IOU Central LogoAfter realizing that IOU Central is planning a launch in the United States, I reached out to Barry Coleman, the VP of Marketing for IOU Central to ask a few questions about their plans.

Thanks for taking the time to chat with us. Tell us a little about yourself and what you do at IOU Central.

I am the VP of Marketing for IOU Central Inc. (IOU Central). I officially joined the team in December 2008, but I acted as a consultant to IOU Central for several months prior. Most of my professional experience has been in the mortgage industry (sales & marketing). My front-seat view of the inefficiencies that helped create the collapse of the sub-prime mortgage industry is what excites me most about peer-to-peer lending. I like that we have an opportunity to seize control of borrowing & lending. Keep fees & costs low… and let borrowers & lenders take full advantage of true, market-driven rates… That is what peer-to-peer lending is all about.

What was the origin of IOU Central, the company?

We were incorporated in Delaware in August 2006 under the name IOU Central Inc. and as a wholly owned subsidiary of IOU Central Inc. (IOU Canada), a Canadian corporation, which had been formed two months prior.

How did you decide to first launch with a Canadian site (as opposed to a US site)?

Because there was no peer-to-peer lending operation in Canada, the management of IOU Canada decided to first launch its website in Canada. IOU Canada was the first company in Canada to offer peer-to-peer lending.

What regulatory issues did you run into in Canada?

Officials from Quebec’s Financial Markets Authority claimed that IOU Canada needed to register to deal in securities in order to operate its peer-to-peer lending business and accordingly requested that all new activity on the website be stopped.

Are you actively working on re-launching the Canadian site? Or are you focused primarily on the US site?

Currently, we are primarily focused on launching our US site. With regards to our Canadian operations, the management of IOU Canada is working with Quebec’s Financial Markets Authority in order to be able to offer peer-to-peer lending in Canada.

How is the regulatory environment in the United States different than Canada?

We believe the regulatory environments are somewhat similar.

Will you be following the same registration process that Lending Club completed?

Yes.

How long do you expect the SEC registration process to take?

We will not be able to commence live operation of our loan marketplace in the United States until we file our registration statement with the Securities and Exchange Commission (SEC) and until the registration statement is declared effective by the SEC. Based on current expectations, we plan to commence live operation of our loan marketplace this summer.

Your web site says “We are looking forward to releasing an online marketplace that will revolutionize peer-to-peer lending”. How will your site be different than existing P2P lending sites?

I don’t want to go into too much detail about our platform because we plan to file our registration statement with the SEC next month. With that said, I can say that we are confident our model takes positive aspects from many of our competitors. We like the true market aspect that bidding creates, and we like the security of only lending to qualified borrowers.

Aside from regulatory issues, what is the most challenging part of launching a social lending site?

The biggest challenge that I think faces our company and peer-to-peer lending in general is the ability to manage defaults. There are risks to investing in peer-to-peer loans. This is why we have designed a proprietary underwriting engine and credit-score grading system that allows only the most qualified, credit-worthy borrowers to post loans on our loan marketplace. Our approach is simple… only borrowers we would lend our personal money can post loans on our site.

The goals for your marketplace seem somewhat at odds: on one hand, you want tight control on underwriting, and on the other hand, you want market pricing. How do you see it?

We don’t think these desires contradict themselves at all. We are building a platform that will allow a true, open marketplace of qualified, credit-worthy borrowers. This creates a win-win for both borrowers and lenders. Lenders can have confidence in their investment with better borrowers, and borrowers will have the advantages of rates determined from our marketplace.

How are IOU Central’s operations funded? Have you raised funding from VCs, or another source?

IOU Canada was primarily funded by a group of angel investors.

How big is the IOU Central team? Where is everyone located?

Our corporate headquarters, which includes operations and most of the management team, are located just outside of Atlanta, GA. IOU Canada’s offices, which include most of R&D and technology, are located in Montreal, Quebec, Canada. The entire team is comprised of seven senior executives with experience that spans all facets of the business, plus several other employees and consultants.

It has been noted that Robert Bialek and Arkadiusz Hajduk, who originally co-founded FairRates in Denmark, joined your team before the original launch; how did that connection happen?

Our CEO, Phil Marleau, learned of FairRates and was impressed with the team’s technical expertise. After several discussions with Robert and Arkadiusz, Phil flew over to Copenhagen in the summer of 2007 to meet with the team. In the end, IOU Canada ended up acquiring their company.

Tell us something interesting or amusing about working at IOU Central.

I take great pride in working at IOU Central. Our entire team (including all contractors & consultants) has completely bought in to this concept. Peer-to-peer lending is a fascinating industry with an unlimited ceiling. Now, more than ever, is the perfect time to introduce this industry. With banks (and other lending institutions) tightening credit guidelines, it is very difficult to borrow money. On the other end of the spectrum, investors are having a hard time diversifying their portfolio with solid investment choices. IOU Central and peer-to-peer lending offers both.

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