ECONOMIC COMMENTARYNovember 9,2017Three Myths about Peer-to-Peer LoansPeer-to-peer lending platforms,which provide a way for individuals who want to invest to lend to those who want toborrow,have experienced phenomenal growth in the past decade.Many praise the industry and maintain that P2Ploans provide unique benefits to consumers.We examine a comprehensive set of credit bureau data to examineP2P borrowers,their credit behavior,and their credit scores.We demonstrate there is little evidence of these benefits.In fact,P2P loans resemble predatory loans in terms of the segment of the consumer market they serve and theirimpact on consumers'finances.Peer-to-peer(P2P)lending came to the United States inBut signs of problems in the P2P market are appearing.Defaults2006,when individual investors began lending directly toon P2P loans have been increasing at an alarming rate,resemindividual borrowers via online platforms.In the decadebling pre-2007-crisis increases in subprime mortgage defaults,since,the industry has grown dramatically,and P2P lendingwhere loans of each vintage perform worse than those of prioris now widely regarded as the most progressive consumerorigination years (figure 1).Such a signal calls for a closefinance innovation in financial markets today.examination of P2P lending practices.We exploit a compre-Online lenders and policymakers have suggested that thehensive set of credit bureau data to examine P2P borrowers,P2P market offers unique benefits to consumers.Threetheir credit behavior,and their credit scores.We find that,onbenefits are often repeated and seem to have becomeaverage,borrowers do not use P2P loans to refinance pre-widely accepted.First,P2P loans allow consumers to refi-existing loans,credit scores actually go down for years afternance expensive credit card debt.Second,P2P loans canP2P borrowing,and P2P loans do not go to the markets under-help customers build their credit history and improve theirserved by the traditional banking system.Overall,P2P loanscredit scores.Finally,P2P proponents claim that P2P lend-resemble predatory loans in terms of the segment of theing extends access to credit to those who are underservedconsumer market they serve and their impact on consumers'finances.Given that P2P lenders are not regulated or super-vised for antipredatory laws,lawmakers and regulators mayneed to revisit their position on online lending marketplaces.Figure 1.Delinquency Rates by Loan VintagePanel A:Peer-to-Peer LoansPanel B:Subprime MortgagesPercent delinquent1420122512201120132008201020102003200920071520022001200661050134567891011121314151617Loan age (years)Loan age (months)Source:Authors'calculations based on data from TransUnion.Source:Demyanyk and Van Hemert(2011).ISSN0428-1276FEDERAL RESERVE BANK OF CLEVELANDFrom Peer to Peer to Institution to PeerEvaluating Three Claims about P2P LendingWhile P2P lending hasn't changed much from the borrowers'We investigate three questions:Are P2P loans used toperspective since 2006,the composition and operational char.refinance previous loans,do P2P loans help borrowers buildacteristics of investors have changed considerably.Initially,a better credit history,and do P2P lenders serve individualsthe P2P market was conceived of as individual investors lend-or markets underserved by traditional banks?To accuratelyassess these questions,we need to compare the behavior ofYet even from the industry's earliest days,P2P borrowersfinancially identical people who differ only on one dimen-attracted institutional investors,including hedge funds,banks,sion,namely whether they took a P2P loan.That is,weinsurance companies,and asset managers.Institutions areneed a sample of people with the same trends of incomes,now the single largest type of P2P investor,and the institu-debt,credit scores,and patterns of loan repayment beforetional demand is almost solely responsible for the dramatic,atany of them took out a P2P loan.Some people in the sampletimes triple-digit,growth of P2P loan originations (figure 2).2have taken out a P2P loan and others have not.The shift toward institutional investors was welcomed byData with the sample of financially identical individuals arethose concerned with the stability of the financial sector.not readily available,so we construct the sample ourselves.In their view,the P2P marketplace could increase consum-We use data from the TransUnion credit bureau,in whichers'access to credit,a prerequisite to economic recovery,we observe about 90,000 distinct individuals who receivedby filling a market niche that traditional banks were unabletheir first P2P loan between 2007 and 2012.We also observeor unwilling to serve.The P2P marketplace's contributionabout 10 million individuals who did not receive P2P loansto financial stability and economic growth came from theand whom we label non-P2P individuals.Using a statisticalfact that P2P lenders use pools of private capital rather thantechnique called propensity score matching,we identify non-federally insured bank deposits.P2P individuals who are financially similar to P2P individualsRegulations in the P2P industry are concentrated on inves-during the two years prior to the date on which P2P individu-als obtained their P2P loan.We match individuals based ontors.The Securities and Exchange Commission (SEC)ischarged with ensuring that investors,specifically unaccred-the location of their residence,their credit score,their totalited retail investors,are able to understand and absorb thedebt,their income,their number of delinquencies in the pastrisks associated with P2P loans.two years,and whether or not they have a mortgage.On the borrower side,there is no specific regulatory bodyAre P2P loans used to refinance previous loans?dedicated to overseeing P2P marketplace lending practices.The most widely promoted argument in favor of P2PArguably,many of the major consumer protection laws,lending is that it lowers borrowing costs.Consumers cansuch as the Truth-in-Lending Act or the Equal Credit Op-take on a fixed-term and potentially lower-cost P2P install-portunity Act,still apply to both P2P lenders and investors.ment loan and use the proceeds to repay expensive linesEnforcement is delegated to local attomey general officesof credit (e.g.,credit card accounts),thus lowering theirand is triggered by repeat violations,leaving P2P borrowersoverall borrowing costs.potentially vulnerable to predatory lending practices.Figure 2.Growth of Peer-to-Peer LendingFigure 3.Interest Rates for P2P Loans and Credit CardsOutstanding balancesConsumers with a personal loan(millions)Percent1101619Peer-to-peer.1001517C or D ratingAverage credit card9014158013Average peer-to-peer701260Peer-to-peer,5010Aor B rating402009201020112012201320142015201620072009201120132015■Total balances◆-Consumers with a balanceSource:TransUnion Consumer Credit Database.Source:Bankrate.com and lendingclub.com.This claim is typically supported by two facts.First,aFigure 4.Total Debt Outstanding,Credit Scores,andnumber of P2P platforms report lower average borrowingDelinquency before and after P2P Loan Originationrates than those offered by an average credit card company.Second,the vast majority of P2P borrowers across differ-Panel A:Total Debt Outstandingent P2P platforms say that repaying their existing debt isthe main reason they want to take out a new P2P loan.ForRatio of debt to income----95%confidence intervalexample,about 81 percent of borrowers on Lending Club,a2.0P2P platform,cite refinancing and consolidation of existingdebt as a core use of Lending Club loan proceeds.18:Peer-to-peerOur investigation suggests that not every P2P borrowermanages to obtain a better interest rate than a credit cardrate.At Lending Club,for example,P2P borrowers are1.6:Non-peer-to-peercategorized by grades A to D,reflecting the probability ofdefault.On average,around 40 percent of loans are awardeda grade of A or B.These higher-rated borrowers are con-sidered the least risky and are charged 8-12 percent interestrates.Borrowers with grades C or D tend to be riskier,and1.2their annual interest rate can go as high as 30 percent.These-2-102interest rates do not compare favorably with credit cardNumber of years since peer-topeer loan originationinterest rates (figure 3).To verify whether borrowers actually use the proceeds oftheir P2P loans to repay pre-existing debt,we need ourPanel B:Credit Scorematched data sample.All borrowers pay off their loansVantage score----.95%confidence intervaleither fully or partially sometime after they borrow,but695equipped with matched data,we can statistically evaluateNon-peer-to-peerwhether borrowers use P2P loans to refinance their existingdebt accounts,i.e.,pay off (higher-interest rate)credit cards690and/or consolidate other loans,to a greater degree thanpeople who did not take P2P loans.685If P2P loans are used for refinancing and loan consolidation,we should not see differences in total debt balances betweenP2P and matched non-P2P borrowers during and after the680Peer-to-peerP2P origination year.If anything,total debt balances of P2Pborrowers could decline after P2P origination if (cheaper)675P2P term-loans are used to refinance (more expensive)re--10volving credit card debt.However,instead of this pattern,weNumber of years since peer-to-peer loan originationobserve total debt increasing after the P2P loan originationyear(figure 4).Using a statistical technique that allows usto account for other potential differences between P2P andPanel C:90 Days Past-Due Delinquencynon-P2P borrowers'financial,economic,and demographiccharacteristics,we estimate that,on average,the non-P2PNumber of delinquent accounts--.95%confidence interval1.6debt balances of P2P borrowers grow about 35 percent more么Peer-to-peerthan those of non-P2P borrowers within two years of theP2P origination year.One can argue that P2P credit might be used to refinancethe most expensive consumer debt-credit card accounts.Because credit card debt,on average,constitutes only about6 percent of total consumer indebtedness,it might be dif-Non-peer-to-peerficult to capture the effects of refinancing by evaluating the1.0dynamics of total debt or even total non-P2P debt.To thisend,we isolate credit card accounts.Once again,however,the results show that credit card debt increases for P2P bor-0.8rowers.P2P borrowers exhibit a 47 percent increase-rather-2-1012than a decrease-in their credit card balances after obtainingNumber of years since peer-to-peer loan originationP2P credit as compared to matched non-P2P borrowers.Note:Year 0 is the year of origination.Source:Authors'calculations based on data from TransUnion.Do P2P loans help in building a better credit history?before and after obtaining P2P loans.We observe that P2PP2P lenders suggest that P2P loans help borrowers improveborrowers obtain other credit from traditional banks at ratestheir credit histories and credit scores.Specifically,P2Psimilar to non-P2P individuals.For example,as shown inproponents cite three ways in which P2P borrowing contrib-table 1,33.63 percent of P2P borrowers increase their creditutes to consumer credit score enhancement.First,applyingcard balances at the same time as they obtain a P2P loanfor a P2P loan leads only to a "soft"credit score inquiryThis fraction is 10 percentage points larger than that forthat does not affect one's credit score as opposed to a "hard"non-P2P consumers.Similarly,10.5 percent of P2P borrow-credit card or bank loan inquiry that,by definition,doesers also obtain a non-P2P installment loan from a traditionalaffect credit scores.Second,P2P loans are reported to creditbank alongside their P2P loan.Among the pool of matchedbureaus as installment debt rather than revolving debt(suchnon-P2P consumers,6.7 percent obtain a non-P2P install-as credit cards);this by itself could improve one's creditment loan.In addition,the new loan balances from tradi-score because,in a typical credit bureau model,installmenttional banks and P2P platforms are of similar sizes,about 2loans are considered less risky than revolving loans due topercent of borrowers'annual incomes.the smaller uncertainty associated with the expected streamof payments for installment loans.Finally,because P2PUsing our data sample of matched P2P and non-P2P indi-loans are allegedly issued to refinance existing high-costviduals could create an incomplete comparison,as we couldbe comparing P2P borrowers and non-P2P borrowers whocredit card debt,they have the capacity to free up cash flowand thus lead to a reduction in total outstanding balances,are similarly banked or underbanked.To evaluate if this isresulting in improved financial health for consumers andindeed the case,we abandon the propensity-score-matched-subsequent credit score improvements.comparison approach and compare the characteristics ofP2P and non-P2P borrowers using the full sample of indi-To evaluate if P2P loans indeed enhance borrowers'creditviduals.If P2P credit is flowing to traditionally underservedhistories,we compare the credit scores and delinquencyareas and consumers,we should observe that individualsrates of P2P and non-P2P borrowers after P2P loan origi-from these underserved groups-including racial minoritiesnation.If P2P borrowing helps improve borrowers'creditand those with lower incomes,lower credit scores,lowerhistory,we should observe P2P borrowers'exhibiting lowerdebt-to-income ratios,and limited access to traditional creditdelinquency rates and higher credit scores after P2P loanintermediaries-would be more likely to obtain a P2P loan.origination as compared to non-P2P borrowers.It is somewhat tricky to do this full-sample comparisonOur results suggest that the credit scores of P2P borrow-properly in the statistical sense because P2P consumersers fall substantially and delinquency rates rise after takingconstitute only a small fraction of our data sample (90,000on a P2P loan (figure 4)compared to non-P2P borrowers.P2P consumers versus 10 million non-P2P consumers).ToWe also discovered that numerous measures of deroga-this end,we first evaluate the characteristics of P2P marketstory events(number of past due accounts-both revolving(identified by zip code)that attract P2P lending,and then weand installment-and number of bankruptcies)significantlyzoom in on those P2P markets and evaluate the characteris-increased for borrowers who took out P2P loans.Thesetics of individuals who got P2P loans in them.results indicate that P2P loans have the capacity to worsenborrowers'prospects for future access to financing.Do P2P lenders serve individuals or markets underserved byTable 1.P2P and Non-P2P Borrowers'Access to Creditthe traditional banking system?So far,the evidence we have presented suggests that P2Pcredit is not systematically used by consumers to refinanceor consolidate their existing credit accounts.Rather,P2PP2PNon-P2Pcredit is accompanied by increases in consumer debt beyondborrowersindividualsP2P borrowing.While some might see this evidence as aMeasure(percent)(percent)glass half empty and blame the P2P industry for contrib-Balance of new P2P/income2.420uting to potentially unsustainable consumer debt,othersShare with increased credit card balances,33.6322.99might see it as a glass half full and argue that P2P lendersShare with new credit cards,30.7120.76provide access to consumer finance to the underbankedBalance of new credit card,/income1.651.08US population.Share with increased installment balances,10.957.42To evaluate this possibility,we first use our matched sampleShare with new installment accounts,10.456.73and statistically evaluate whether P2P credit is flowing toBalance of new installment loans,/income,2.882.04underserved consumers.To do so,we compare access toNumber of individuals in sample81,637408,123traditional loans by P2P borrowers and matched non-P2Pborrowers.We find nothing to suggest that P2P borrow-ers are different from non-P2P borrowers.Our evidenceindicates that P2P borrowers are unlikely to be cut off fromtraditional banking services,and they access these servicesSource:Authors'calculations based on data from TransUnion (2007-2014).www.baogacWe find that the residents of P2P zip codes indeed have,Laws and regulations designed to protect this at-risk seg-on average,lower incomes and lower credit scores.P2P zipment of the population have existed since the creation ofcodes have less-educated and more racially diverse popula-the Equal Credit Opportunity Act of 1974;the protectionstions.Potentially,these characteristics could indicate thathave been reinforced with a series of antipredatory laws andthese areas are indeed underserved by traditional banks.the Dodd-Frank Act.Interestingly,the Equal Credit Oppor-However,the results also show that P2P credit is flowingtunity Act defines creditors as lenders who make decisionsinto zip codes in which borrowers tend to have higher,and set terms,such as interest rates.Such a definition offersnot lower,debt-to-income ratios,and there are more bankan opportunity for regulatory agencies to apply fair-lendingbranches and fewer individuals without credit cards in theserules and antipredatory lending laws to online lenders.Yetareas.These facts indicate that the residents of P2P zipcurrently there are no regulators that oversee the onlinecodes do have access to the traditional banking system andlending marketplace and its players.It might be time to lookhave previously obtained credit;thus,they are not likely tomore closely at P2P lending practices and evaluate theirbe unbanked.implications for consumer finance.When we zoom in on the P2P zip codes and compare theFootnotesP2P and non-P2P borrowers who live within them,weonce again observe that P2P borrowers are characterized by1.This Economic Commentary is based on our working paper,Demyanyk,Loutskina,and Kolliner (2017).For more de-lower income levels,lower credit scores,and a higher num-tails and an expanded analysis,see the working paper.be African American and not have a college degree.At the2.See,for example,https://www.risk.net/risk-manage-same time,P2P borrowers'levels of debt-to-income ratiosment/2372612/hedge-funds-securitisation-and-leveragetend to be similar to non-P2P borrowers'.This evidencechange-p2p-game,and https://www.crowdfundinsider.once again indicates that P2P borrowers are unlikely to becom/2014/10/51371-peer-peer-lending-turned-hedge-fund-underbanked but are likely to be overleveraged even priorconsumer-lending/.to obtaining their P2P loans.3.We estimate the share of underbanked consumers as theConclusionsshare of individuals without a credit card in a zip code usingBased on our findings,one can argue that P2P loansdata from another credit bureau,Equifax.The Equifax dataresemble predatory loans in terms of the segment of theare available to us from the Federal Reserve Bank of Newconsumer market they serve and their effect on individualYork's Consumer Credit Panel/Equifax.To measure localaccess to traditional banking services,we count the numberborrowers'financial stability.The 2007 financial crisis illustrated the importance of consumer finance and the stabilityof bank branches in a zip code from the Summary of Depos-of consumer balance sheets.The crisis inspired a wide setits data,reported by the FDIC.of research that explored the contagion mechanisms acrossReferencesfinancial institutions,across individual consumer credit ac-Demyanyk,Yuliya,Elena Loutskina,and Daniel Kolliner,counts,and across consumers in local markets.The bulk of2017."The Taste of Peer-to-Peer Loans,"Federal Reservethis academic research calls for stable financial markets andBank of Cleveland Working Paper,no.2017-18.long-term sustainable credit markets.Demyanyk,Yuliya,and Otto Van Hemert,2011."Under-While P2P lenders do not yet claim a significant share of theretail financial market,the double-and triple-digit growthStudies,24:1848-1880.rates of P2P origination volumes and the rapidly expand-ing P2P customer base indicate that online lenders havethe capacity to represent a formidable market force in thenear future.The evidence we document,combined withthe fast growth of the P2P market,suggests that the P2Pindustry has the potential to destabilize consumer balancesheets.Consumers in the at-risk category-those with lowerincomes,less education,and higher existing debt-may bethe most vulnerable.The overall performance of P2P loansstrikingly resembles that of the subprime mortgage marketbefore the 2007 subprime mortgage crisis (figure 1).www.baogaoba.xyz独家收集不断更新