Alan Samuels
Chief Product Officer & EVP
People Capital
In most of today's loan comparison sites, borrowers can find lenders and loans. In the model Alan Samuels and his firm are launching, it will work both ways - with lenders able to find borrowers as well.
Has peer-to-peer lending achieved success of any significance in your opinion?
The early pioneers, like Prosper and Lending Club, have had some success. They spent a lot of money doing so, believing "If you build it they will come." They haven't been very successful in student loans. We're a second-stage company with a desire to specialize in private student loans.
What regulatory intervention has hindered the growth of peer-to-peer lending?
There has been increasing intervention by the Securities and Exchange Commission for 18 months now. They've actually closed down some lenders and delayed the issuance of licenses. Prosper was shut down for nine months. Virgin Money has abandoned its U.S. business. Loanio voluntarily shut down after a week in business awaiting licenses. Meanwhile, recent House financial reform legislation (HR 4173) will create a new Consumer Financial Protection Agency if it becomes law. That agency will oversee peer-to-peer lending.
You intend to bring a new wrinkle to the private student loan marketplace. Please explain.
First, we are soliciting lenders who are accredited investors. We'll be able to aggregate capital in the millions of dollars, rather than in small sums. Second, we have launched a fully transparent marketplace. Lenders can find the borrowers they are looking for, constructing a portfolio by criterial like GPA, SAT, college, year of study, type of degree, major, region. Third, we create a multi-dimensional marketplace where borrowers and lenders will both be present.
How will an 18-22 year-old student benefit by dealing with you?
He or she will have access to multiple lenders and multiple types of loans. He or she will be able to present himself or herself as more than a credit score. As a result, he or she will receive actual offers. And the offer process proceeds in an auction format which may sweeten the deal as it progresses. We announced the beta launch of our platform this past week.
How might that student's college benefit?
A savvy college may see an opportunity to stretch their financial aid or endowment dollars. For example, rather than discount tuition $20,000 for a desirable student, why not guarantee a loan or pay the interest on his or her behalf? We are exploring several creative ways for colleges to participate and benefit themselves and their enrolled students.
Your underwriting depends on much more than past repayment performance. Please explain.
Actually, we don't underwrite. We provide the information to lenders for their underwriting. That information contains traditional loan application data. It also includes our proprietary analysis (Human Capital Score) which projects a student's future income potential.
When do you launch, and how much business do you expect to do in your first year?
We expect to originate $15 million in student loans our first year, beginning in early 2010.