Peer-to-Peer Lending (P2PL) and Non-Authenticated Private Lender Risk

What is Peer to Peer and Private Lending?

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Is Private Lending Risky?

Yes, it can be risky, so minimize the risk!

Risk Management & Private Lender Authentication

Some risk can be managed or eliminated, other risk can neither be managed nor eliminated. At PEMI^®, we have found that the most common risk when dealing with peer-to-peer or private lending transactions is incompetence risk and inexperience risk, based upon the role of the individual involved in the transaction.

Private Lender Authentication

There is a real need for 3rd-party authentication of persons who pass themselves off as "private lenders".

Does the Private Lender have the capacity to help the applicant?

Does the Private Lender maintain the applicant's personal financial information in secure environment?

Does the Private Lender simply collect applicant information and then pass it on to another party to see if they might be interested in lending money?

Are there indicators that the private lender may be involved with fraudulent or non-desirable activities?

Are there indicators that the private lender is a predatory lender?

Three Types of Risk: Borrower, Broker, Investor-Lender

1. The private equity mortgage industry group consists of individuals and organizations that trade in what is classified as digital and non-digital, non-bank, non-institutional, non-syndicated, non-regulated or regulatory exempt and free trading; also known as Peer-to-Peer (P2P)/Private/Crypto/Secret/Shadow securities and related financial instruments, secured by real estate

2. Capital seekers, Borrowers, Investors or Lenders who trade in private equity mortgage instruments are typically private individuals or organizations classified as: non-bank, non-institutional, non-syndicated, non-regulated or regulatory exempt and free trading; also known as Peer-to-Peer (P2P)/Private/Crypto/Secret/Shadow entities.

3. Brokers (middle-persons) are classified as credit intermediaries and depending on the jurisdiction, may be either regulated or non-regulated by government or government appointed industry.

When it comes to money, you cannot trust unknown people or organizations. Do you really know the credentials and qualifications of the people you are dealing with? In today's era of white-collar crime and fraud, you owe it to yourself to know that the parties you are working with are credible.

If you are seeking to borrow or lend money on a non-institutional (peer-to-peer or private) basis, do you really know the credentials and qualifications of the people you are dealing with? In today's era of white-collar crime and fraud, you owe it to yourself to know that the parties you are working with are credible.

PEMI® asks one question to ask any person who calls themselves a "private lender":

“Can You Prove It?”

(prove you really are a private lender)

(prove you really have the means to help me)

(prove you are not trying to take advantage of me)

(prove you will keep my information safe and secure from theft, even if I do not accept your terms)

(prove you will work with me if things go bad)

(prove you are not taking my information and re-selling to other people)

Whether you are a borrower, lender or investor, you disclose a lot of personal confidential information in your business dealings. Make sure the people who receive your confidential information are credible.

Borrower Risk: A person in the role of borrower might look to a broker or a lender to arrange private funds but due to the broker's incompetence or the lenders inexperience (or both), the borrower gets no money and might have lost money for upfront fees or related costs.

Borrowers: Look for the P2PL^TM source identifier trademark logo at the offices of your finance broker (loan broker, mortgage broker) whenever you are seeking non-institutional credit. Demand it.

These are only a few of the many types of examples. Fraudsters are very creative and will find many ways to con you. To learn more about unscrupulous finance brokers or private lenders, see: Predator Brokers and Predator Lenders.

Broker Risk: A person in the role of a broker might be approached by a private lender who promises to provide credit to clients "when banks say no". If the broker does not effectively review the private lender for capacity, ability and experience, the broker might be unwittingly exposing his her or her clients to a predatory lender or worse.

Mortgage agents have friends, families or business partners that have surplus funds are looking to invest those funds into mortgage type investments. Often, the mortgage agent assumes that the person who is holding themselves out as a mortgage investor is a bona fide investor with sufficient capital, experience or gravitas to complete a mortgage transaction. This is not always the case and can result in some very poor experiences for the borrowers, brokers or both.

Another problem is that an investor-lender might claim to a mortgage agent that they have funds for a mortgage transaction and then when it comes time for funding "they change their mind". Or, investor-lenders who commit to specific terms and conditions and then, for no apparent reason, change the nature of the terms and conditions.

These are only a few of the many types of examples. Fraudsters are very creative and will find many ways to con you. To learn more about unscrupulous private lenders, see: Predator Lenders.

Investor and Lender Risk: A person in the role of an investor or private lender might be approached by a mortgage broker who claims to have good borrowing opportunities but in fact, are colluding with borrowers to obtain your money through false applications and wrong information. Or, the investor or private lender has no experience in lending in private situations and due to a combination of lack of experience and systems, they end up losing money because they advertised their name and address in the local newspaper or website and became targets of a criminal element because people know that "they have money". This is why it is important to have a broker represent you -- but make sure the broker is a good (experienced) broker. PEMI helps you with finding a good broker.

Private Lenders and Investors: Demand that your originators and referral sources are quality focused -- it makes common sense.

These are only a few of the many examples that an investor or lender might face. To learn more about unscrupulous finance brokers, see: Predator Brokers.

Standards + Audit = Certified Quality Management System = Risk Reduction

Risk Reduction happens when Standards and Audit come together.

Organizations who implement a certified Quality Management System (individuals and companies) meet rigorous requirements to ensure that they are credible and understand how to work in the peer-to-peer and private lending sector.

The risk of working with a non-certified Quality Management System finance broker or lender can be severe. People have lost their identity, their money or their peace-of-mind, for trusting a party who is not credible.

Standards:

Peer-to-Peer & Private Lending (P2PL) Risk Mitigation Standards

Audit:

Peer-to-Peer & Private Lending (P2PL) Business Processes Audit

Source Identifier Trademark:

Peer-to-Peer & Private Lending (P2PL) Risk P2PL Source Identifier Trademark

Once you understand the benefits of Standards, Audit and the Source Identifier Trademark, you will demand them. The more you know, the better you are.