If the p2p lending service constantly monitors all running loans for their refinancing chances and then actively promotes a refinancing offer to those borrowers that have chances to lower their rates, there is a lot to gain:

1. The borrower will be pleased that the p2p lending company offers a solution that could lower his rates
2. The p2p lending company can earn origination fees again. This measure costs nearly nothing and therefore is much more cost-effective in generating revenue then market to attract new borrowers
3. P2P lending services that are short on borrowers (surplus of lender demand) can generate new loans for lenders to bid on
4. New lenders will find this loan attractive as the past performance record of this borrower shows that he pays on time.

The only disadvantaged party are lenders on the old loan. They lose the high interest rates for the remainder of the term.

Process

The important thing to do is to make the refinancing process seamless. Add all fees on top of the open balance when determining new loan sum. Don’t pay out the loan amount of the new loan to the borrower. Settle loan amount and old balance internally. Either set the loan term of the new loan to match the remaining term of the old loan or let the borrower choose a new loan term and thereby prolong the loan and further lower the payment rates.

If the new loan is not funded there is no disadvantage for the borrower – his old loan will keep running.

Is there any p2p lending company already doing this? Let me know.

The cases were handed over to the law firm Hunt & Henriques.

Since then there was none or little official communication about the progress. Relying on other sources, P2P-Banking.com reported last year that several of lawsuits in these cases were lost.

The new blog post by Prosper describes in detail which steps were undertaken and what results the measures yielded. The only step that can be counted as somewhat successful was the pre-legal phase of letters threatening lawsuits which recovered about 40,000 US$ payments. 66 accounts then went into the legal process.

Surprisingly 16 cases (24%) had to be closed because the debtor moved out of state (3) or Prosper was unable to obtain service.
On a sidenote: Interested parties have raised the questions why Prosper did not apply to the court to allow service by publication, which seem to legal and often used in California as P2P-Banking.com was told. In this case, after other measures failed the plaintiff runs an classified ad in a newspaper. It does not matter if the defendant actually sees this newspaper ad.

The remaining 50 cases further dwindled when Prosper deducted cases with bankruptcies and lowered credit scores which it deemed not worthwhile.

To sum it up: Aside from the pre-legal phase the legal test failed the expectation of Prosper and the lenders. But Doug Fuller of Prosper.com still thinks, the effort was worth it for the future

At this point, I have no expectation that this legal test is going to be the financial success that I had predicted. However, there is still value in getting the courts used to dealing with the enforcement of peer-to-peer loans.

My conclusions from this:

• It took Prosper surprisingly long to realize (or admit) that the legal test was a failure (at least from the financial standpoint)
• It is vital for P2P lending service to ensure that the validation process of the borrower’s identity and address bears quality
• Furthermore so far p2p lending services concentrate of verifying the address of the borrower at the moment of application. The results above show that equal thoughts must be given in implementing processes to keep the borrower address on file up to date during the loan term
• On the US market homeownership (even if verified), should maybe not be seen by lenders as a factor that reduces risk in an unsecured p2p lending loan

Quote from a message to users:

Changes to legislation mean that, with their current licenses, CRS can no longer purchase a debt in order to pursue it. However, they are still licensed to pursue a borrower on behalf of a third party.

What does this mean?

CRS will continue to act on your behalf when a borrower has fallen into arrears, but is not yet in default. Once a borrower does fall into default, CRS can no longer purchase the loan from you. You will therefore no longer be offered 10% of the amount outstanding for the transfer of right and title in such a loan.

What are we doing about it?

We have created a new and independent company named P2PS Limited. This business is governed independently of Zopa Limited and will be non-profit-making. For some loans that have already fallen into default that CRS have been unable to purchase and for loans falling into default hereafter, you will be asked to assign your title right and interest to P2PS Limited, instead of CRS.
You will not be offered any financial consideration for this assignment, but please see our comments below in relation to sums recovered.

As with the current process, you will still have 28 days within which you can opt out of this should you wish to pursue your part of the debt independently. Once P2PS Limited has been assigned with the right and title to a debt, it will then pursue the borrower for repayment, and a County Court Judgement or Bankruptcy where applicable. Whenever any funds are successfully reclaimed from the borrower, P2PS will apportion funds appropriately to the original lenders of that loan (excluding any that opted out) after deducting P2PS Limited’s costs.

Further discussion on this change can be found here.

Quoting today’s numbers from Kiva’s statistics page:

Will Kiva run out of goals now? Definitly not:

But we believe this is only the beginning . . .

Kiva is about dreaming big. The entrepreneurs on the website dream about big business; our Field Partners dream about financially including all of the poor; Kiva Lenders dream about ending poverty.

Kiva was a big dream before the idea of lending to someone on the other side of the world became a reality. Now we have big dreams about making Kiva the world’s hub for alleviating poverty.

This is a quote from a Kiva blogpost from October, which also give the strategic goals for the next 5 years:

1. Raise 1,000 million US$ in loans over the internet
2. Reach 2 million entrepreneurs around the world
3. Realize our own self-sufficiency in the process.

Kiva has my support. Let me know, if I can do anything to win your support for Kiva.

Furthermore it differs by the eye-catching make. But see for yourself:

Unfortunately it is available in German language only.

On this occasion, the French micro-credit organization Babyloan, is organizing an event November 7th and 8th in Paris.

Come and meet the team !

The author lives in France and reports as a guest blogger on french p2p lending trends for P2P-Banking.com.

Signup Bonus

New lenders signing up at Lending Club via this link get 25 US$ to lend.

Currently Vittana lists 11 open loan listings.

• Defaults: FSME and Health Africa ceased to exist. Ebony Foundation loans were defaulted because Ebony failed to repay
• There are payment problems with 2 providers
• Eastern Europe portfolios are hard hit by economic downturn. 3 partners are problematic
• Future plans for research project on alternative ways to display loans on the site (e.g. dashboard) – see related ‘popularity issue‘ discussion here
• MFIs are working on updates on the impacts of recent Tsunamis (Samoa, Philippines) – will come in the next weeks.
• Q&A touched transparency – one question was how much can be revealed on the homepage and how much needs to be one click away on the help page (e.g. descriptions on processes like net billing)

Adopt legislation classifying person-to-person lending as a consumer banking service, not a securities offering.

Create a Start Up Liaison at Treasury Department or within banking regulators to guide and fast-track the development of new financial products by start-up companies and organizations seeking to innovate the way consumers and businesses raise and access capital.

(Source: press release; photo credit: Vince Alongi)