
A startup is betting $10K your marriage fails - dskrvk
http://nbr.com/2016/02/12/a-start-up-is-betting-10k-your-marriage-fails/
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ritchiea
On one hand this seems openly predatory toward lower income couples who are
more likely to divorce and more likely to need the money but on the other I'm
surprised that there are investors who want to absorb years of handing out
loans, basically giving away money, to then become a debt collecting business
that will be threatened by default rates. And who wants to run that business
where you give people money, wait for their nasty divorce and then harass them
into repayment (not that people don't repay their debts, but in all honesty
harassment is inevitable here).

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awl130
there are tons of investors that would want to invest in this. a loan with a
time horizon of 3,5,10 years is certainly worth a look and would fit in with
any consumer finance type investment (micro loans, car financings, etc).

the investors would obviously not be involved in debt collection, and neither
would the company itself. like any consumer finance (credit card, e.g.) it is
a well-structured process of third-parties that handle collection. this is a
slam dunk if they can get this executed. the PR risk is real however, i grant
you that. there is real regulatory risk here

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ryporter
With a normal loan, the borrower enters into the agreement with the intention
of eventually paying back the loan. In this case, they do not, and are
unlikely to react kindly when confronted with repayment after going through a
divorce. I hope SwanLuv is massively discounting the anticipated debt in their
calculations, because I think this debt will be even less valuable than the
average debt sent to a collection agency.

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awl130
obv. your discount rate will reflect the higher default rate. one comp are
student loans extended by trade schools; there is a massive amount of loans
outstanding by students that either never graduate or never find a job in
their trade. they too are unhappy but that is the nature of debt. this will
show up on your credit report just like unpaid credit card debt, student loans
or car loans

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mikeash
What a horrible product to offer. Couples planning to marry will almost
certainly be more optimistic about their chances for eventual divorce than the
facts warrant. And even if they're realistic, there's immense social pressure
not to admit it. This company's business model is basically going to pressure
people into signing up even if it's a bad decision. And then to cap it off,
they'll be collecting on the debt right when couples are going through a
terrible time.

I feel like this is the sort of business that Martin Shkreli would start if he
were outright evil instead of just a sociopath.

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avn2109
Nobody is forcing couples to (under) estimate their divorce probability or
make bets about that probability.

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avn2109
Wells Fargo will happily let me (but not force me to) take a highly-leveraged
long position in the San Fransisco residential real estate market (in mid
February 2016, arguably near the top of the market) which is a bet with
~comparable downside probability to divorce and ~similarly devastating payoff
if things go south.

Does that make Wells Fargo "clever predators?"

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spronkey
Yes.

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song
On one hand, I find it cynical and clever and appreciate the idea the way I
appreciate black humor. On the other hand, I hope they get shut down. This is
toxic and will cause problems:

1\. Because people will see it as free money, it's likely to increase expenses
for weddings which are already too high

2\. It's extremely problematic in case of abusive relationships. They have a
clause saying that the abuser is liable to repay the entire amount but that
would not help a lot (most) people who escape from an abusive relationship. In
many cases, people who've been abused will not want it to become known.
There's a lot of reasons for it (the perceived stigma of having been abused,
blaming themselves for having been abused, not wanting to cause problems to
their ex,....). That means that a lot of abused people would still be stuck
with the bill at the end. It also creates one more barrier to escaping from a
an abusive relationship which is already hard enough.

This I believe is a net loss for society and will cause sufferings. Even if it
might save a few couples who will work it out instead of facing the
consequences of paying back the loan, it won't balance the number of people
who stay in very bad situation just as a consequence of having had a slightly
grander wedding party.

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foldr
Surely there must be some doubt as to whether it's possible for the contract
to be legally binding. Say that a woman divorces her husband because he's
abusive. Must she then pay back her share of the loan?

Their website only appears to be interested in advertising this to straight
white couples, which seems odd. (I'm not "offended" by this, but it's shitty
advertising.)

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shenanigoat
Statistically, most couples in America are straight and white. It would make
sense to advertise to this demo...however not exclusively.

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mchahn
> most couples in America are straight and white.

True, if by "most" you mean a bit more than 50%.

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rrowland
What other definition is there for "most"?

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uptown
"Most" could be far less than 50% if there were no other cohorts that exceeded
the lower percentage.

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nly
Why would you want to spend $31k on a wedding when you can spend that over a
couple of years and create literally months of amazing memories, travelling
and/or experiencing things together? I'd like to think the kind of people
spending that much can do both, but the article claims this is the 'average
cost'. wtf?

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sokoloff
Here's a case where the median and average cost could be quite far apart.

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dskrvk
Indeed:

> In 2012, when the average wedding cost was $27,427, the median was $18,086.
> In 2011, when the average was $27,021, the median was $16,886. In Manhattan,
> where the widely reported average is $76,687, the median is $55,104. And in
> Alaska, where the average is $15,504, the median is a mere $8,440.

Luckily, these are not national figures, merely numbers reported by visitors
of a particular website. Unfortunately, I couldn't find any more
representative numbers, especially with expenses measured against income
level.

[1]
[http://www.slate.com/articles/life/weddings/2013/06/average_...](http://www.slate.com/articles/life/weddings/2013/06/average_wedding_cost_published_numbers_on_the_price_of_a_wedding_are_totally.html)

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bwillard
I am having trouble figuring out how in the world they can make the numbers
work.

\- The lowest possible rates I've seen for personal loans are ~9%.

\- From the article: over 50 years the "cumulative divorce rate of ever-
married women approached 40 percent". \- 22% of divorces are caused by
financial dificulty ([https://www.institutedfa.com/Leading-Causes-
Divorce/](https://www.institutedfa.com/Leading-Causes-Divorce/)), so assume
there is no money to get back there.

So for an investor to think giving out this type of loan is better than a
standard personal loan the minimum rates they could offer would be 9 / .6
(stay married) / .8 (already bankrupt) = ~18.75%.

And there are all kind of unfavorable terms in this loan:

\- it's a bullet loan so there is no incremental income stream (at least until
the divorce)

\- you have to track people's marital status to see when loans are due

So for the best qualified people you have to charge ~18.75% to come close to
breaking even on the returns from a normal personal loan at which point you
start having to worry about usury laws that cap the interest that can be
charged.

Maybe their algorithm is just going to select for couples with high credit
rating that they think will get divorced soon. But once it becomes known that
getting approved for one of these loans is a strong signal of getting divorced
it seems like people would shy away from them.

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avn2109
>> "But once it becomes known that getting approved for one of these loans is
a strong signal of getting divorced it seems like people would shy away from
them."

~100% of couples, always and everywhere, are sure they will _never_ get
divorced and that divorce is solely for other people. Centuries of actuarial
results cannot convince them otherwise, so probably this won't either.

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grizzles
Sign me up for the Las Vegas franchise. I'll be f ing running that town within
10 years. It fits in well with my paramour introduction service business and
my marriage dissolution insurance business ideas. I love finance geeks.

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nl
Good luck collecting on that! Divorce lawyers will love it though - another
thing to argue over.

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eveningcoffee
I would also recommend a perfect present for the new couple - a smart bedroom
IoT CO2 meter that would help to keep the nasty CO2 levels in the bedroom
inside comfortable levels such that the new couple can enjoy healthier and
happier future together.

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waterlesscloud
How often does divorce lead to bankruptcy as a side-effect? Will that
influence the ability to collect?

This seems like a pretty sketchy idea just on the numbers side of things.

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siliconc0w
Even given a divorce they would see no interest or payments for most of the
life of the loan - probably 5-10 years on average at least. And these are
unsecured loans with the money probably going towards a wedding so there
aren't going to be any assets there. The interest rate will have to be insane
and even then they're going to have a hard time raising money.

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simonebrunozzi
In my opinion, this is a tricky way to convince thousands of couples to apply
- and therefore provide data, etc - without any need to give the 10k to all of
them.

Smart marketing move, but... What happens to OUR data if we're not selected to
receive the 10k?

Can I guess? The company keeps the data and uses it whether you like it or
not.

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ryporter
What happens when this company fails? I would assume the debt would be
auctioned off, and a firm that specializing in this sort of investment would
scoop it up at a discount.

It would be hilarious if they auctioned off the contracts separately. You
could have couples (or a shill) showing up to bid on their own contract!

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SturgeonsLaw
"Honey, I'm going to buy out our loan that's payable upon divorce"

"Why?"

"..."

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pmarreck
If you were an automobile engineer and you discovered a car part that had a 30
to 50% failure rate, resulting in total destruction of the car, despite the
fact that the part was sold with a stellar, inspiring, lifetime guarantee,
what conclusion would you rationally come to?

Would you at least buy insurance for that part?

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SturgeonsLaw
This seems like the opposite of insurance though

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pmarreck
Yes, I'm aware. I was knocking on prenups ;)

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AznHisoka
Can I bet this startup will fail? Seriously there's no way the SEC and
government will allow this. You can't just create any financial instrument you
want and expect the government to just twiddle their thumbs and be ok with it.
Otherwise we'd have eBay futures a long time ago.

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pbreit
OK, I'll bite: this is a terrible idea and I believe has no chance of success.

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awl130
this is a phenomenal idea. priced like a fixed instrument, the stronger a
relationship, the lower the price and the higher the interest rate. the site
should allow wedding guests to hypothetically buy or sell a share of this loan
(it must be hypothetical in order to avoid security law). if the hypothetical
interest rate approaches zero then the couple can rethink their union and have
an out clause: this 'loan' should be structured with an upfront fee that the
company can collect from the couple if they decide to cancel this contract
before the wedding.

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eknight15
I wish we could have done this for our wedding. Wedding costs are ridiculous.
I had no idea how many little things there are, even when trying to do it as
cheap as possible.

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patmcguire
Ha, from the title I took this as a very dark take on the lifestyle involved
to get a startup off the ground... not the case.

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EGreg
I think they might deal with a lot of chapter 7 bankruptcies

