Prosper

Lending Club Observations

wiseclerk 6 Comments

Recently I noticed two changes on p2p lender’s Lending Club website.

On the statistics page the link to download the loan data was removed. Before it was possible to download the complete loan data since inception of the service. Furthermore the predefined setting for the parameter “Loans issued from” is set on March 1,2008 now. That means, if you look on the page and do not change that parameter manually you see how loans performed that were issued between March 1, 2008 and today. Older loans issued between June 1, 2007 and Feb 29, 2008 are not included in the displayed results.

When I noticed that, I was reminded of what Prosper did with it’s statistics. Prosper segmented it’s loans (e.g. prosper select index) and cited only results for better performing segments in press releases. Furthermore the predefined values on Prosper’s statistic page, were set in a way that lowered the late payments and default ratios compared to an average over all Prosper loans.

But Lending Club had successfully positioned itself with transparency a core value in the past, so I asked Lending Club to comment on the reasons for the changes.

Rob Garcia, Director Product Strategy told P2P-Banking.com:

This is a temporary situation. We chose to take down the files due to privacy concerns raised by our customers. We are working to address these concerns in a way that continues to provide full transparency to platform data, while protecting the privacy of our customers….

On the setting of the parameter he stated:

The default setting for the statistics page is a year. So since we are now in March, the “From” date is defaulted to March 2008. This is to show the most relevant annualized indicators for the last year. Users can then change the “From” and “To” dates to explore the indicators for a specific time frame they may be interested in, including from inception (June 1, 2007). We did this based on numerous email inquiries from lenders asking for annual default rates instead of a general default rate since inception (so that they can compare annual defaults to annual interest rates to get actual net returns). We’re looking at tools to make that calculation easier…

Yesterday Lazy Man wrote about his observations on how Lending Club reports risk. The posted screenshots show that interpretation of the risk figures is not obvious under certain circumstances.

Which sites do offer p2p lending statistics?

wiseclerk

When analysing numbers on p2p lending activity, users can rely on independent third party sites gathering statistics for many p2p lending services. These services either obtain the raw data via an interface provided by the service or they do parse the web pages of the service to collect the data.

Most of the statistic sites offer reports and tools to analyse and graph the overall development of the marketplace as well as the status of an individual lender’s investments.

The majority of the users are lenders, as the borrower usually needs the information only once – before applying for a loan – to determine what interest rate is appropriate.

Tools for Prosper:

Tools for Lending Club:

Tools for MyC4:

Tools for Zopa UK:

Tools for Smava:

Tools for Auxmoney:

Tools for Boober NL:

Feel free to copy this list, but please do set a link citing this page as source. If you know another social lending / p2p lending stats site, please let me know.

Long term readers may remember that the Wiseclerk.com domain initially started as a report site on Prosper.com. It was in fact together with Savagenumber.com the first service of this kind.

(Photo credit: ArtemFinland)

P2P lending trends to expect in 2009

wiseclerk

As last year I’ll again attempt some predictions on what trends and developments can be expected in peer-to-peer lending 2009.

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player -  Zopa. I wonder if we’ll see the launch of a competitor there.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

First Banks experiment with own p2p lending applications (probability 50%)
While p2p lending volumes are far from being a business threat to banks – banks do watch the developments. Possibly in 2009 a bank will launch its own p2p lending application. The principal aim will not be to generate revenue, but rather to collect experience and to gauge acceptance by the bank’s customers. It will be interesting to see banks testing the water on their path to implement a p2p lending concept that supplements their core business.

Continue reading →

Review of peer to peer lending developments in 2008

wiseclerk 3 Comments

As the end of 2008 approaches here is a look back on the highlights of peer to peer lending news in 2008:

Prosper files amended S1-registration statement with the SEC

wiseclerk

Prosper.com yesterday announced it’s new registration filing.

The SEC filing follows an earlier one from last year that apparently did not succeed. Some speculation on the reasons Prosper’s first filing was ill-fated are on Fred93’s blog.

According to the filing, the class action lawsuit against Prosper reported previously on this blog, is currently the only class action lawsuit by lenders stated in the filing.

The sections on ‘Government regulation’ (page 73) and ‘Risks Relating to Compliance and Regulation’ (page 32) state numerous other legal risks the Prosper business model might face in the future.

For the year 2007 the filing reports that Prosper marketplace incurred a net loss of 11.8 million US$ – but still had more than 20 million US$ in cash or cash equivalents on Dec. 31st, 2007.

The following quote shows that in many attempted listings Prosper was not able to verify the income of the borrowers:

For example between September 1, 2007 and August 31, 2008, we verified employment and income for only approximately 22.6% of borrowers. …

Of the borrowers undergoing income verification for the period from September 1, 2007 to August 31, 2008:

+ approximately 56.7% provided us with satisfactory responses and received a borrower loan;
+ approximately 37.7% did not provide satisfactory responses, or did not respond, and their listings were cancelled; and
+ approximately 5.9% either withdrew their listings, or failed to receive bids totaling the amount of their requested loan.

On a side note: The document also discloses that Prosper bought the Prosper.com domain in 2006 for a price of 603,659 US$ (page F-14), of which 320,000 was payed in cash.

Prosper faces class action lawsuit; pays 1M US$ in fines to states

wiseclerk 6 Comments

The SEC cease and desist order against Prosper offered the legal arguments on a plate, now the first class action lawsuit filed against Prosper Marketplace Inc. uses the SEC filing as exhibit A to state it’s case. Regarding numbers and affected lenders the lawsuit by The Rosen Law Firm, New York, states

“…As of October, 2008 approx. $21.7 million of loan notes purchased by Class Action members have become worthless because the borrowers did not pay the loans to Prosper. Additional loan notes will become worthless as more loans are charged off as uncollectible.
…
there are tens of thousands, and perhaps hundreds of thousands of, loan note purchasers that are class action members…”

Prosper is required to file a written response within 30 days. The first court date is set for May 1st, 2009.

On the same issue – selling unregistered securities – but in an otherwise unrelated case Prosper agreed to pay a 1 million US$ fine in a settlement to the states to avoid individual states suing against Prosper. More information on that in the press release of the North American Securities Administrators Association (NASAA).
This is somewhat surprising to me as Prosper did obtain licenses in over 25 states and conducted lending under those, before it switched to the model using the WebBank. (see ‘Prosper riding the state-by-state roller coaster‘ and ‘Prosper goes national with 36 percent max interest rate‘). The same states that granted the licenses now wanting to sue Prosper?

Last week Zopa’s CEO Giles Andrews commented that regulation issue were the reason why Zopa did not use it’s UK model when it entered the US market.

While Lending Club has completed SEC registration and therefore is in compliance with the rules of the SEC, it might still face some risks. An article of the Oregonian on the NASAA settlement states:

“Oregon regulators also are investigating 40billion.com, owned by Atlanta-based 3 Guys in a Garage, and is currently reviewing a registration request by Sunnyvale, Calif.-based Lending Club, Anselm said.”