Movie Review: Maxed Out

If you enjoy banking, finance and lending, I'm recommending that you rent the film Maxed Out.

"Maxed Out" was released in the summer of 2007 as a documentary and shows inside stories and behind the scenes tales of the credit industry, collections and bankruptcy--and left me a bigger believer in peer-to-peer lending than ever.

The film is unrated and covers some pretty heavy topics. Language includes a couple of "F-Bombs" and some discussion of suicide, but it wasn't so offensive that I felt bad about letting my tween daughter watch the film for financial literacy.

The bonus features are also very good including a 1940's educational film about credit (a fun one to watch) and an interview with Dave Ramsey.

Maxed Out also shows debt from the view of the consumer, the investor, the collector and many other steps along the way. It also shares diverse perspectives from Dave Ramsey who doesn't believe in debt, to a Real Estate agent who sees debt as a tool and a way of life to Robin Leach of Lifestyles of the Rich and Famous. I was surprised at how well the movie showed such varied perspectives without feeling fragmented or disjointed.

The subject matter movie is a downer for sure, but the movie is eye-opening in so many ways. It has a perky soundtrack and comedic interludes (not kidding). I think will motivate you to humanize your finances more. If you've seen it--please comment and let us know what you thought.

IOUSOS.Com offers to "Cure Your Debt" With Medical Providers

I've just completed a post at Pennywise Family about medical bills. While planning that project, I was contacted by IOUSOS.com about their company. You might remember that IOUSOS.com was a presenter at FINOVATE, which we followed closely here at PLR, though since the company isn't a P2P or micro finance company we didn't profile them specifically at that time.

IOUSOS is a new venture of Brian Mullally from GlobeFunder, and while licensed as a collections agency, is more like an accounts receivable interface for medical providers and patients.

For medical providers, billing can be especially collections-intensive as the invoices aren't always understood by the patient, and there is sometimes miscommunication between insurance and the patient. Additionally the sheer volume of invoices overburdens many medical providers with administrative follow up. Finally, there is a growing number of people who simply cannot pay.

A Kaiser Health tracking Poll was referenced in IOUSOS materials, shows that one in five Americans have found themselves forced into serious financial straits due to medical bills. Those materials also report that health care providers are owed an estimated $100 to $200 Billion in unpaid bills.

IOUSOS aims to help medical providers speed up their AR turnaround and help get patients a bargain.

Patients or providers can initiate contact with IOUSOS. I like to test-drive everything I write about here, so I plunked in one of my daughter's medical bills for $500 worth of blood work from earlier this month (the bill has arrived, but is not yet due). They ask for the amount owed, account numbers and name and birth date (here I couldn't tell if that meant me, my daughter or my husband who is the insurance subscriber, so I guessed). After that information is put in the system, you make an offer. I offered $300.

I'm willing to pay the entire thing, and I will, but I'm going to pay it cash in 15 days. I'd just like to see how they treat it. Currently, my hospital isn't using their system, but IOUSOS will send a message to the hospital saying I've offered that payment to be made through their Web site, and ask if they will accept that as payment in full. (Don't worry, their web site says that it doesn't get reported to credit bureaus as a "charged off bad debt" I checked!).

The hospital can counteroffer, or offer a payment plan, or decline to work with IOUSOS and send me another invoice in a month, which is their normal practice.

While just a start up, IOUSOS has already registered 17,000 patient users and has $25 Million in transactions. Sixty percent of these were referred before the collections process began.

Medical providers can turn over their invoices immediately to IOUSOS, or at an aging point at which they want to stop pursuing them for collections. Friendly letters with the user's access codes are sent to patients who owe on a bill in the system, and patients can make an offer, pay by credit card, or establish a monthly payment plan at no charge--the medical providers provide all of the fees, and the fees are success-based, so IOUSOS keeps the collections moving.

I'll update with a comment when I hear back from the hospital about my daughter's bill. This could be a really convenient way to pay medical bills, especially the big ones for those who are under-insured or have serious medical conditions. It might even be a helpful tool for cheap people like me.

Overall, it's a well-designed site, and an idea a long time coming. The interface is friendly and easy to use and doesn't have a "collections" feel at all. It has the feel of an uninterested third party. In-reality they only get paid if the patient pays up, but this may be the critical breaking point between IOUSOS and a traditional collections agency (which usually buys the bad debt and then tries to collect more than they purchased it for). IOUSOS has to treat you well in order to get paid. I like that, and I hope more companies adopt this sort of an interface!

(More on collections soon--I saw a great film on the subject. Perhaps a post for tomorrow?)

Jessica Ward is a freelance writer in the Seattle area. She writes on personal finance, business and family.

Debt sale on Prosper: 701 loans

701 defaulted loans have been sold to debt buyers for prices ranging from 2.8% to 14.5% of principal. This is the largest debt sale on Prosper with more than twice as many late loans sold as the previous largest debt sale three months ago.

Here are the results of the debt sale as reported by Prosper:

Debt Sale Weighted Average Prices

• Homeowners - 12.5%
• Non-homeowners - 7.3%-9.6% depending on credit grade (NC was 4.8%)
• Texas (all) - 3.5%

Unlike the most recent debt sale, homeownership played a significant role in the final sale price.

Prosper announces debt sale and more aggressive collections

On the official forums, Prosper has announced a debt sale and an aggressive debt collection pilot program.

Debt sale: As reported on December 22nd: "We have recently concluded bidding on a package of Prosper loans and are in the process of negotiating terms of the Purchase Sale Agreement with the winning bidder. We are looking to execute the sale as soon as possible."

Aggressive debt collection pilot: As reported on December 22nd: "Prosper is testing a collection law firm and is recording this on member accounts as 'New Agency Test'. This is a limited pilot to test the process of collecting more aggressively on Prosper Accounts. Thus far, in approximately one month, we have seen an uptick in payments and promises to pay in almost 10% of the accounts and the law firm has had direct contact with more than 1/3 of the accounts in the test. These results are encouraging. Actual suits will be initiated on the non-payers in early January. We expect an additional 5% of the accounts to come to terms once they receive service of process."

I'm surprised that Prosper didn't choose to make these announcements on their new blog. Thanks to Rateladder for notifying us of these changes on his blog (debt sale, debt collection pilot).

309 late loans sold in Prosper debt sale

Over the past week Prosper conducted their third debt sale. Prosper's policy is to default loans and sell them once they are more than 3 months late. However, in order to conduct a debt sale they need to pool a significant number of loans together to attract the needed buyers. This results in infrequent consolidated debt sales of loans that are anywhere from four to ten months late on payments.

The first debt sale was in Dec 2006 with 51 loans sold.

• 27 - 30%: Homeowners with any credit grade
• 15 - 18%: Non-homeowners with a credit grade of D and above
• 3.0 - 3.7%: Non-homeowners with a credit grade of E and HR

The second debt sale was in May 2007 with 294 loans sold.

• 16 - 19%: Homeowners
• 2.4 - 3.3%: Non-homeowner

This debt sale was the largest yet with 309 loans sold. Possibly due to the recent downturn in the housing market, homeownership was not a factor that was considered in the latest debt sale.
Here are the details from this third sale:

• Eligible loans were 122 days past due as of July 26, 2007, provided the loan was not part of any bankruptcy filing
• 309 loans were sold
• Price range: 1.8% - 26% as a percent of principal balance

Pricing on the loans is determined solely by the debt buyer and can vary from sale to sale. Several factors were used to determine pricing in this sale, with credit grade being a primary reason instead of homeownership. Here's the weighted average prices by credit grade for this debt sale:

• AA-A = 23%
• B-D = 13.3%
• E, HR, NC = 8.1%

Prosper anticipates the next debt sale will occur in December of 2007.

In the second Loan sale it seems the primary determining factor was homeownership, and some lenders had changed their bidding strategy to factor that in. One lender who goes by the name of PrintAns commented in the Prosper forums, "I hadn't viewed homeownership as good or bad when picking the listings until the last bad loan sale. When they sold bad loans more was given for loans where the borrower was a home owner. I now use home ownership part of my criteria."

In a way it seems unfair for Prosper to be changing the rules of the game, but in reality it is the debt buyers that change their criteria and the amount they are willing to pay for different types of loans based on the changing economic conditions in the marketplace. It probably doesn't help that liquidity for all types of debt purchasing has been drying up throughout the economy.

John Witchel, Prosper's CTO, commented about the debt sale process on his blog several months ago. He specifically mentions two challenges they face in these debt sales. The first is that Prosper is a new and different asset class, and the debt sales are typically geared more toward established asset classes like credit card debt. The second challenge is volume. It takes a certain volume to attract debt buyers, which is the primary reason for the infrequent timing of the debt sales.