New Credit Opportunities

The changes in credit card legislation have been numerous, onerous, and bordering on the insane; they have also been written about extensively and we will not delve deeper at this point in time. A series of unrelated articles recently made me wonder if the new regulations will actually shift the powers of personal credit in interesting new directions. For starters, take a look at this posting from The Baseline Scenario. The posting gives us insight into ways companies will try to circumvent the new regulations in unexpected (expected?) ways. The second posting is about a peer-to-peer lender called Fynanz. Check it out here.

The reason I’m bringing this up is to point out that there might be an interesting shift towards peer-to-peer lenders as private individuals will be more than willing to lend at 29% or less, if Citi is lending at 30%. It will be interesting on a lot of levels. First, peer to peer lending sites will have an increased opportunity to gain market share. Second, it will be interesting how individuals will actually report the interest income earned and whether this will be a way to skirt certain IRS codes. Third, will companies look here for financing solutions? Can this provide a more direct lending facility? Fourth, can companies use these platforms to skirt the credit card regulations altogether?  Fifth, what are the implications for credit scores? Sixth, will this be an easy market to securitize?

Just some thoughts as we try to make connections between the seemingly unrelated. By the way, this is a long way off, and the market for peer-to-peer lending is infinitesimally tiny compared with the consumer credit market, so I don’t think it’s a powerful force of nature yet. But something to keep an eye on, especially in the educational finance arena as Sallie isn’t what it used to be.