Friday, April 21, 2006

Strong criticism of Christian Second Chances Group

I'm not particularly upset that I have a late loan given my bidding risk profiles (in which some % of my bids are non-qualitative, mathily modelled only, w/some sanity checks. I would of course be far less happy if some of my personally vetted loans defaulted though...)

Also, given that I ascribe no signal to membership in this group (and maybe even negative signal), I'm not particularly surprised by the group leader's behavior either.

Let me be clear, I have nothing but respect for the genuinely religious whose acts match up with their professed beliefs. For instance, after confirming that a priest was looking for a loan, and that his identity had not been stolen, I happily put down a roughly $2,000 bid for his loan.

However, in the case of this group leader, his use of 50% shared rewards (and past advertising of this as a "good" thing), made me rather suspicious of his motives. There are plenty of groups where the leaders go to much more trouble, and offer 100% rewards, or at worst, 75% rewards, for far greater service to borrowers and lenders.

Someone who pays lip service to Christian ideals, and does minimal vetting, if any (given the way he was spamming people in the past to join his group), but takes a huge slice and says/said that a 50% slice is a huge favor to borrowers -- that's just unconscionable (but apparently, profitable while the pyramid scheme lasts).

Remember what this means in $'s and cents -- for an E or H borrower, this leader gets 2.5% -- not of the original loan amount, but 2.5% annual interest on the loan over 3 years! That $5000 37.5% loan that s/he "got" funded -- that's a $100 right there if it pays off.

S/he also gets additional match reward $'s up front (in addition to the % rewards) as well.

Some people might say, doesn't the ongoing 2.5% slice align incentives? Well, no -- the far bigger incentive is to line up lots of loans, and hope as many get funded as possible, suck the money from the ones that had basically no added value but were honest and got funded, and ignore the ones that don't. (If s/he were willing to actually do some work, on the other hand, build up reputational capital, that'd be a different story.)

Most of all, I think that the utter lack of concern on the part of the group leader, and failure (to the best of my knowledge, and other lenders' knowledge) of southbay, the group leader to respond to ANY lender communications over THE LAST SIXTEEN DAYS is demonstrative of what I suspected all along. Anyone care to speculate as to whether s/he's been nonetheless continuing to recruit/respond to new borrower requests to join the group? Post here if you've done so in the last 16 days...

In the past, I've been reluctant to privately message borrowers to tell them that they're getting a bum deal w/their group -- no intelligent lender would give extra credence to membership in this or that group, and a 2.5% rate difference in a capped world can be huge for an E or HR borrower (sometimes, w/0% shared, it is a 5%!! difference!). Going forward, it may be a different story, depending on rules about spam. (So far, I've restricted my advice to comments in posts by borrowers in forums on how to get more bids, or those who PM me for advice.)

Until now, I was unwilling to make any public comments about this group, as much as I wanted to, because I did not have definitive public evidence. However, I was personally certain of the sheer crapulence of this group, and would have been perfectly willing to bet 30% of my annual salary that this would be one of the first few groups to have truly late payments), and willing to tell other lenders this in non-public forums (fora?).

Someone wittier than I has already said something like "It doesn't seem very Christian of this group leader to ignore all lender questions, and I won't be giving him any Second Chances, either."

Now that's a T-shirt motto that I'd buy!

I'm offering a $15 paypal payment to the person who comes up w/the best T-shirt motto on the topic of this group's behavior. You can post profane comments if you must, as long as you're witty, but those get automatically disqualified -- I need something actually wearable (and that cafepress will let me buy). If fewer than 15 "real" comments from different posters are posted, I reserve the right to not pay out -- though posters should feel free to submit multiple possibilities for consideration.

Comment below, or email them to me!

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