The news is circulating about Zopa leaving the United States market and the impact it has on the six participating credit unions and their members in the Zopa program. FORUM Credit Union was one of six credit unions piloting the US Zopa model. Our volume has been minuscule and likely the lowest of the six participating credit unions. There will be no impact to the members participating in the program as their insured certificates of deposit and their personal loans will be transferred to the credit union for servicing. The decision to exit was made by Zopa and is not reflective of the credit union’s ability to participate. As credit union friend Sarah Mason from Affinity Plus Credit Union succinctly stated, “As one of the credit unions who were partnered with Zopa, I would like to clarify that we have no credit availability issues and have changed none of our lending practices. This decision was made by Zopa.” Well stated.
I have been quiet on the topic out of respect for Zopa and the potential for some type of credit union CUSO (not FORUM Solutions) or credit union centric type of organization continuing the program. While continuation might happen, it won’t take place without a gap in service. Zopa never could gain the traction they needed here in the US and I am sure the latest turn in the economic climate was likely the last straw and thus their quick decision to exit. They were prudent with their promotion of the program and the pilot program. I still believe there is a place in peer-to-peer lending for credit unions, especially if it is run by a credit union centric organization, preferably a CUSO, and credit unions could leverage select employee groups in the framework. Just not sure if the timing is right given the economic climate.
katie on October 13th, 2008 at 11:48 AM
Zopa is an inferior model relative to the other p2p options. Rates paid are far lower than other p2p options and people are not interested in providing “charitable contributions” by providing a “person in need” lower rates.
This was a bad idea from the get-go and having a CUSO manage it does nothing to correct the flaws in the model.
What is the basis for your still supporting this failed and inferior model?
Doug on October 13th, 2008 at 05:33 PM
Katie… thanks for your comment and your thoughts on the Zopa – credit union model in the P2P world. I believe that the Zopa – credit union model that was deployed was unique in the P2P market because it focused on secured investments (which many people are seeking these days) and an opportunity to help others (we do live in the most charitable country in the world). I mentioned the use of Select Employee Groups (SEGs) with the P2P model in this post. I have visited many SEGs in my credit union career and have seen in the break rooms of many companies, employees rallying around a fellow employee in a time of need. Let’s use a family member with a severe medical condition as an example. Employees holding bake sales and other fund raisers to help out the employee who is experiencing a difficult situation that also places a financial drain on this person. I think the Zopa – credit union version of P2P was a worthwhile tool now and in the future for fellow employees to help such an individual with the cost of the medical situation by taking less on their investment (certificate of deposit) to help their fellow employee without losing their base investment. I believe there is merit and worth in such a concept. Some people aren’t all about the rate they earn. As you mentioned many of the other P2P players offer attractive rates while also associating a great deal of risk with this reward. Risk in losing your investment. Some of the cases I have seen at other P2P sites border on predatory lending, in my opinion. So my basis for the support is providing a mechanism for people helping people through a secured investment for the person “lending” the money and the benefit of a low cost or even zero cost (yes, this is possible) loan. The “failure” of Zopa in the US has more to do with execution and timing. I am a glass half full type of guy and don’t view it as a failure as the learning experience has been a worthy pursuit for FORUM Credit Union and I remain hopeful that we can use this experience to shape a winning P2P or people helping people solution for the future. Also, I want to emphasize that the model that was used did not localize the matching of borrower and saver and thus was one of the major problems, thus the focus on local SEGs could make a big difference. Without the localizing effect, I agree with your statement about “person in need” – too difficult to validate the need and this is an important part of the formula.
krrisjon on October 29th, 2008 at 05:38 AM
Cheers for writing about this. FYI – here’s some more info about debt relief you might like!
Sean Ryan on December 2nd, 2008 at 01:57 PM
I believe Doug is spot on regarding peer-to-peer lending. When Zopa’s major U.S. competitor entered the market I called a friend the was involved with the million dollar question. How are they getting past the SEC without being a Credit Union? I believe P2P and regional based lending are going to surge over the next few years. P2p is a novel idea but has no scale unless there is an institutional backer that can normalize a great portion of the lending offers. A CUSO would be a perfect solution for a P2P combine. I have a friend involved in a start-up where the borrower-lender have an existing relationship and they are using the system to service the loan(s). I believe that type of social lending network would work very well coupled with a CUSO program.