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Roundup of Social Lending News – February 4, 2012

by Peter Renton on February 4, 2012

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

Last week, I included in this column an article by This is Money about Zopa in the UK that caused a bit of an uproar there. Basically they said that Zopa’s default rate was increasing, but it was still under 1%, and so this week they published a followup article. I hope to have an in depth look at Zopa published here some time this month. Plenty of other interesting articles below including one from a blogging newcomer, Lend Facts, about defaults at Lending Club. Enjoy your weekend and go Giants.

Nickel Steamroller - Using Mint and Yodlee to Track Your P2P Investments

This is Money (UK) - We are a safe place to invest: Angry lend-to-save websites hit back over ‘rising risk’ claims

Consumerism Commentary - Top Ten Personal Finance Start-Ups

Lend Facts - Defaults and Charge-Offs

The Wall Street Journal (Money Hunt) - How to Finance Your Start-Up Without Tapping Home Equity

Money Q&A - Review Of Peer-To-Peer Lending Site – Prosper

The New York TImes - Banks Taketh, but Don’t Giveth

The Anonymous Widower (UK) – Zopa in Hard Times

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{ 14 comments… read them below or add one }

Dan B February 4, 2012 at 6:24 am

I think we can all name 2 companies that would give their right arm for a default rate of 1% like Zopa.

I understand these are tough times in Britain. Important problems like a slowing economy, rising unemployment, massive defense cuts, both Manchester teams unceremoniously eliminated from the Champions League :) ………..but clearly Zopa isn’t part of that problems list.

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Roy S February 4, 2012 at 9:04 am

Much, MUCH better article on p2p lending in the UK than the first one that seemed to attack the industry (This is Money). I’m glad they finally did their due diligence, and included some real facts!

Best parts of the article:

I think Meekings really hit the nail on the head when the article wrote, “Meekings says it should be seen as an ‘investment’ rather than a ‘savings’ option.”

“Zopa’s 0.88 per cent default rate – the amount of money being shaved off savers’ returns – is well below the default rates lenders are told to expect . . . the average assumed bad debt is a cautious 2.6 per cent – considerably higher than 0.88 per cent.” Not only is 2.6% extremely low in the first place, Zopa is overestimating the default rate threefold!

Regarding Ratesetter, “not a single saver has lost a penny since its launch.”

Is it me, or does it seem that the p2p lending industry has it a little more together than the industry in the US? Obviously, Prosper is rewarding the higher risk with higher returns than what most investors are seeing in the UK. But I just get a different impression of the industry in the UK. Maybe the grass on the other side has been spray painted or it could be the color glasses I’m wearing…?

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Hank February 4, 2012 at 9:36 am

Thanks for the mention, Peter. I really appreciate it.

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charlie H February 4, 2012 at 12:46 pm

Zopa is tiny compared to LC or even Prosper.
Bankruptcy rules are also different in the UK.

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Dan B February 4, 2012 at 6:34 pm

Well it seems like all the hyenas started gathering in the UK right after Quackle went under. Yes, unbelievable as it may sound, people of sound mind (or impressive humor) got together & came up with that name.

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Dan B February 4, 2012 at 8:58 pm

Charlie H……….You couldn’t be more wrong. Zopa has originated some 185 million pounds to date or US$292+ million, whereas Prosper just crossed US$300 million 4 days ago.

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Peter Renton February 5, 2012 at 5:10 pm

@Dan, I have no idea who thought up the name, Quakle, but it doesn’t exactly inspire confidence. They were targeting the higher risk borrowers but I have read their default rate was close to 100%.

@Roy, I agree that the UK p2p lending market seem to have a much sounder model. Zopa’s default rate is truly amazing and Ratesetter has this Provision Fund that reimburses lenders for borrower defaults. The returns are smaller but the fact that no lender has lost money is a remarkable achievement.

The regulatory environment is different in the UK – you don’t need to go through an onerous registration with a regulatory body like the SEC so it encourages more innovation than here. And with their new P2P Finance Association they are trying to raise the level of credibility for the entire industry.

@Charlie, Dan is right. The latest numbers I have from Zopa is that they are now issuing more than 10 million pounds in new loans a month which is considerably larger than Prosper – but obviously nowhere near the size of Lending Club.

@Hank, You are welcome.

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Charlie H February 6, 2012 at 2:16 pm

Exchange rate….
Forgot the pound was THAT much stronger then the $

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Larry V February 7, 2012 at 10:22 am

Can we here in the US invest (lend) on Zopa?

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Roy S February 7, 2012 at 10:54 am

@Larry, According to zopa, you have to be a UK resident. See http://us.zopa.com/

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Peter Renton February 7, 2012 at 12:55 pm

@Larry, Roy is right – Zopa is for UK residents only. They actually tried to open a US operation but closed it down due to the onerous SEC registration requirements.

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Dan B February 8, 2012 at 5:29 am

Loved the NY Times piece. Funny & a bit disconcerting at the same time…………since I also have a 20+ year old business account at Wells Fargo.

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Gary February 13, 2012 at 9:26 am

Peter – if one has a trust registered in Isle of Wight, does that establish residency and allow for investment in Zopa?

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Peter Renton February 13, 2012 at 9:35 pm

@Gary, I am not up to date on Zopa’s residency requirements – you will have to pose that question to them.

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