A New Collection Market Emerges from P2P Lending

Person-to-person (P2P) lending represents a massive growth market for lending networks and consumers with a recent research report estimating its value will rise to $5 billion by 2010. This burgeoning market could also present a significant opportunity to the ARM industry, according to an analysis article from insideARM.com.

Prosper Marketplace, the largest P2P lending network with more than 450,000 members and $100 million lent since February 2006, has developed a well-structured process to deal with consumers that fall behind on payments. That includes farming out accounts that are 30 days or more past due to one of two collection agencies, Firstsource and Penncro Associates, Inc.

Penncro has been collecting for Prosper for about a year and a half, while Mumbai, India-based Firstsource is new to the party, having begun its work for Prosper in the last couple of months.

Penncro, based in Southampton, Pa., is positioning itself in front of the trend, according to Steve Beranek, senior vice president of business development. “We want to be the go-to collector for P2P lending networks,” said Beranek.

Penncro has received from Prosper about 2,700 accounts for collection with a value close to $2.5 million, according to disclosures made by Prosper on ITS web site. While that’s a very small piece of the overall business at Penncro — the company employs around 600 people in four offices in the U.S. and Dominican Republic — Beranek notes that the sector has taken on a life of its own.

“We do have collectors that specialize exclusively in these P2P accounts,” said Beranek. He noted that behavior profiles have also developed over the past year, allowing collectors to more effectively work the debt. “P2P borrowers typically have more connection to their lender than with a traditional bank relationship,” he said. “We are seeing that many of the borrowers have more desire to pay because of this.”

Beranek said that the P2P market was not on Penncro’s radar screen until Prosper called "out of the blue", asking it to participate in a bidding process with several collection agencies. Prosper originally used three agencies but Penncro is the only one of those left.

Beranek commented that Penncro’s growth in the new market won’t be by accident. “We have already had conversations with other P2P networks,” he said. "We really want this market."