Show Us Your Pay Stub: Income Verification in P2P Lending
13 Pages Posted: 2 Jul 2013
Date Written: July 1, 2013
Abstract
Peer-to-peer lending is an alternative credit market that allows individual borrowers and lenders — people like you and me — to engage in credit transactions without traditional banking intermediaries. This research centers on income verification practices in peer-to-peer lending. We report on a descriptive analysis of all the loans that were funded through Lending Club, currently the world's largest peer-to-peer lending platform, with issue dates before September 1, 2012. The score that Lending Club assigns to a requested loan is supposed to encapsulate all the information that is needed for the lender to assess the risk of a potential default, This study points, however, to a potential weakness of Lending Club’s loan assessment tools, which indicates that information about a loan’s income verification status is in fact relevant and has value. Given this understanding, lenders’ choices are surprising. Lenders that are registered directly on Lending Club’s platform, including a crowd of small investors, fund a higher percentage of the listed loan amount when the borrower’s income is not verified, while all other investors display the opposite, traditional risk-averse behavior.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Did Securitization Lead to Lax Screening? Evidence from Subprime Loans
By Benjamin J. Keys, Tanmoy K. Mukherjee, ...
-
The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis
By Atif R. Mian and Amir Sufi
-
The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis
By Atif R. Mian and Amir Sufi
-
Understanding the Subprime Mortgage Crisis
By Yuliya Demyanyk and Otto Van Hemert
-
Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
-
Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
-
Understanding the Securitization of Subprime Mortgage Credit
By Adam B. Ashcraft and Til Schuermann
-
Housing Supply and Housing Bubbles
By Edward L. Glaeser, Joseph Gyourko, ...
-
Housing Supply and Housing Bubbles
By Edward L. Glaeser, Joseph Gyourko, ...
-
Urban Growth and Housing Supply
By Edward L. Glaeser, Joseph Gyourko, ...