Interview of FANAFI Foundation | P2P Lending, Peer to Peer Lending, People to People Lending

The following is an interview of Jeff and Heather aka FANAFI Foundation. This interview was conducted Thursday February 14th 2008 in the wake of the recent drama surrounding their blog (starting point for initial back story here). These are my questions and their unedited words. (I did add a few links to their response for those that want some background reading.)

Originally, what brought you to P2P lending and Prosper in particular?

Looking for something different than stocks, bonds, etc and stumbled upon Prosper.com in a blog article (can’t recall where) about the launch. I was intrigued by the concept of lending money to a person who, like me perhaps, needed an alternate means to fund a project whether it was home improvement or life improvement (school, small biz, etc). Prosper seemed to fit a niche I had been looking for where we weren’t ‘all in’ for owning pieces of a company as with stocks or pooled into a non-specific bond. P2P lending really stuck in my head as a serious concept and nothing like it had been implemented on such a scale before. Prosper was the first of many P2P’s and we’ve dabbled in several others such as Zopa.com, Kiva.org and LendingClub.com, but it was the urgency that drove us to lending and actually borrowing came up as well (recently repaid) a few times to fund various projects my wife Heather and I had been working on. We now, amazingly, have more than $10k invested in various P2P efforts, which I wouldn’t have seen coming back in Feb. 2006 if you had asked me.

What was your original feeling on group leader rewards and groups? And when the rewards were eliminated?

Group rewards and groups and general… Oh boy, well, originally I didn’t want to start a group, but I thought to myself, what the heck. So I came up with a group (literally overnight) with a message and it did pretty good for a while. Then it grew, well, a little too big for comfort. Then it collapsed into a heap thanks to poor decisions by some of it’s borrowers. They weren’t solely to blame in my opinion as Prosper was pushy about getting loans in and out as fast as possible. So fast in fact there was a time when there was a week or longer delay in the origination of a loan (remember those days ol’ timers?). Group Rewards were nice, but they weren’t our purpose, nor was the idea of growing into a top group based upon loan volume. IF I could do it all over again… I would not have done a group at all. My biggest mistakes are bidding on people out of courtesy and not based upon credit or merit of the need. I’ve paid for it with many defaults over the past year. I was glad when Prosper eliminated the Group Leader Rewards as it brought some sense of clarity to the role (marketing vs. management) of the GL. The referral program would have been best in the early days. This is one of many reasons why I believe LendingClub.com is setup for long term success since it’s not bloated with overhead costs of a reward program works beyond offering pure growth incentives and isn’t fueled by pushing loans out of personal necessity. GL’s, a few of them, got very pushy and authoritative toward pushing for higher interest rates for their groupies so the loan would fund so they would eventually profit. Unfortunately, the change is likely too little, too late to salvage the group concept at Prosper though. It definitely had potential if it had been kept pure (referral only) from the start though. Glad they’re gone!

At some point in the past your attitude turned remarkably sour toward Prosper. Why?

My changing of loyalty with Prosper came as a result of the handling (mishandling) of the Jessica Wolcott incident. I believe Prosper should have pulled the loan, refunded the bid amounts to lenders and helped prosecute her beyond her current sentence. Instead, they insisted I turn a blind eye to justice and lender sentiment by not going on Inside Edition, NY Post or Fox News any further than was already done when the story broke. I clearly recall Prosper Shira calling me to convince me to not push the issue any further and that it would be good for the community (Prosper’s) if we didn’t smear her any further. In hindsight, I should have followed my gut. Prosper needed the change then as we still see serious mistrust of management for their call on this and other issues of policy. Time has healed many of the wounds for me, for others, they are very much a daily torment. Just the handling of some of the issues that occurred and the banning of people who were just stating the truth… Well, it got out of hand. Lack of communication has always rubbed me wrong, so Prosper, I’m asking, please don’t let this continue. I can’t recall the last time I got just a message from anyone at Prosper just checking up on things. This might be why I don’t care to manage a group any longer since I can’t get any help or replies back concerning issues raised by lenders.

Recently you had made a claim that Prosper had been selling your contact information. Do you still believe that?

Unfortunately I never had a chance to set the record straight on this one since they haven’t ‘officially’ replied to me. Prosper is not likely the only company possibly divulged our information based upon the following… Catherine has yet to reply to me on the record about their findings. However my ‘other’ contact at Prosper.com has told me that they have not sold our data to any third parties, but if they had it would not include any fictitious data or name such as the one we keep there. It would be nice however to hear this from Catherine (you have my email address, use it). This sort of clears it up enough for me to press on with the events of your next question as I trust my ‘other’ contact without condition… My one wish however… Official contact. I hate using back-channels to get information out of people, especially corporations who should know better.

Even more recently, your attitude has shifted again in favor of Prosper. Why? Did anything happen (personally or professionally) to facilitate this remarkable change of stance?

Prosper has had it’s share of dilemmas over the past two years. However, it is now starting to turn the ship back onto it’s intended course with changes in collections, service and tools. Although not perfect, it’s certainly a starting point for positive behavior that could lead to great things happening this year and beyond. A gut-check and realization that we are actually poised to make money this year at Prosper, even after several more write-offs/defaults, made us (Heather and I) look at our goals for this year, five years and all the way up to retirement to see if Prosper fits. We were surprised to find it does fill a place after several days of going over our plans. Lenders should realize that the reason they don’t succeed or find themselves banging their head against the wall is a lack of research and common sense when reviewing a listing. Heather and I spent a few days looking at Prosper data seeing if we could come up with a steady, stable and profitable lending model. We are turning it on next week with a special standing order we cooked up which should produce around 7-9%, which is within the range we are comfortable with for this type of investment long-term. Back to the change of heart though… Prosper was the start of it all for us. We were able to accomplish so much from our borrowing experience that there was almost a sense of guilt that we weren’t doing the same in offering the same opportunity to others. Additionally, the Group Leader Rewards are best kept where they started in our opinion, at Prosper. So we are going to invest them in loans as that was the intention of us even accepting them in the first place. Spiritual changes played a role as well, which is why I have and will again here, publicly apologize to Prosper Shira for any ill feelings or words I may have sent her way over the past year. At the end of the day, we all had our share of mistakes in the early days of Prosper, I accept mine, you should all accept yours and Prosper is working on accepting theirs. My question to those who have issues with Prosper…

If they were to truly redirect their efforts and start listening to you, would you come back and join the renewed beacon of opportunity that I believe is starting to shine again?

Forgiveness is one of the many stepping stones along the road to your success my friends, my partners, my fellow lenders.

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