Prosper Marketplace's $US28,500 ($39,544) loan to the husband of the couple that killed 14 people in California last week risks drawing regulatory scrutiny of the online lending industry's "fast and easy" business model.
Online lenders such as privately-held Prosper and market leader Lending Club Corp are part of a small, but fast-growing industry. They advertise quick, unsecured loans to potential borrowers, giving approval in minutes and money within days.
Sources say shooter Syed Rizwan Farook took out the Prosper loan around the middle of last month.
Authorities have said Farook, 28, and wife Tashfeen Malik, 29, were radicalised Muslims and the FBI is treating the December 2 attack as an "act of terrorism".
"This is certainly not a good storyline to be associated with," said Morningstar analyst Timothy Puls.
"There's not a whole lot of regulation on this industry and we think that's coming."
Online lenders such as Prosper are not regulated as banks because they do not finance loans themselves. After vetting potential borrowers using proprietary algorithms they get a bank, often Utah-based WebBank, to write the loans.
Prosper and its competitors then sell the loans to investors.
Fox News first reported that Farook received a deposit of $28,500 from WebBank.com around November 18. This is the Prosper loan, according to a source familiar with the matter.
The Utah industrial bank has been central to the growth of the online lending industry, allowing the companies to "rent" its bank charter and charge interest rates above usury laws in other states such as New York.
WebBank declined to comment, citing federal and state laws protecting the privacy of customers.
Prosper and WebBank's links to Farook could put pressure on the banks that originate their loans to do more of their own due diligence because they are ultimately responsible for monitoring their customers, even if the loan is only on their books for a short period of time.
Individual banks have been fined hundreds of millions of dollars in recent years for failing to root out customers who were using money for illegal purposes.
"The law generally doesn't recognise that 'our business partner is taking care of it,'" said David Long, founder of Northern California Fraud Prevention Solutions, an anti-money laundering consultancy in San Francisco, where Prosper is based.
Online lenders are projected to originate $23 billion of consumer loans this year according to Morgan Stanley, nearly double the amount they issued last year.
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