, but I doubt that they make up for the fact that all the other information that is presented is now months, maybe even years out of date. And on top of that it seems pretty obvious that many of these “restricted investors” are paying a premium to buy the notes as well.

Brian B.
Brian B.
May. 13, 2011 8:28 am

Peter – ‘wanting to protect their citizens from investments they consider too high risk’

But there are already exclusionary elements that protect investors. Only financially qualified investors are allowed to participate. Something like 250k network required to invest, and you are not allowed to invest more than 10% of your networth. So the single mom schoolteacher on foodstamps isn’t allowed to invest her next paycheck into this system. Only middle-high income families will meet these requirements, and even still, they are not permitted to invest juniors entire college fund, only a very small fraction, a fraction so small that it would be overshadowed by the stock markets routinely +-10% bounces every year anyway.

How is that not sufficient protection? No low income families can try to make a quick buck. And no high income families are allowed to bet the farm. The networth limits already ensure that even if this risky investment fails, that nobody will become financially crippled through the losses.

If lawmakers think that default rates are going to be really high, that shows a lack of trust in their own constituents, or worse a dubious desire to allow their own constituents to scam other states investors. Since SEC has approved this business model, they have already suggested that there is reason to believe that excessive default is not an inevitable conclusion. So, if lawmakers trust that most borrowers are good apples with a few bad ones mixed in, its irresponsible and inconsistent to not allow a financially stable household to invest in p2p lending as no more than 10% of a diversified portfolio.

Brian B
Brian B
May. 13, 2011 8:41 am

My main question I forgot to ask earlier – do we know where the holdup is? Are there laws that need to be passed through state legislatures? Is there just a guy with a rubber stamp at the Secretary of State office that needs to say yes?

-If it’s a law, lets find out the bill number so local voters can call their state congressmen and senators and push to get it passed.
-If it’s sitting on someone’s desk in the Secretary of State office, let’s find out who’s desk. Again, voters can call their elected official and ask for status updates and recommend a speedy push.

Assumption: Permission to invest from these states is held up by 1 or more state employees/committees/laws. (the alternative is that Lending Club/Prosper are the holdup, i find this to be unlikely)
Fact: Somewhere along the line, every state employee works for someone who is elected to their position, every policy can be overturned by someone, and every law can be changed.
Solution:
-Step 1: Find out exactly what person or committee is holding up approval.
-Step 2: Find out who his boss is, and that person’s boss, etc until you reach the person who is voted into their office.
-Step 3: p2p sites provide us with talking points, specifics about bill numbers, application numbers, dates submitted, etc.
-Step 4: Local voters call their locally elected officials and make their opinions heard in a concise, logical, intelligent manner.

Wasn’t the blackout period only a few months long, and they came out with half the country’s permission. But in the years since, they have gotten permission from <5 new states. I see no reason to assume that the sites will be able to lobby for access to the remaining states on their own. If they could, it would have happened by now. State officials hearing support from local voters goes a long way as compared to requests from out of state corporations.

Dan B
Dan B
May. 13, 2011 3:11 pm

@Peter……………The LC attorney either doesn’t know the answer or doesn’t know how to explain it. If what stands between allowing/not allowing restricted states residents to use the secondary market is as he explains it,……………..then why does Prosper, who uses the same FolioFN outfit, not allow users from any of the restricted states residents to buy/sell in the secondary market? After all, LC & Prosper share many of the same restricted states, don’t they?

This answer that was given to you is a perfect example of the low intelligence/low quality people that I was referring to when I made the comments earlier this week about the lack of quality people in p2p.

Dan B
Dan B
May. 13, 2011 6:37 pm

Well if all they need is somebody who says nothing & can talk BS, then they should hire me as I can do that effortlessly………….& likely cheaper too.

Dan B
Dan B
May. 14, 2011 11:10 am

@Peter………Well if you see me go through a Arianna Huffington like transformation here you’ll know that I’ve followed up on that. (i.e. her late 1990’s transformation, not the recent one)

Charlie
Charlie
Nov. 17, 2011 5:28 pm

Found this via google. Was there ever a follow up article on this? Thanks in advance.

Allen Montgomery
Allen Montgomery
Jan. 22, 2012 3:43 pm

Last time I checked, these things were a hell of a lot safer than lottery tickets, which my state shamelessly promotes. I am tempted to leave the state of Indiana, just to escape this idiotic paternalism.

Paul
Paul
Apr. 9, 2012 7:15 pm

Is there an option for Iowa residents to apply for a peer to peer loan anywhere?

Starting a new business and need some capital to get going.

“If I say it, will it come?

virginie
Feb. 6, 2014 4:55 am

Hello Peter,
Can non-US investors invest on Prosper or Lending Club ?

Best regards

Virginie

RobertF
RobertF
May. 9, 2014 8:49 am

Why does California limit the amount notes purchased to 10% of net worth? Also if ones’ gross annual income is less than $85,000 you are limited to $2,500 in purchased notes. I’m not very knowledgeable in these kind of things but I suspect California politicians are influenced by the banking industry. What gives?

Daniel Subman
Jul. 6, 2014 7:30 pm

According to Lending Club, Missouri does not allow peer to peer lending but according to the above map, it does!

Aaron
Aaron
Jan. 19, 2016 3:27 pm

I currently live in Virgnia. I am in a career that can require me to move from time to time. If I were to move to a state that does not allow P2P lending (Texas, for example), would I still be able to use my account that was created in a participating state?