IN A financial landscape that ranges from the dreary to the disliked, peer-to-peer lending stands out. P2P firms, also called marketplace lenders, channel loans directly from institutional investors and individuals to borrowers, for a fee. In the process, they have lowered interest rates for many and expanded access to credit. They have been growing pell-mell (see chart), in part because their structure allows them to escape much of the regulation being heaped on banks. But recent months have shown that they are not immune to the burdens that weigh down their conventional rivals. On the face of things, it is business as usual. Lending Club, the biggest P2P firm, doubled its loan book last year. This year it expects it to grow by 72%, to over $14 billion. Yet its share price has fallen below $9, from a peak last year of $25. That is chiefly due to America’s slowing economy and rising interest rates (although the pace of increases is likely to be slow—see Free exchange). Under such circumstances, delinquent loans tend to increase. Prosper, the second-biggest P2P lender, has said that delinquencies are indeed rising on its riskier loans, although it emphasised that only a tiny subset of its portfolio had been affected and that the deterioration was trivial. Nevertheless, it has raised rates for all borrowers, especially the riskier ones, who now pay 31%. Lending Club has also raised its interest rates.

The primary motivation for these increases may have been to reflect the risk of credit losses, but it is also possible that raising funds has become tougher. Borrowing costs in other risky markets have risen sharply recently. The volume of loans that P2P firms have sold in securitised packages has halved since the end of last year.

Meanwhile, a case working its way through the courts may subject P2P loans to state usury laws, from which banks with a national charter are exempt. That would prevent the P2P firms from lending to the riskiest borrowers in much of America. In addition, the Consumer Financial Protection Bureau, a federal agency, announced this month that it would begin accepting complaints about P2P consumer lending.

Nonetheless, the problems of P2P lending may be overstated, says Ram Ahluwalia of PeerIQ, a firm that crunches data for the industry. Securitisations may have slowed but they have not stopped. Defaults remain manageable. There may be ways around an adverse ruling on usury laws. And the market that P2P lending is catering to clearly has not been saturated. As long as that remains the case, growth may slow, but it is unlikely to stop.