Lending Club for Puerto Rico

March 23, 2016 • 👁️ Loading...

Puerto Rico needs a peer-to-peer lending platform, and there could be a great source of investment for such a platform.

Peer-to-peer lenders like Prosper and Lending Club run online platforms that can quickly and automatically match borrowers seeking a loan to investors willing to provide funds at an attractive interest rate.

In Puerto Rico, the Act 22 community is a high net worth group with incentives to generate Puerto Rico sourced interest and dividends. If you hold an Act 22 tax decree, Puerto Rico sourced interest and dividends are tax-free. However, there are not many safe Puerto Rican investments these days.

The two leading p2p lending companies, Prosper and The Lending Club, do not offer services in Puerto Rico. I did find that Peerform does lend in Puerto Rico, so at least the market is being served.

I asked support at The Lending Club if there was a way to restrict my loans to Puerto Rico, and got this response:

To answer your question though, we don't lend in PR. However, you should review the prospectus – you're earning interest from Lending Club notes, not the underlying borrower, so location would not matter.

There are probably reasons for having the payments come from LC notes, not the underlying borrower. To tap into the Act 22 funds, this issue could be solved by having the interest payments come from a Puerto Rican company.

I wonder if there is a way to test this idea by creating a Puerto Rican company that is in the business of making loans only in PR. What are the regulatory hurdles that need to be overcome? How big is the market?

I currently have funds invested with The Lending Club and I'm making over 8%. How great would it be if investors in Puerto Rico could get 8% tax-free and local borrowers could have access to funds more easily and more cheaply than other alternatives?

Here's hoping someone will create The Lending Club for Puerto Rico. I would certainly be interested in investing.