applying for a fixed-rate loan through Lending Club, the Redwood City, CA-based peer-to-peer lending operation. If the loan goes through, Lending Club pays ReadyForZero a 2 percent finder’s fee.
It’s a sensible partnership: 60 percent of the loans Lending Club makes are to consumers who want to pay off high-interest debt, according to Rob Garcia, the company’s senior director of product strategy and a member of ReadyForZero’s advisory board. The startup could send Lending Club more business by giving consumers the confidence to apply for debt-consolidation loans, while also saving Lending Club’s time by screening out consumers who aren’t likely to qualify. “This team is onto something disruptive,” Garcia said in a statement.
Over time, Ebrahimi says, ReadyForZero hopes to develop two other revenue sources. One would be selling a new kind of credit report—one far more detailed than what Experian and other credit-reporting agencies offer. “The magic will be that as we can see more and more of the history of your paydown, we may be able to say that you have had starts and stops here or there, but actually you are pretty credit-worthy,” he says. “We can create a report, and you can use that however you want.”
The other possibility—and one that sounds much bigger to me—is that credit card companies could hire ReadyForZero to help their own customers pay off their debts. Right now, if an account holder gets into financial trouble and can’t pay off his card, the card issuer will wait for 180 days, then sell the account to a collections agency, usually at a huge discount (the agencies pay just $12 to $20 for every $100 of debt). “There is no in between,” says Ebrahimi. “You fall off the cliff, and you’re screwed.”
But with the data it will collect on its users, ReadyForZero could eventually step in as an intermediary, protecting card holders from collections agencies while at the same time helping card issuers identify the least troubled customers and get more of their money back. “This type of tool could basically automate the process for credit card companies to help you pay back your debt in a more reasonable way,” says Ebrahimi. “So they don’t lose the whole spread between $12 and $100, and you get to feel you are actually paying back your debt.” Which is a lot better than having your hair on fire.
