Wall St's 'takeover' of P2P loan business sparks concerns

IT was that rare thing, scarcely seen in the financial world since the debut of the ATM or microfinancing: an innovation to help regular people. When peer-to-peer, or P2P, lending began in the middle of the last decade, it offered an easy way for people to lend money to one another over the Internet.

On sites such as Prosper Marketplace and Lending Club, prospective borrowers could list their requests, often alongside their personal stories, and people with spare cash could decide whether to finance them.

By cutting banks out of the process, borrowers typically got a lower interest rate than they would have paid on a credit card or a loan without collateral. And individual lenders earned higher returns - averaging in the high single digits - than they would have received by parking their money in a savings account or a certificate of deposit.