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Hey commentzorro, thanks for your comment. I am not sure I follow how you are connecting difficulty in bankrupting to higher rates. If anything, opposite will b

by sksk 11y ago

Hey commentzorro, thanks for your comment. I am not sure I follow how you are connecting difficulty in bankrupting to higher rates. If anything, opposite will be true (if your assertion is correct) as they will eventually get most of their money back. Consumer bankruptcy laws are fairly well defined in the US (not that it is nice for the consumer but there is a process) so it is not quite driven by the banks although they probably wrote the legislation around it. If you ask me higher rates are justified because consumer's get tricked into it. Take department store cards for example, they charge 25% - 30% because no one thinks they need to carry this balance forward when they are buying a refrigerator -- they just want the 15% off at point of sale and 0% for 6 months is a bonus. Fast forward 6 months, they have not paid it off and the credit card company calculates interest by going back in time as those interests were 'deferred'. Now with all the compounding they end up getting stuck in debt for much longer they needed to be. For people we give credit to, we focus on consumers with good credit. For others, we will still service them and help them by optimizing their payments and those payments will directly come from their checking account. Edit: I want to clarify one thing. When I say good credit -- it does not mean you need to have a FICO Score or long history. We look at everyone holistically so it comes to down whether you are a responsible borrower measured across many dimensions.

commentzorro 11y ago
There no way to ask in a polite way and I don't think you're doing anything wrong. It's excellent to help people get out of debt quicker ... but are you planning on picking off the low hanging fruit (best credit and demographic) and leave the hardest hit with the likely to increase rates if you're really successful. (And I see no reason why you wouldn't be.) Sort of like selling cheap health insurance to the young and healthy so the rates for the old and sick rise.
- sksk 11y ago
  That's an excellent question. We want to serve everyone but how we serve them will be different. For example, people with very poor credit -- like the ones that go to Payday lending are not going to benefit from having a revolving line that pays off their credit cards; most don't even have credit cards. However, all of them can benefit from a platform that does the right thing for them -- for example, recommend the right payment amount based on people's cash flow unlike a credit card company which tries to push for minimum payment. Or suggesting changes in spending behavior that can dramatically reduce their overall cost. Especially, the poor disproportionately suffers from compounding of interest. Imagine going to a payday lender (or heck a subprime credit card) and missing a payment. First of, those APRs are insane and on top of it, they compound and just makes it impossible for them to get out of it. We really believe compounding of interest should be abolished on the lending side. In the software world, when users struggle to use a product, the product fails, you don't ding the users. But in finance it is the other way around -- the consumer pays the price for mistakes the lender does. If more main stream consumers demand simple interest and no fees across the entire industry, we will slowly get rid of these evil practices and eventually benefit everyone. We are also talking to regulators on how we can make many of these principles (dead simple terms) as the model for future lending products. The Economist recently had a very interesting article about how the poor end up paying more fees even though they are the ones who cannot afford it -- for depositing money they pay fees, for withdrawing money they pay fees..they really cannot win either way. While, it is harder for us to help the poor on basic banking (deposit type products) at this time but we certainly have plans to do so. Lending can be profitable, we just don't think it has to be predatory for it to be sustainable.

by sksk 11y ago

commentzorro 11y ago

There no way to ask in a polite way and I don't think you're doing anything wrong. It's excellent to help people get out of debt quicker ... but are you planning on picking off the low hanging fruit (best credit and demographic) and leave the hardest hit with the likely to increase rates if you're really successful. (And I see no reason why you wouldn't be.) Sort of like selling cheap health insurance to the young and healthy so the rates for the old and sick rise.

sksk 11y ago
That's an excellent question. We want to serve everyone but how we serve them will be different. For example, people with very poor credit -- like the ones that go to Payday lending are not going to benefit from having a revolving line that pays off their credit cards; most don't even have credit cards. However, all of them can benefit from a platform that does the right thing for them -- for example, recommend the right payment amount based on people's cash flow unlike a credit card company which tries to push for minimum payment. Or suggesting changes in spending behavior that can dramatically reduce their overall cost. Especially, the poor disproportionately suffers from compounding of interest. Imagine going to a payday lender (or heck a subprime credit card) and missing a payment. First of, those APRs are insane and on top of it, they compound and just makes it impossible for them to get out of it. We really believe compounding of interest should be abolished on the lending side. In the software world, when users struggle to use a product, the product fails, you don't ding the users. But in finance it is the other way around -- the consumer pays the price for mistakes the lender does. If more main stream consumers demand simple interest and no fees across the entire industry, we will slowly get rid of these evil practices and eventually benefit everyone. We are also talking to regulators on how we can make many of these principles (dead simple terms) as the model for future lending products. The Economist recently had a very interesting article about how the poor end up paying more fees even though they are the ones who cannot afford it -- for depositing money they pay fees, for withdrawing money they pay fees..they really cannot win either way. While, it is harder for us to help the poor on basic banking (deposit type products) at this time but we certainly have plans to do so. Lending can be profitable, we just don't think it has to be predatory for it to be sustainable.