IOU Central Launching in USA

Note: IOU Central was not available for comment, due to the SEC’s “quiet period” though they have been contacted for comment.

Look out Lending Club, Pertuity Direct and Prosper, Canada’s IOU Central is on its way to America.

IOU Central filed a registration statement with the SEC on May 13th in which they seek to “register the offer and sale of up to $225,000,000 in aggregate principal amount of Borrower Payment Dependent Notes.” The notes are to be offered on a continuous basis following the effective date of the registration statement.

According to the company’s press release notes “will be issued in series and the proceeds from the sale of each series of notes will be designated by the registered lenders who purchased the series of notes to fund an unsecured consumer loan originated through the IOU Central loan marketplace to a registered borrower.”

IOU Central first made news by becoming the first p2p lending company in Canada in February 2008. They were only open a couple of weeks before they halted operations to 'resolve a regulatory matter'. We are still waiting for the first p2p lending company to open in Canada. Right now the most likely contender is CommunityLend.

IOU Central purchased a P2P lending startup from Denmark called Fairrates. Fairrates was built in 10 months by Arkadiusz Hajduk and opened in April 2007. They had lenders willing to invest but had a problem finding and vetting good borrowers. In Denmark there is no access to credit history and Fairrates was hit with a couple fraud cases.

After little success in Canada, IOU Central will try its luck in the United States. Prospective borrowers and lenders registering on the site receive the following email:

Thank you for your interest in IOU Central!

We are getting ready to release an online marketplace that will revolutionize peer-to-peer lending. Our platform will give borrowers the benefit of a true marketplace that allows for better interest rates. The platform will also give lenders freedom in lending with our real-time bidding system. We will keep you notified of our progress as we register with the Securities and Exchange Commission (SEC).

Thanks for being a part of the IOU Central revolution!

See you soon!
The entire IOU Central team

We love hearing from you, so if you ever have any comments,
questions, feedback, ideas, etc. please don't hesitate to email us at
feedback@ioucentral.com. We have a lot in the works, so visit ioucentral.com
often..

From company news and press releases it appears that IOU Central will have a slightly higher credit score requirement than Pertuity Direct and Lending Club—according to an article on wiseclerk.com, a Equifax score of 670 will be required. Lenders will pay a 1% servicing fee (the same as Lending Club). Borrowers will pay a 2% loan origination fee, and borrowers can request loans of up to $25,000 in two separate loans.

IOU Central is a peer-to-peer lending company. The company’s internet-based loan marketplace enables borrowers to post loan requests and purchase notes from lenders. IOU Central launched in Canada’s Peer to Peer lending space in February 2008, but stopped shortly thereafter due to regulatory conditions. IOU Central is headquartered in Kennesaw, Georgia in the United States.


Jessica Ward is a freelance writer and editor, based in Seattle, WA and writes in the personal finance and microfinance space. You can check out her other work at www.jessicaward.me.

P2P lending: 2008 in review

The P2P lending marketplace changed significantly in 2008. Of course, we said the same thing in our 2007 P2P lending review. There are also likely to be even more significant changes in 2009.

In 2006 the only real P2P lending story was Prosper. In 2007, Lending Club launched and Zopa expanded to the U.S. In 2008 the story is dominated by regulation - Lending Club obtained a green light by the SEC and most other companies shut their doors as they work towards SEC approval.

Here's a look at each individual company:

Lending Club

• First a quick review of 2007: launched inside of Facebook in May 2007 and loaned $100,000 during their first month, expanded to users outside Facebook and became the first p2p lending platform to loan to borrowers nationwide without state-by-state lending caps, hosted a popular YouTube video contest, and received $10 million in venture capital
• In April 2008 Lending Club halts lending in order to register their secondary market and lending operations with the SEC
• In October Lending Club re-opens for investors and announces a secondary market

Prosper

• First a quick review of 2007: named one of the 50 best websites of 2007 by Time, passed $100 million in loans (now at $108 million), received $20 million in venture capital for a total of $40 million raised
• April - Follows Lending Club's lead and eliminates state rate caps
• October - Immediately after Lending Club reopens, Prosper enters a quiet period and halts operations
• December -Prosper is fined $1 million. They then file a S-1 registration statement with the SEC.
  

Zopa

• First a quick review of 2007: Zopa expanded from the U.K. to the U.S.
• Named 'most threatening non-bank' in April by the 2008 Retail Banker International Forum.
• In October I had a bad experience trying to obtain a loan from Zopa. A couple days later Zopa closes operations in the US

Loanio

• Loanio launches in October with a focus on platinum verification and co-borrowers
• Follows Prosper's lead and halts operations in November in order to register promissory notes with the appropriate securities authorities.
  

Other companies to capture our attention in 2008:

• Swap-A-Debt seeks regulatory approval
• Pertuity Direct announces they will launch 'immediately after the New Year' And they do.
• Fynanz becomes the first P2P student loan marketplace. They halt p2p lending and rebrand themselves (Jan 2009) as a loan platform for credit unions.
• In Canada, IOU Central beats CommunityLend to Canada's market for a couple of weeks in February before they halt operations to 'resolve a regulatory matter'. We are still waiting for the first p2p lending company to open in Canada.
• In January 2008 Globefunder opens their doors to borrowers. Since they are only open to institutional investors we have not discussed them on the blog much since.
• Microfinance grows in the U.S. and around the world. We will cover these companies more in 2009 than we have in the past.
  

We started Prosper Lending Review in 2007. It has been fun and we have learned a lot. Our traffic has grown significantly. According to unique visitors, these are our most popular articles in 2008.

15 Most Popular Articles of 2008

A Prosper scam: The story of Jessica Wolcott - This also happens to be the most read story of 2007 as well.
PayPal competitor Revolution Money Exchange offers $25 sign-up bonus
How does Prosper compare to other investments?
Why does Revolution Money require my social security number?
Borrowing money to lend on Prosper: Wise or Foolish?
P2P lending review: Best of 2007
Prosper: A hands-on education in risk management
Eleven perspectives on P2P lending - this is my favorite article of the year
Fynanz to tackle peer to peer student loan niche
When to bid on Prosper loans
Why would a borrower use Prosper instead of a traditional bank?
P2P Lending Carnival #4
What effect would a recession have on the Prosper marketplace?
Revolution Money Exchange improves referral program
Peer to peer lending in Canada - CommunityLend

We look forward to 2009 and the many positive changes it will bring to the p2p lending marketplace. Happy New Year!

P2P lending company for sale

As reported by Rateladder, there is an unknown company that has offered their newly developed p2p lending site for sale. They posted the following announcement on p2ptechforsale.com:

We are from a company that is looking to sell all rights to our proprietary P2P lending technology. Our company has been quietly in development for the past year, though have made the very difficult decision to halt launch plans for reasons internal to our team. We hold extremely high hopes for the future of P2P lending globally, and believe very strongly in the value it provides borrowers and lenders.

We have developed a complete P2P lending web application that will provide any aspiring P2P company with technology to support rapid deployment in any geographical market. We built it from the ground up, and went through extensive internal testing and went so far as to conduct closed testing with users.

...The front end is fully branded, and a sale can be made to include branding, or packaged as a white-labeled solution. Available intellectual property includes company name, logos, taglines, and a number of top-level domain names.

Over the past few months there have been several individuals and teams that have tried to build, buy and sell p2p lending sites.

• Freelance projects - I've seen at least five different listings on freelance websites over the past couple months where people are looking for help to build a prosper clone. Here is another one posted a couple weeks ago.
• Loanio - Loanio has been in development for over a year. We first reported on them back in July 2007. Some have speculated the current site for sale is Loanio. I admit that was my first thought too. According to my recent email conversations with CEO Michael Solomon the technology is in final testing. The regulatory challenges of launching a p2p lending company are a very difficult barrier to entry (see Lending Club and IOU Central). According to p2ptechforsale, those selling the site "are not lawyers by trade." The founder and CEO of Loanio is, however, a lawyer. He has a Law Degree from Brooklyn Law School. Loanio is scheduled to present at FinovateStartup tomorrow.
• IOU Central - IOU Central launched in Canada earlier this year after purchasing a P2P lending startup from Denmark called Fairrates. Fairrates was built in 10 months by Arkadiusz Hajduk and opened in April 2007. They have since run into regulatory challenges and have halted lending.
• CommunityLend - Also from Canada, CommunityLend has built a platform, team and is reportedly ready to launch.
• SocialLendingGroup - Social Lending Group has a functioning website and tried to sell it in February but could not find someone willing to pay the $2,000 reserve.

Update: I have been contacted by Loanio, IOU Central and CommunityLend. None of these platforms are for sale.

Canada's CommunityLend nears launch

We first reported on CommunityLend back in June 2007 and then again when they raised $2.5 million in venture capital. It appeared that they would become Canada's first peer to peer loan marketplace. Then, in February, IOU Central stole the headlines when they launched. IOU Central, however, was only open a couple of weeks when they closed to resolve a regulatory matter.

It now appears that CommunityLend is very close to launch. They just opened a newly designed website today. In an email from CommunityLend they announced that their "new look is "based on [their] launch design" and they "are now getting close to launching [their] service."

In addition, they are looking for people interested in setting up a borrower community on CommunityLend. From their email announcement:

"Finally, we would like to request that anyone who is interested in setting up a borrower community on CommunityLend contact Dave Coleman, our Community Advocate. Communities can be a great way to connect with people who share similar interests and help each other out financially. Examples are ethnic groups, interest groups, or even industry groups that want to use CommunityLend as a way to help finance their clients; the list goes on."

IOU Central halts operations to 'resolve a regulatory matter'

IOU Central, the first P2P lender in Canada, has suspended all new loan requests and stopped bidding on loans in order to "resolve a regulatory matter." This is the announcement on their website:

What Functionalities Are Available?

Please note that the posting of new loan requests and the placing of new bids on loans has been temporarily stopped. Any loans which have already closed and been funded will be repaid and serviced in accordance with the borrower and lender agreements.

Why Is IOU Central Operating With Limited Functionalities?

IOU Central is now operating with limited functionality while we resolve a regulatory matter. IOU Central is acting in a very new area. We are the first in Canada, although similar models are operating under similar regulatory environments in the US and the UK. We are modeled on those innovative enterprises. We are committed to working with all the relevant regulatory bodies in order for us to continue to offer this service to borrowers and lenders. We will take all measures necessary to ensure we are working in full compliance with all regulations.

When Will IOU Central Be Fully Operational?

We will notify all our users by email when the site is fully operational. If you are not already a user, you may register with us and we will notify you by email when the site is fully operational.

CommunityLend is also expected to open in Canada soon. In comments on Prosper Lending Review, Colin Henderson, the CTO and co-founder of CommunityLend has said, "We remain on plan for our upcoming launch as we work through it with our various partners."

(Thanks for the tip Wiseclerk)

Where did IOU Central come from?

A couple days ago we wrote about IOU Central and how they beat CommunityLend to become the first P2P lending marketplace in Canada. IOU Central seemly came out of nowhere. We wrote about CommunityLend last June and then again in December when they secured $2.5 million in funding but had not heard about IOU Central. In Netbank's post about IOU Central Jim Bruene also wrote, "We were surprised to learn today that someone beat Community Lend to market."

IOU Central was able to beat CommunityLend to market by purchasing a P2P lending startup from Denmark called Fairrates. Fairrates was built in 10 months by Arkadiusz Hajduk and opened in April 2007. They had lenders willing to invest but had a problem finding and vetting good borrowers. In Denmark there is no access to credit history and Fairrates was hit with a couple fraud cases. Hajduk is now the Product Manager for IOU Central and he spoke at a conference for entrepreneuers in Poland this week. Bartlomiej Owczarek from Virtuous cycle published his notes from Hajduk's speech reprinted here:

Presentation of Arkadiusz Hajduk about his P2P startup (IOU Central):

• The startup was initially located in Denmark
• Two guys on a sofa
• I liked the quote - “expert is a person who committed all possible mistakes in a narrow field of specialty”
• Idea was inspired by Prosper
• They didn’t bother with business plans and presentations (note: maybe not so good in the end, given later credit history problem, see below)
• Nevertheless, they got angel from early on - entrepreneur, house builder
• Features of their angel - did call from time to time, but otherwise didn’t require much reporting, in retrospect now they would prefer someone more of a “mentor” type
• They coded for 4 months without office
• Then they got office, at respectable location (good for customer trust)
• They coded another 6 months when they had office
• First version was seen and tested by some 30 people
• Operating model assumed that they don’t make credit decision or take on risk - all this is on the lender
• Highlight of the “growth” period - 90 minutes on the front page of a major business portal
• After launch, lenders turned out not a huge problem; in a first week, one person offered equivalent of ca. PLN 50k
• However, huge problem with (good) borrowers
• Also, in Denmark there is no access to credit history (only yes/no credit problems query possible)
• Side note: banks in Denmark do not care to advertise to people more than 25 years old, because no one ever changes the bank
• They had two evident fraud cases
• In the end, business model didn’t fly because of borrower problem (people took wait-and-see approach), resulting in the “decline” phase
• Luckily, they were approached by people from Canada, who had non-technical capabilities in the area but needed technology platform, and they sold out
• Angel apparently got 150% of his initial contribution
• Lessons learned: don’t hesitate to kill your own ideas

Virtuous cycle also had notes about a couple other P2P lending startups who were also at the conference - Finansowo, Monetto, and Kokos. They all hope to become the P2P lending platform for Poland. Of the three, Kokos is already active. Wiseclerk published an interview with Kokos a couple weeks ago. Finansowo will be launching within a week and Monetto is also close to launch.

IOU Central beats CommunityLend to Canada's market

IOU Central just launched as Canada's first P2P lending platform this month. Here's a short YouTube introduction from Phil Marleau, Chief Executive Officer and Founder of IOU Central.





IOU Central appears to be much like Prosper and Lending Club. A borrower can apply for a loan in the amount of $1,000 to $25,000 and for a term of up to 3 years. The lender, on the other hand, can bid on a loan in amounts ranging from $25 to $25,000. One significant difference is IOU Central allows the borrower to choose the term of the loan from 1 to 36 months. There are currently 21 borrowers looking for loans. 11 have received bids so far.

“At its core, IOU Central empowers individuals to be their own banker by giving them a platform to lend money to whomever they want. It’s no longer just your local bank that can earn interest on your deposited money!” said Marleau. “It also gives borrowers an alternative source of funds at competitive rates with no lengthy procedures to go through as are currently required at many traditional financial institutions.”

We expected CommunityLend to be Canada's first P2P lending platform. We first wrote about them last June and then again in December when they secured $2.5 million in funding. CommunityLend's website still reads, "We are moving full speed ahead to make our beta launch available for early 2008 with regulatory work, technical development, and market planning all underway."

Unlike CommunityLend, IOU Central managed to avoid any press until they launched on February 12th. Here's a few links to other articles in the media about IOU Central:

• IOU Central's media page
• Netbanker: IOU Central Launches First P2P Lending Exchange in Canada
• WiseClerk: IOU Central Launches P2P Lending in Canada
• TMCnet: Person-to-person loans finally come to Canada with the first online lending marketplace: IOU Central
• StartupNorth: IOU Central - Canada gets its first Peer to Peer Lending Company

Update (2/22): According to Financial Post, "In its first week of operation, IOU Central's Marleau said they have $10,000 deposited in investor accounts and a total of $75,000 in requests for borrowing."

P2P Lending Carnival #4

In June of last year I reviewed the top Prosper blogs. Since then, the number of bloggers covering P2P lending has increased significantly and the content covers much more than just Prosper. I'm proud to host the 4th edition of the P2P Lending Carnival. There are a huge range of articles in this edition including some heavy anti-P2P lending posts. Prosper, Lending Club, Lending Hub (Australia), Kiva, Virgin Money, and IOU Central (Canada) are covered. We have posts from borrowers as well as lenders. So enjoy...this represents the "best of" P2P lending articles over the last 2-3 weeks. Past editions have been hosted by Lazy Man and Money, Brip Blap, and Rateladder.

6 Ways To Manage The Risk of Peer to Peer Lending - This is a post by SVB on the official Prosper Blog. She wants to make the leap into P2P lending and takes a look at how to overcome her risk aversion. She has some great tips. I look forward to following her story as she starts lending.

5 Ways to Help Get a Prosper Loan Funded - Jacob from Early Retirement Extreme has lent out more than $12,000 over the past 18 months and has a few great tips for borrowers.

Is Person to Person Lending Safe? - Cash Money Life responds to reader's questions about the safety of P2P lending. "Just like any other investment," he writes, "you need to do your research to determine the level of risk you are willing to assume and the percentage of your portfolio you are willing to invest."

Peer Lending Lessons From the Dating World - In case you missed it, the CEO of Lending Club, Renaud Laplanche, was interviewed on CNBC's Power Lunch. During the interview, a comparison between P2P lending and dating was made. Money $mart Life discusses the comparison and offers some "peer lending 'dating' tips" of his own.

Get a Better Rate for Your Small Business Loan from Virgin Money - Ben takes a look at the story behind Richard Branson's purchase of Circle Lending and its rebranding into the Virgin Money empire.

Is Peer to-Peer Lending Ready for Prime Time? - Moolanomy considers P2P lending "riskier than the stock market" but thinks there is still the potential to earn money as a lender.

Prosper Taxes and Prosper Taxes: Help Me… Help You - Rateladder and Lazy Man both take a look at the confusing tax situation for the various forms of income and loss including interest, defaulted loans, late fees, referral rewards, collection fees, service fees and group leader rewards.

Prosper vs. Lending Club SmackDown–Who has the best interest rates? - The Dough Roller makes a detailed comparison of the interest rates at Prosper and Lending Club from the borrower's perspective. DR writes, "How they set interest rates is fundamentally different. Prosper follows an EBay auction style format...Lending Club sets the interest rate based on a formula...there is no bidding." DR finally concludes, "Whether you are a borrower or lender, the starting place should be to determine the interest rate you would pay or receive at Lending Club....At present, I suspect that many Prosper lenders are underestimating the risk of default, which results in better interest rates for borrowers at Prosper, and better interest rates for lenders at Lending Club." This is a well researched article and the best comparison I've seen so far. The comments are very good as well. As Don points out in the comments, Prosper uses ScoreX Plus from Experian which differs from the FICO credit score Lending Club uses so a strict comparison can't be made between the two when looking at interest rates. For more Prosper bidding tips take a look at Matt's article about when to bid on a Prosper loan.

7.2M In January Prosper Loans, But How About February? - Mike from Prosperous Land takes a quick look at recent loan stats. He is one of my favorite Prosper bloggers and I'm glad he started posting more often. For a look at two of his articles about recent Prosper drama read Prosper Approaching Nuclear War and Junk Mail Seller Revisited.

Lending Club Loan in Review - LuLu, a college student, borrows money from Lending Club and pays off her Discover Card, Citi Card and consolidates other debts.

IOU Central Launches P2P lending in Canada - WiseClerk, the best site for information about international P2P lending, takes a look at Canada's first P2P lending service.

My Opinions on P2P Lending - Ana rants against P2P lending. "I don’t think P2P lending is a good idea at all, not only for philosophical reasons but also for practical reasons," she writes. She feels these sites encourage unhealthy debt and would even avoid being a lender to avoid the ethical dilemma of "slapping those chains of debt onto another person."

Why I Started Lending Money With Prosper And Lending Club - After seeing the rates drop on his high yield ING savings account, David from My Two Dollars is turning to P2P lending.

Peer to Peer Lending: Neat Idea, Bad Investment - Adfecto thinks that bonds or the stock market are better investment options due to high default rates. He says, "I started out very excited and the more I learned, the more I ran the other way." Adfecto, I'd be interested in your comments on Matt's risk management article.

P2P Borrowers: The Greatest Tenants You Can Find - Mike compares a peer loan to a real estate investment. He writes, "I have come to think of the people I loan money to as the ideal tenants for my virtual real estate business."

Pennsylvania loans or what were early Prosper lenders thinking? - Brett takes a look at the high rate of defaults on Pennsylvania loans. We have also wondered about Pennsylvania in the past. In addition, Brett looking for some help critiquing his new Prosper portfolio.

How to Write a Good Application for a Personal Loan - The Lending Hub (not to be confused with the Lending Club) is a new P2P lending start-up in Australia. They share some tips on how to write a good loan request as a borrower. Their tips are solid and apply no matter what company you are seeking funding from or what country you are in. Stay tuned...later this week we will have a guest post from Ivan, Lending Hub's CEO.

Thanks everyone for submitting articles. If you want to be included in Lending Carnival #5 you can submit your blog post here.