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P2P lending firms gain momentum in the US market

Online peer-to-peer (P2P) lending is experiencing unprecedented levels of growth in the US, as the cost of borrowing from banks and credit cards remains high and the current economic climate uncertain, according to reports.

Indeed, this alternative way of borrowing is slowly moving from individuals connecting on a private level to a more institutional type of investment, with US P2P lending firm Lending Club recently attracting $25 million worth of funding from an investor. Other firms, such as Prosper, have also attracted significant investments.

Concerns have risen, however, as to how this type of financing model should be regulated with the arrival of more and more 'institutional investors' - in the US, P2P lenders are overseen by an array of state and federal level authorities. The US Government Accountability Office, the 'congressional watchdog', released a 7 July report that pointed out that 'new regulatory challenges could emerge as the industry continues to evolve, particularly if [the] growth [is] primarily due to the increased participation of institutional versus individual investors'.

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