The mobile-home trap: How a Warren Buffett empire preys on the poor

Kevin Carroll, former owner of a Clayton-affiliated dealership in Indiana, said in an interview that he used business loans from a Clayton lender to finance inventory for his lot. If he also guided homebuyers to work with the same lender, 21st Mortgage, the company would give him a discount on his business loans — a “kickback,” in his words.

Doug Farley, who was a general manager at several Clayton-owned dealerships, also used the term “kickback” to describe the profit-share he received on Clayton loans until around 2008. After that, the company changed its incentives to instead provide “kickbacks” on sales of Clayton’s insurance to borrowers, he said.

Ed Atherton, a former lot manager in Arkansas, said his regional supervisor was pressuring lot managers to put at least 80 percent of buyers into Clayton financing. Atherton left the company in 2013.

During the most recent four-year period, 93 percent of Clayton’s mobile-home loans had such costly terms that they required extra disclosure under federal rules. Among all other mobile-home lenders, fewer than half of their loans met that threshold.

Customers said in interviews that dealers misled them to take on unaffordable loans, with tactics including last-minute changes to loan terms and unexplained fees that inflate loan balances. Such loans are, by definition, predatory.

“They’re going to assume the client is unsophisticated, and they’re right,” said Felix Harris, a housing counselor with the nonprofit Knoxville Area Urban League.

Some borrowers felt trapped because they put up a deposit before the dealer explained the loan terms or, like the Ackleys, felt compelled to swallow bait-and-switch deals because they had spent thousands to prepare their land.

6 Planning Differences for Female Clients

Women arent so different from men when it comes to their financial goals, a new Pershing study notes: They want to live comfortably while maintaining their lifestyle, and want to be able to cover their healthcare costs for both their families and themselves.

Yet women face some challenges that men do not. The study, titled Women: Investing With A Purpose, calls out six planning differences that advisors should consider when working with female clients. (It also identified one thing the industry is getting wrong about female clients.)

Page through to see the full list, or click here to see a single-page version. — Maddy Perkins

Image: iStock

Feds bust 40 suspects in ID theft-fraud takedown in South Florida

At the start of 2015, a local police officer reported that his own identity had been stolen and used to obtain fraudulent unemployment benefits from the state.

That tip led federal agents to a Miami Gardens residence, where they found lists with names, birth dates and Social Security numbers stolen from more than 1,000 people, authorities say.

On Thursday, the US attorney’s office spotlighted the arrests of Miami Gardens brothers Densom Beaucejour and Winzord Beaucejour — among 42 defendants recently charged — to dramatize the spread of ID theft-related crimes in South Florida.

The Beaucejours, both in their early 20s, were charged with conspiring to use stolen IDs for submitting bogus federal income tax returns. But that wasn’t all. They’re also accused of seeking false state tax refunds in Ohio and filing bogus unemployment claims in Florida.

US Attorney Wifredo Ferrer said that as investigators have begun targeting the “persistent and pervasive threat” of income-tax fraud over the past three years, the crooks have diversified into other criminal schemes, even outside of Florida.

“As the heat has been going up on stolen identity-tax refund fraud, the bad guys … still need to find other targets to use those stolen identities,” Ferrer told reporters at a press conference. “The new crime du jour is unemployment insurance claims.”

Ferrer also cited credit card, debit card and Social Security fraud among the newer offenses charged in the latest takedown of ID theft offenders. His announcement was designed to heighten awareness of the spreading problems in the run-up to the tax-filing deadline on April 15.

Collectively, the various defendants used tens of thousands of stolen IDs to try to collect about $22 million in tax refunds and other government benefits from the Treasury Department, Florida and other states, such as Ohio, Michigan and Texas, according to the US attorney’s office. Of that total, $3.2 million was paid out — most in IRS-issued tax refunds but also $656,000 in state unemployment benefits.

The force behind the fraud is still the same. For the past four years, Florida has been ranked No. 1 in the country for identity theft, according to complaints compiled by the Federal Trade Commission. South Florida’s ID-theft rate is twice that of the rest of the state.

Ferrer said stolen IDs are the “new crack cocaine” for these offenders, who buy lists of names, dates of birth and Social Security numbers from “insiders” at hospitals, medical offices and schools, among other places. Florida, Georgia and the District of Columbia have emerged as national hot spots for ID theft-related crimes, especially tax-refund fraud.

“It is frustrating and frightening to think that someone else has your personal identification,” said Kelly Jackson, special agent in charge of the IRS criminal investigations, noting the problem has spread from Miami-Dade and Broward counties into Palm Beach County.

Beginning in 2010, IRS criminal investigators, working with local and federal authorities, began targeting the crime. But the numbers show it remains very much a growth industry.

Nationwide, the IRS estimated it received 5 million returns with stolen identities, totaling $29.4 billion in fraudulent refund claims during the 2013 filing season, according to the latest Government Accountability Office report. Of that total, the agency estimated it paid 900,000 bad refunds totaling $5.2 billion.

“However,” the GAO report cautioned, “the full extent of [identity-theft] refund fraud is unknown.”

But on Thursday, Ferrer and other local, state and federal officials focused on criminal cases that revealed new trends.

Among them: Leonce Jeudy, 24, of Plantation, is charged with using stolen IDs to commit income tax, unemployment and credit card fraud. He’s also charged with drug dealing, possession of a firearm and ID theft.

Earlier this year, after a traffic stop, Sunrise police officers obtained a search warrant for Jeudy’s residence. Court records show officers found thousands of stolen IDs and more than 100 credit and debit cards — along with an AK-47 rifle, ammunition, methamphetamine and other drugs.

Eighteen of the recovered debit cards showed that Jeudy received $30,000 in false tax refunds and two other cards revealed fraudulent unemployment insurance payments.

The head of the Florida Department of Economic Opportunity, which handles unemployment insurance benefits, said fraudulent claims “have reached crisis levels.”

DEO’s executive director, Jesse Panuccio, said that in the past year detection efforts uncovered and halted 97,000 fraudulent claims worth more than $400 million.

But Panuccio said that a fraction of the false unemployment claims can slip through the system because of the sheer volume.

There’s also another factor: the state agency routinely contacts employers to verify the past employment of purported claimants, but they don’t always get back to the state in a timely fashion.

“The employer gets a notice,” he said, “but the employer doesn’t always respond quickly.”

ID Theft Suspect Caught, Booked Anonymously

An identity theft suspect was arrested in Council Bluffs on Wednesday, but officers still arent sure what to call him.

That man was apparently trying to buy iPhones from a Verizon store near S. 24th Street and I-80 around noon Wednesday when employees discovered he was using a fake ID. Officers were called but the suspect took off before they were able to take him into custody. Police chased the man to a Shopko parking lot nearby, where the suspect was tased and taken in.

That suspect faces multiple theft charges along with charges for eluding and disobeying police. He was booked as John Doe in Council Bluffs because he had multiple forms of ID on him at the time. He told police he was originally from Michigan and had a fake ID from Pennsylvania, but officers cant confirm his actual identity just yet.

Police told WOWT 6 News that suspect may have been in the company of other suspects who ran from the Verizon store in an unknown vehicle.

Small Business Loans Available After Federal Disaster Declaration Denied For …

A classroom at the damaged Southgate-Rippetoe Elementary School in Moore, that took a direct hit during the March 25 tornado.

Expert says Ball State not alone in ID theft

MUNCIE – Stolen identity/tax refund fraud victims at Ball State University are just a portion of similar targets nationally, which the federal government might be unaware of, according to the head of the Indiana Attorney Generals Identity Theft Unit.

You are not alone, Rich Bramer, who is also director of the AGs Consumer Protection Division, told about 50 BSU faculty and staff on Wednesday. There is a widespread tendency toward stealing university employees information and using it to file false tax returns and steal their refunds.

For example, more than 200 employees at the University of Iowa, at least a dozen at Seminole State College, and at least 80 at Western Kentucky University became tax fraud prey this spring in addition to more than 140 at Ball State, Bramer said, citing local media reports.

Since 2014, data breaches have occurred at more than 30 colleges and universities, including Indiana University and Butler University, and five of the breaches were larger than the Sony Pictures hack, the former prosecutor said.

So theres clearly something going on, he added. We dont know what. I have talked to my counterparts in other states, many of whom were not aware of this trend. We will look at it. We will try to investigate. We will discuss it. We need to try to find out whats going on. As far as I know, there is no federal institution looking into this at this time, but Im going to bring it to their attention.

Sources of identity theft include stolen laptops, hacked servers, lost smart phones and other portable devices, in-house identity thieves and employees with ulterior motives.

What I think you have experienced here, somebody is getting in somewhere on a server and getting your information, Bramer said.

Personal information stolen from Ball State employees included Social Security numbers. In some cases the Social Security numbers of employees children also were stolen.

PROTECT YOUR INFORMATION: Tips and precautions to avoid identity theft

One of those employees asked Bramer whether authorities would look for things the Ball State victims might share in common to determine the source of the breach.

I would want to first look at the bigger picture, he answered. Why have we had all these people at Ball State suffer this problem? Why have we had all these people at James Madison University suffer this problem? Why are all these university and college employees having this problem? And I dont have an answer to that. But Im going to bring it up with my counterparts in other states.

Asked whether he suspected the stolen identities at Ball State were related to the cyberattack on Anthem, which insures BSU employees and those at some of the other higher education institutions, Bramer responded: I have not been informed of any link at this moment. If we had a definite link, wed issue a fraud alert to let everybody know.

Bramer warned BSU victims to be on guard if anyone unprompted, unknown, not clearly known or iffy asks questions about their identity.

For example, a person claiming to be from Bramers bank called him after hours recently to report that Bramers debit card had been hacked. When the supposed bank employee asked questions to verify Bramers identity, Bramer, a former prosecutor, identified himself as chairman of Indianas ID theft unit, refused to answer questions, and turned the tables, asking the caller to prove his identity.

As it turned out, Bramer learned after paying a visit to his bank the next day that his debit card had indeed been hacked and the call was legitimate.

If youre already a victim, its very likely they will try to repeat the theft against you, Bramer said. Clearly, your information is on the market. If its been sold once, it could well be sold again.

Contact Seth Slabaugh at (765) 213-5834.

Financial Services Industry Supports 20 Years of Pro Bono Financial Planning

ATLANTA, Ga., March 19, 2015 (GLOBE NEWSWIRE) — via PRWEB – In its 20th year of supporting the delivery of pro bono financial planning, the Foundation for Financial Planning is pleased to reflect on 20 years of uninterrupted service to the underserved.

During this time, more than 13,000 industry professionals have volunteered to provide pro bono financial planning to the underserved. This contribution of time is valued at over $27 million and the generosity of pro bono financial planning services has resulted in serving more than 350,000 people, which included more than 52,000 one-on-one pro bono financial planning sessions. It Matters!

With two decades of support for underserved communities, the Foundation for Financial Planning exemplifies the true spirit of commitment and dedication to supporting pro bono financial planning, said Bernie Clark, Foundation Chair. This year, the organization continues its drive to engage corporations and professionals nationwide in the Foundations efforts.

The Foundation for Financial Planning is unique and is the only organization dedicated solely to supporting the delivery of pro bono financial planning to underserved communities. With the exceptional success of the last 20 years, the Foundation is now poised for an even greater future. There is no better industry example of giving back than the work and mission of the Foundation for Financial Planning — it is a testimonial that financial services corporations and professionals believe all people should have access to and can benefit from financial planning, said James A. Peniston, executive director of the Foundation for Financial Planning.

The Foundation has provided more than $5.7 million in grants to local, regional and national nonprofits in support of pro bono financial planning and knows supporting efforts in local communities through grant-making and collaborative partnerships are critical to long-term success. The Foundations grants cycle is open through April 30, 2015.

About the Foundation for Financial Planning

The Foundation for Financial Planning, a 501(c) (3) non-profit is the only organization solely devoted to supporting the delivery of pro bono financial planning. Its mission is to help people take control of their financial lives by connecting the financial planning community with people in need. Visit http://www.foundationforfinancialplanning.org for more information and to learn how you can contribute to making a difference in the financial lives of others.

The Foundation for Financial Planning meets its mission daily by connecting financial planners with underserved populations and has helped provide more than 350,000 people with pro bono financial planning. The Foundation has provided more than $5.7 million in grants to local, regional and national nonprofits in support of pro bono financial planning, including providing financial planning resources free of charge to the military and has connected more than 13,000 financial planners with volunteer opportunities. It Matters!

This article was originally distributed on PRWeb. For the original version including any supplementary images or video, visit http://www.prweb.com/releases/2015/03/prweb12595755.htm

Foundation for Financial Planning
Dawn Butler

+1 770-938-1110

Govt’s External Debt, States’ Debt Profile On the Rise

But as at June last year, states in the federation had a domestic debt stock of N1.551 trillion or $9.963 billion. The Federal Governments share of the rising external debt then stood at $6.363 billion. A breakdown of the debt showed that $3.146 billion of the debt owed by states were borrowed from multilateral institution while $118.9 million were bilateral loans. In the case of the Federal Government $3.652 billion were loans sourced from multilateral institutions while a total of $2.793 billion were loans obtained from China Export-Import Bank and the funds the Federal Government raised from Eurobond.

The DMO said, however, that the Federal Government debt is sustainable as its debt sustainability analysis showed that the debt/GDP ratio was only 2.4 per cent. The bulk of the Federal Government loans were concessionary with low interests and long moratorium.

Based on the rising debt profiles of state governments, the Federal Government last year directed banks not to grant fresh loans to state governments until they got the relevant approval and clearance from the Federal Ministry of Finance. The Federal Government had defended its decision to dissuade banks from granting unsecured loans to state governments, saying it was to protect the states from excessive accumulation of debts.

The Minister of State for Finance, Bashir Yuguda, had said that the decision was not aimed at stalling the development efforts of the state governments. The Minister said that most of the states have been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans.

Mr. Yuguda, who was delivering a lecture titled: Nigerias Economic Policies and Reforms: An Assessment of the Real and Informal Sectors, said the countrys overall debt profile, particularly those of the state governments, was scary.

Though he did not provide specific details then, the Minister emphasised the need for the states to continue to look inwards for other sources of revenue to pursue their development programmes.

Nigerias total public debt stock, external and domestic, according to the Debt Management Office, as at December 2014, stood at about $67.73 billion or N11.2 trillion, which is about N1.2 trillion higher than the 2013 figure of N10.04 trillion. A breakdown of the figures showed that external debt, including those of the states, was $9.71 billion or N1.63 trillion.

As at December 2013, the total stock of external debt was $8.821 billion indicating a rise of $556 million in the first half of 2014. But as at December 31, 2012, Federal Governments external debt was $4.14 billion as against a total debt stock of both federal and state governments of $6.5 billion.

As at June last year, Federal Governments borrowing from multilateral institutions amounted to $3.826 billion while loans from bilateral sources mainly China Exim Bank and Eurobond amounted to $2.537 billion. In the case of states, a total of $2.904 billion was sourced from multilateral institutions; $108.9 million was obtained as loans from bilateral sources, thus making the states total outstanding external debt as at June 2013, $3.013 billion.

LendUp: A Responsible Alternative To Payday Loans?

Do you need to borrow $250 or less for just a few weeks? Are you fed up with traditional payday lenders and looking for a better way to borrow money? If so, you might consider LendUp, an online lender that offers small-dollar loans with no credit check required.

But is a LendUp loan really a better alternative to a payday loan? Here’s a look at what LendUp offers, how much its loans cost, how the application process works and whether its service is legitimate.

What LendUp Offers

LendUp is an online-only direct lender of small-dollar-amount, short-term, unsecured loans designed for emergency cash or making ends meet. When you begin with LendUp, you can choose your loan amount and loan term, from $100 to $250, and seven days to 30 days. You can only get one loan at a time. They are similar to loans you might have seen labeled payday loans, installment loans, direct loans, personal loans or cash advances.

How LendUp Is Different

LendUp’s difference from payday lenders, the company says, lies in its transparent, up-front pricing and what it calls the LendUp Ladder. This structure allows customers to earn their way to an annual percentage rate (APR) as low as 29% over time as they repay their LendUp loans on time and complete credit education courses at the LendUp website. The courses cover credit building, consumer credit rights, the true cost of credit, credit reports, building credit and protecting yourself online.

LendUp has four status levels borrowers can achieve: silver, gold, platinum and prime. You start at the silver level, and as you move up, you can borrow as much as $1,000 for as long as six months. Once you reach the platinum and prime levels, your payments can be reported to credit bureaus to help improve your credit score and fatten your credit file. You also pay a lower interest rate as you establish a good repayment history. The interest-rate drop isn’t entirely a reward for good behavior, though: One reason your APR gets lower is because the repayment period is longer.

What if you have trouble repaying a LendUp loan? Unlike a standard payday loan, you cannot simply roll the loan over at additional cost. Instead, LendUp says it will work with you to create a repayment plan at no additional cost. Eligible borrowers can even request an automatic extension of up to 15 days online. As with other creditors, if you don’t repay your loan, your account may be sent to a collection bureau, you may be sued and LendUp may report your account delinquency to credit bureaus, which will hurt your credit score significantly.

What LendUp Loans Cost

The APR on LendUp loans is high compared to other types of consumer loans. It ranges from 29%, for the best, established customers to as high as a state’s legal maximum APR for short-term loans: 460% in California, for example. APR is highest with the seven-day, $250 loan, at 767% (or less, depending on your state’s laws), and lowest with the 30-day, $100 loan, at about 210%.

To put these rates in perspective, a 30-year fixed-rate mortgage might have an APR of 4%, an auto loan might have an APR of 6%, a student loan might have an APR of 5% to 8%, and a credit card for someone with good credit might have an APR of 11%. An APR of 29% is often the default rate that credit card users have to pay when they are delinquent on their minimum monthly payments.

Peer-to-peer lender Prosper charges 6.68% to 35.97% APR, and its competitor, Lending Club, charges 7.64% to 28.69% APR. Both Prosper and Lending Club require a minimum credit score of around 650. The other consumer loans listed here also have minimum credit score requirements, and the lower your score, the higher your rate. (For related reading, see Top Alternatives To A Co-Signer). By contrast, LendUp has no minimum credit score requirement.

One reason the APR on LendUp loans is so high is because the loans are for such a short period. When you borrow from LendUp, you pay a loan fee of 15% to 20% of the total repayment amount, minus 30 cents per day for every day under 30 days of loan duration. So you might borrow $200 for 30 days with a 15% fee of $34.90, and the APR would work out to 212.31%. That same loan for 14 days would have a fee of $30.10 and an APR of 392.38%. But LendUp makes its fees clear up front, so you understand exactly what you owe before you borrow.

Additional Fees. The loan fee may not be all youre charged with a LendUp loan. To receive your loan funds rapidly, within two hours of approval or the same day you apply, LendUp charges an additional fee. There is a fee for using your debit card to repay your loan early. And if your scheduled repayment doesn’t clear your checking account, LendUp charges a one-time $15 non-sufficient-funds fee.

Requirements and Application Process

To get a LendUp loan, you must be at least 18 and be a legal resident of the United States. At the time of writing, loans are available to consumers in 16 states: Texas, Louisiana, New Mexico, Alabama, Wyoming, Idaho, Oklahoma, Washington, Illinois, Mississippi, Oregon, Kansas, Missouri, Tennessee, Minnesota and California. The company has applied for licensing in Florida, Maine, Ohio and Indiana, but is not yet authorized to do business there. LendUp isn’t available nationwide because 18 states limit or ban payday lending; only 32 states specifically allow it.

To apply, you’ll need an active checking account, a phone that can receive calls and a valid email address. You can apply from your smartphone, tablet or computer. Make sure you’re using a secure Internet connection, not public WiFi, so that your sensitive personal information can’t easily be stolen. Then provide your name, address, Social Security number, birthdate and mobile phone number. You’ll also need to provide information about your employment and income. The application then asks for your checking account number and the bank’s routing number for the account where you want your loan proceeds deposited.

Banks look vulnerable as lucrative loans market gets personal online

For banks, this new wave of rivals is sparking a debate about how best to respond to the growing competition from technology companies that although tiny, have the potential to pinch valuable customers.

The banks record share prices can make them appear indestructible, and the new challengers face enormous barriers in trying to enter the market, but there is a strong awareness of the power of disruption. Witness the upheaval unleashed by Uber in taxis, or iTunes in music.

As a seniorBank of England official, Andrew Haldane, argued back in 2012, there is no automatic need for banks if borrowers and savers could connect directly.

The banking middlemen may in time become the surplus links in the chain. Where music and publishing have led, finance could follow, Haldane said at the time.

So, what might the wave of new online competitors mean for Australias all-powerful banks?

Barely a week goes without a technology firm trumpeting a new offering in the finance market.

With unfamiliar brand names, and often led by former bankers, these businesses are typically offering cheaper or easier credit, to an online customer base that has little need to walk into a bank branch.

Peer-to-peer lending is perhaps the most visible example. Simply put, it is where a website facilitates lending between saver and borrower – cutting out the need for the bank. It is an approach that has sparked rapid growth overseas.

In Britain, peer-to-peer lending has been roughly doubling in size for the last few years and last year its volumes eclipsed pound;1 billion ($1.9 billion), the industry association says. Across the Atlantic in the United States, the worlds biggest P2P business Lending Club last year floated in a bumper initial public offering, with its shares surging 56 per cent on debut.

Daniel Foggo, chief executive of the Australian arm of UK peer-to-peer lender RateSetter, is eyeing the $100 billion personal loan market, which includes automotive, credit cards and unsecured credit. Ultimately, he says the peer-to-peer lenders could grab as much as 20 per cent of these markets in Australia.

While banks have argued the popularity of peer-to-peer platforms is being inflated by low interest rates, Foggo points out that in the UK it has been around for almost a decade.

Overseas there have been peer-to-peer lenders operating since 2006, he says. Zopa [a UK lender] has reported their return through that full credit cycle, and they had positive returns every year.

One reason peer-to-peer lenders like Foggo are eyeing Australia is that its an affluent, technology savvy market. Underlining this threat to the banks, a KPMG survey this week found young customers rate the mobile and online presence as the most important attribute when choosing a bank, and they were becoming less loyal.

But the growth overseas is not just being driven by new technology or lower costs, but something much more profound: erosion in trust towards banks and large corporations.

Australias banks have not had their reputations trashed like those overseas during the global financial crisis. But that does not make them immune to global forces unleashed by the internet.

SocietyOnes co-founder, Matt Symons, argues that what is really disruptive about peer-to-peer platforms is that trust is moving away from institutions -such as banks -towards individuals. Individual ratings of other peoples reliability through eBay or Airbnb allow more and more customers to cut out middlemen that were previously taking a profit.

In the world of credit, peer-to-peer and other online lending platforms achieve this by extending lower rates of interest to people who have the better credit ratings.

In that world, trust is moving away from the institutions and towards individuals; thats what is potentially very disruptive about these peer-to-peer lending platforms, Symons says.

SocietyOne is the longest-running peer-to-peer lender in Australia. It has attracted equity investments from Westpac, Rupert Murdochs News Corporation and companies controlled by James Packer and Kerry Stokes.

But there are plenty of others also eyeing their piece of the action. Other peer-to-peer lenders including MoneyPlace, Marketlend and ThinCats, whileDirectMoney, led by the former Aussie Home Loans boss Stephen Porges, has started writing personal loans via an online platform.

Then there are other online rivals using technology in other ways to target the banks turf in small business lending.

Kabbage, an American online lender thats writing $2 million a day in small business loans in the US, last month announced a partnership with locally based Kikka Capital. Its pitch is it can write working capital loans of up to $100,000 within seven minutes, by having businesses provide their financials online.

Australian start-upMoula last year began offering working capital loans to small business, something online payments giant PayPal now does as well.

Consultant Martin North says that such is the interest in online lending to smaller businesses that it is becoming quite a crowded market in terms of alternatives to the big banks.

North believes the peer-to-peer model has serious long-term potential, especially for business lending, which is a lucrative, high-margin segment for banks. Supporting this, North cites a survey he conducted that found 35 per cent of small business borrowers would be interested in using the service, and many investors would be happy to lend this way.

In the long term, we will see a substantial peer-to-peer lending market in Australia and it will be competitive with the banks, but it will take time to evolve, he says.

Statistics are hard to come by in Australia but Goldman last month estimated $US11 billion ($14 billion) out of $US150 billion in annual US bank profits could be threatened by non-traditional lending, such as on peer-to-peer platforms, over the next five years.

At the same time, however, the uphill battle facing these minnows of finance should not be understated.

For instance, there is no suggestion it will touch the largest source of bank profits in the country: the $1.3 trillion mortgage market.

Macquarie analyst MikeWiblinis sceptical of the long-term potential for peer-to-peer lending to be the game changer that proponents claim.

Wiblin says the big challenge facing the industry will be how investors respond when interest rates inevitably rise or there are higher rates of default by borrowers.

All P2P does is what a bank does, but it does it on an automated platform, he says.

While peer-to-peer businesses are getting much of the attention, Wiblin says there are other technology-based businesses eyeing banking that are more innovative and harder to copy -and therefore a bigger long-term threat to banks.

If there was a case to say peer-to-peer was getting big, then the banks would just buy them out, or start to do it themselves.

Indeed, this is what is already starting to happen in overseas: technology upstarts are being absorbed into conventional finance.

Some 80 to 90 per cent of the capital lent out by the two US giants, Prosper and Lending Club, actually comes from institutional investors, according to Forbes.

Westpacs head of retail and business banking, Jason Yetton, says the bank is watching the market closely and is keen to learn from these new rivals, after it invested $5 million in SocietyOne last year.

We could fight and defend against these new entrants, but we know partnering will provide insight into the development of financial products and online creditworthiness algorithms that would otherwise be blind to us, Yetton said last week.

For all the promise of greater competition, however, the wave of new financiers also raises questions about whether new risks are being created.

For one, there is the risk that investors who lend their money via a peer-to-peer platform may lose some of their capital because borrowers default, notwithstanding that many of these new firms have provision funds to protect lenders against bad loans.

There are no official statistics measuring the size of the peer-to-peer market in Australia, but the Reserve Bank last month noted that some retail investors have been attracted to the relatively high rates of return offered by the nascent market of peer-to lenders.

[The Australians Securities and Investments Commission] has warned that investors should understand and take into account the associated financial risks of these products, which include a lack of liquidity and a difficulty in assessing the quality of the borrower, the RBA said.

A further question is how these business models would cope with much higher interest rates or a wave of defaults, something they are yet to experience, certainly in Australia.

Banks have made a point of highlighting this.

ANZ chief executiveMike Smith last month said that digital change was as fundamental as the industrial revolution, and regulators should be wary of new risks being introduced.

He cited the example of peer-to-peerlenders, saying the industry was emerging at a time when very few loans were going bad and that needed to be taken into account by regulators.

When people get burnt, the question is going to be asked, why are you being burnt, who regulated it? Whos responsible? And I think that thats going to be the worry, Smith said.

It is true that the number of loans going bad is at a historic low -and this makes life easier for non-banks to compete in lending.

Yet both Foggo and Symons point out that default rates among peer-to-peer lenders in the UK have in fact been lower than for commercial banks. Both peer-to-peer lenders also say their platforms are targeting the most creditworthy borrowers, which would minimise the impact of a rise in bad debts, something many think is inevitable.

On the question of regulation, authorities are alert to the risks highlighted by Smith but a regulatory crackdown looks unlikely.

Instead, the financial system inquiry argued that it should be made easier for peer-to-peer lenders and other crowdfunders to do business, because they are a promising source of finance for start-up businesses that cant always access a bank loan.

The regulatory framework should facilitate financing via the internet, the report said.

At the moment, peer-to-peer lenders in Australia are regulated by the Australian Securities and Investments Commission, but unlike banks they are not subject to prudential regulation because they dont take deposits.

And despite the warnings of bankers such as Smith, it looks unlikely that this sector will be subject to greater regulatory constraints any time soon. The corporate regulator last month announced a new hub to help fintech start-ups navigate the regulatory system more quickly, and it is firmly against regulating peer-to-peer lenders as if they were banks.

Instead of resisting the change, the signs are that regulators are welcoming the extra competition as a win for customers.