SacBee article about Peer to Peer Lending

I was interviewed last week on the subject of peer to peer lending. My comments aren't quite in context, but this is a nice intro/overview to peer to peer lending in the Sacramento Bee.

The points that I shared with the reporter are:
1. Lenders will have to see good management of receivables by their selected P2P companies to make P2P lending a long term "sticky" trend.
2. Borrowers will have to get a better interest rate than they can with traditional banking. If credit markets loosen up again when the economy calms down, I'd like to see P2P lending hold on, but if interest rates go down for borrowers, they're not getting better for lenders--how will P2P companies respond to hold on to lenders? My hope is that they'll lower their administrative fees and they'll be able to based on economies of scale. That said, I don't know how much administrative cost there is to running a P2P company, and I don't have a sense for how much the industry can benefit from scale.

I think Lending Club's IRA product is a very good way of hanging on to lenders longer-term.

This all presumes of course (my presumption) that credit will become less expensive in the consumer market. Consumer debt interest rates and credit availability cycle up and down, and my assumption here is that the current market will eventually relax.

Jessica Ward is a freelance writer and blogger from Seattle. She also blogs at www.pennywisefamily.blogspot.com and is guest bloging at www.debtkid.com.

Loanio Files S-1 With The SEC

Loanio.com of Nanuet, NY, has filed an S-1 with the Securities Exchange Commission as of June 22, 2009.

This is the first major step in resuming US peer-to-peer loan operations. Loanio opened in October of 2008, but put loans on hold shortly thereafter to come into compliance with the securities regulation.

The S-1 is filed, but not yet effective, so Loanio's P2P platform isn't available yet to borrowers or lenders. We'll keep you updated as we hear more about a launch date, or specific information about the states that Loanio will be approved to operate in.

Jessica Ward is a freelance writer based in the Seattle area. She also writes about adoption at http://www.jessc098.blogspot.com/. You can follow her on twitter at www.twitter.com/jessc098

Kiva.org Lends in America: How Do They Do It?

I was heartened to see Kiva.org’s new domestic program. The loans are slightly larger than most of their overseas lending opportunities, but still relatively small for traditional business lending. However, I couldn't help but wonder how they're able to do this when so many other P2P platforms have failed to lend domestically due to heavy SEC regulation.

What I’ve learned is that Kiva loans don’t pay interest to lenders, and aren’t securities, so as such, they don’t fall under the SEC umbrella. Additionally, as a micro lender, Kiva is a 501(c)3 nonprofit organization, the government with oversight authority is the Internal Revenue Service (IRS).

This means that interest-bearing Kiva accounts are still likely to be a long way off (if ever), but that the program should be sticking around for a while for borrowers, which is great news for micro lending enthusiasts.

The initial domestic roll-out happened in early June and included 45 American entrepreneurs seeking loans from $1,025 to $10,000.

Kiva’s field partners are Accion USA and OpportunityFund.org.

According to an online article in OnPhilanthropy.com, Kiva has provided $76 Million in loans to help small businesses worldwide

Jessica Ward is a freelance writer based in the Seattle area. She writes on peer to peer finance, family and more. Her freelance portfolio is available online at www.jessicaward.me.

Dating Web Site Seeks P2P Loans Via Virgin Money USA

New York-based dating Web site GetSteady.com is seeking peer to peer loans for growth of its US business operations.

I interviewed its’ founder and President Michael Zuyus via email this week to learn more about the company’s plans for growth and how they are applying peer-to-peer lending to their business plan.

GetSteady.com is a dating web site which caters to the gay, lesbian, bisexual, and transsexual (GLBT) community. The company is seeking loan proposals via Virgin Money’s “Business Builder” product, which is a promissory-note negotiated between the lender and the borrower, and then enforced and managed by Virgin Money USA. GetSteady.com promises interest rates better than traditional investments including savings accounts, CDs and blue-chip stocks.

Mr. Zuyus prefers not to disclose the amount of capital he hopes that this effort will raise, but is seeking minimum loans of $1,000. He has also declined to comment as to if anyone has elected to fund one of these loans.

The company makes an interesting differentiation between peer-to-peer loans as investments. I asked Mr. Zuyus if investors are guaranteed in any way to receive repayment, and he replied “I would like to stress that we do not have investors. If a bank granted my company a loan, they would not be an investor, it’s simply a business loan. In this case, it is a peer business loan.” I found this an interesting re-branding of peer-to-peer loans after hearing the term “investment” thrown around so frequently in reference to peer lending. (I can’t help but wonder if we’ll see this nomenclature adopted more broadly across the industry as a result of regulation?)

I questioned Zuyus about the decision to use peer-to-peer loans in lieu of traditional banking and he cited the recent decline of credibility in the banking community, later saying “Peer to peer lending has become a trusted and viable alternative [to traditional lending], furthering economic growth until banks begin to lend more freely to small business again."

A company press release from June 8, 2009 quotes Zuyus as saying “Using these funds, we aim to expand our marketing and advertising efforts responsibly, quickly capitalizing on the current online dating boom.”

Getsteady.com was founded in 2009 to provide low-cost connections within the GLBT community. The company focuses on serious-minded friendships and relationships based on trust. Members must be verified including their profile photos (Zuyus cites ongoing troubles with users on dating sites supplying false photos).

Jessica Ward is a freelance writer based in the Seattle area. She writes on peer to peer finance, family and more. She also blogs at www.pennywisefamily.blogspot.com.

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.

Zensah fuels growth with Lending Club loan

PLR has decided to profile Peer to Peer users on a regular basis. Our first such profile is the athletic-wear company Zensah, which was founded in January 2004 in Tel-Aviv, Israel.

Zensah is a privately held company which develops high-end performance clothing for runners, cyclists, tri-athletes and other serious athletes. They count among their customers MLB and NBA professionals. Their designs feature seamless technology. The name itself comes from the Italian word sensa meaning “without seams” to symbolize athletes without limits.

Zensah took out a loan for $12,250 at 10.59% with Lending Club to fund some growth. They were able to repay the money within six months, despite having been turned down for a conventional business loan by banks.

Ryan Oliver from Zensah says they learned about P2P lending from reading an article about the process, and found Lending Club very easy, and even says his loan was funded within a week. At the time of their Lending Club loan, they had also considered using Prosper.com, but he described the process as “too bureaucratic” and did not proceed with Prosper. He also says he would definitely recommend P2P borrowing for other companies looking to grow—he even says he wishes larger business loans were available—in the $100-$250,000 range.

I asked Ryan if P2P borrowing was part of a larger social media plan, and he replied that it isn’t now, but if they had a dedicated social media plan, it could be a component.

Jessica Ward is a freelance writer based in the Seattle area. Her work can also be seen at www.jessicaward.me

Lending Club: How do you compare?

Back in May, Lending Club announced a tool in development which would allow lenders to view their performance and compare it to other members. Over the weekend they rolled the feature out for all members. Here are some screen shots:


The Net Annualized Return measure used by Lending Club is calculated daily as a weighted average return on invested capital and is based on actual payments received to date.

I rank in the bottom 13% of all investors, primarily because I am very risk adverse, but my performance is still a respectable 7.39%. How do you compare?