By Michael Erman
NEW YORK, May 25 (Reuters) - Investment fund Blue Elephant Capital Management plans to start buying loans again from online lender Prosper Marketplace Inc after taking a pause for several months, an executive said on Wednesday.
Blue Elephant was one of the earliest investors to securitize loans from Prosper, but stopped buying loans from the lender last year due to concerns about its underwriting criteria and how profitable the loans would be.
Prosper has since tweaked its models and started charging higher interest rates, attracting Blue Elephant's capital again, Chief Investment Officer Brian Weinstein said in an interview.
"We're going to start buying again from Prosper over the next couple of weeks," Weinstein said. "It's the tighter models and the higher rates that are really driving our decision."
Weinstein did not say how much the firm planned to invest in the loans.
The marketplace lending sector has been struggling lately, in part because of the scandal surrounding the resignation of Lending Club Corp's chief executive Renaud Laplanche.
His sudden departure after a troubled transaction has caused ripple effects in an industry that was already facing weaker investor demand and heightened regulatory scrutiny.
Prosper, the second-largest marketplace lender behind Lending Club, said late Tuesday that it plans to raise rates on its highest risk borrowers in order to improve returns for investors.
It is the second rate increase the platform has made this year, and follows a previous rate increase in August 2015.
Prosper cut more than a quarter of its staff earlier this month. The platform's loan volumes fell more than 10 percent in the first quarter of 2016 from the previous quarter.
(Reporting by Michael Erman in New York; Editing by Lauren Tara LaCapra)