One of the problems with peer-to-peer lending and Lending Club is that they are governed by state laws so the way in which they operate will depend on where you reside. Lending Club does not operate in all 50 states but instead only in 28 states. Many people are interested in becoming a part of Lending Club Texas but unfortunately for the time being that is just not possible. There are a couple of work arounds though to still allow Texas residents to invest, so let’s take a look at the reasons why Texans are unable to invest and what they can do to get around the system.
In Texas, much like the way it is in Ohio, the Securities Act views the borrower as the actual issuer of all notes – not Lending Club. In Texas, the state governments wants to be assured that the borrower has the ability to repay the loan as well as being able to verify all of the financial information of each buyer individually. This is not really a feasible solution as there are just not enough resources to verify all of that financial information. The problem lies in the state seeing the borrower as the issuer. If the state saw Lending Club as the issuer then it would be very easy to verify just one company’s financial information.
There is a theoretical workaround though as Texas state government said that if Lending Club could issue and guarantee the payment of the loan then they would approve Lending Club’s application to the Securities Regulator. This would be an impossible claim for Lending Club to make, so that will probably never end up happening.
For Texas residents that are still interested in investing they do have an option. The secondary market is still an available solution to residents of Texas despite the fact that they can’t participate directly. You will need to open an account with Foliofn, the trading platform for Lending Club. Then you can buy notes that are held by other investors. This is allowed in Texas because the main problem is about the issuing of loans. Once the loan has already been issued then there are no laws to stop you from buying and selling them as you please.
While Lending Club in Texas may not be directly available, there are still some options out there for you so you don’t have to feel left out.