Lending Club Launches Auto Refinance Loans

Today Lending Club has unveiled a new product offer. Borrowers in California will be able to refinance auto loans through Lending Club. Lending Club says that the opportunity is huge with currently more than 1 trillion US$ in auto debt outstanding, while just a fraction of that – 40 billion US$ – refinanced annually. The company states this represents huge potential for both Lending Club’s platform and the millions of Americans who could save by refinancing into a more affordable product. Lending Club estimates the average APR for borrowers on new loans through Lending Club will be about 1-3% lower than their current loan, translating into an average savings of up to 1,350 US$ over the life of the loan.

“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars. The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens,” said Scott Sanborn, Lending Club’s President and Chief Executive Officer.  “We are excited to leverage our technology and core capabilities to put thousands of dollars back in consumers’ pockets.”. “This is Lending Club’s first offering of access to a secured loan with an overall risk and return profile that’s complementary to the unsecured loans available through our platform. It’s a big step in the evolution of our platform, a win for consumers, and will give our investors access to another proven asset,” Sanborn said.

Loans will be for amounts from 5K to 50K US$ with terms of 24 to 72 months and APRs ranging from 2.49% to 19.99%.

Lending Club strives to offer a much simpler application process than competitors. While the loans are initially limited to borrowers in California it seems likely that Lending Club will expand that. An article with more details is on Lendacademy.

lendingclub-auto-loan

Prosper Closes Secondary Market

prosper-logo-2016P2P lending marketplace Prosper today informed investors via email, that it will close down the secondary market, effective October 27th. Prosper does not operate the secondary market itself, but uses FolioFn, operated and maintained by FOLIOfn Investments, Inc., a registered broker-dealer.

The announcement email reads:

A Message from Prosper and Folio Investing

Dear …,

We are writing to let you know that as of October 27, 2016, Prosper will no longer offer the Folio Investing Note Trader platform, the secondary market for Prosper Notes. Prosper has found over time that very few investors are using the secondary market and, as such, has made the decision to no longer offer this service. We apologize for any inconvenience that this causes. Prosper remains committed to its retail investor clients and to providing them a great experience.

Here’s what this means for you: The secondary market trading service will be available as normal until end of day (5:30 pm PST) October 19, 2016. After that time, any new orders to list Notes for sale will not have sufficient time to be completed and processed before the site becomes unavailable to users at the end of day (5:30 pm PST) on October 27, 2016.

Once the secondary market trading service is terminated, you will not be able to sell Notes that you own, and you will need to hold them to maturity.

If you have questions about your Notes or the wind-down of the Folio Investing Note Trader platform, please contact Prosper customer service at 877-611-8797.

Thank you.

Prosper and Folio Investing

Prosper has not disclosed usage numbers of the secondary market in the past, but volume traded is perceived to be low and this is also stated in the email. One speculation is that Prosper decided to close the secondary market to cut costs.

My feeling is that this will deliver a blow to the attractiveness of the Prosper marketplace for retail investors. Even if many investors have choosen not to use the marketplace (which several report does not have a very good user interface) the fact that there is a marketplace delivered some assurance that they could exit at least a larger portion of their portfolios should the need for liquidity arise. Also a one month notice seems to me rather short, given that loans can run up to 60 months and with the changed perception the prices could sink (lower markups, higher discounts) in the remaining month of trading as the number of investors wishing to use this last chance to sell will rise in my view, while the number of investors buying will at best stay stable. Continue reading

International P2P Lending Marketplaces – Loan Volumes July 2016

The following table lists the loan originations of p2p lending platforms in July. Zopa leads ahead of Funding Circle and Ratesetter. Assetz Capital and Lendinvest achieved a big surge in volume. The total volume for the reported marketplaces adds up to 341 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of marketplaces open to international investors. Investors can also explore how to make use of current p2p lending cashback offers available.

P2P Lending statistic july 2016

Table: P2P Lending Volumes in July 2016. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

International P2P Lending Services – Loan Volumes June 2016

The following table lists the loan originations of p2p lending platforms in June. Zopa leads ahead of Ratesetter and Funding Circle. This month I added MytripleA. The total volume for the reported marketplaces adds up to 334 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending platforms.

Investors living in markets with no or limited choice of local p2p lending services can check this list of marketplaces open to international investors. Investors can also check how to make use of current p2p lending cashback offers available.

P2P Lending Statistic 06/2016

Table: P2P Lending Volumes in June 2016. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

International P2P Lending Services – Loan Volumes May 2016

The following table lists the loan originations of p2p lending marketplaces in May. Funding Circle leads ahead of Zopa and Ratesetter. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending platforms.

Investors living in markets with no or limited choice of local p2p lending services can check this list of marketplaces open to international investors. Investors can also check how to make use of current p2p lending cashback offers available.

P2P lending Volume May 2016

Table: P2P Lending Volumes in May 2016. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

Shanda Group Buys 11% Stake in Lending Club

Chinese billionaire Chen Tianqiao has bought a close to 12 percent stake in Lending Club.

Singapore-based private investment group Shanda Group, which is led by Chen, said on Monday that it saw the online lender’s battered stock as an attractive buying opportunity.

The sale of the 11.7 percent stake comes as growth in Lending Club’s loan originations is slowing and regulatory interest in the sector is increasing.

Lending Club shares were up in yesterday’s trading. The stock had fallen more than 40 percent since the May 9 announcement of Chief Executive Officer Renaud Laplanche’s resignation after an internal investigation found the company had knowingly sold 22 million US$ of loans that did not match the buyer’s specifications.

‘We have been in discussions with Shanda regarding their investment, and we look forward to a continued dialogue with them,’ a Lending Club spokesman said.

Shanda Group said in a statement that it was a “strong believer” in the business model that Lending Club has pioneered and was “positive on its long-term prospects as it continues to evolve and refine its business.”

The company bought a total of about 29 million Lending Club shares for $148.7 million. It also has call options to buy 15.7 million shares for $11.2 million. Some of the shares were bought before Laplanche’s resignation but the bulk of the purchases were conducted after May 9th.

(Source: Reuters & other)

 

US Treasury Issues Whitepaper on Marketplace Lending

After reviewing information obtained through an RFI the US treasury today published a whitepaper on marketplace lending.

The white paper titled, “Opportunities and Challenges in Online Marketplace Lending,” provides an overview of what the Treasury Department heard in response to its Request for Information, and it contains research on and recommendations for the industry.

Executive Summary

This white paper has been prepared by the Department of the Treasury (“Treasury”) to continue the work initiated by the issuance of the Request for Information (“RFI”) “Public Input on Expanding Access to Credit through Online Marketplace Lending.” This white paper establishes an overview of the evolving market landscape, reviews stakeholder opinions, and provides policy recommendations. This paper also acknowledges the benefits and risks associated with online marketplace lending, and highlights certain best practices applicable both to established and emerging market participants.

Advances in technology and the availability of data are changing the way consumers and small busi­nesses secure financing. Online marketplace lending has emerged as an industry offering faster credit for consumers and small businesses. Through this effort, Treasury took steps to understand the potential opportunities and risks presented by this evolving industry. By engaging directly with industry, Treasury hoped to foster discourse about how this industry could best serve the financial needs of the American public. Treasury received approximately 100 responses to the RFI from online marketplace lenders, trade associations, consumer and small business advocates, academics, investors, and financial institutions. Comments covered a wide range of issues, but several common themes emerged, including the following:

1. Use of Data and Modeling Techniques for Underwriting is an Innovation and a Risk: RFI commenters agreed the use of data for credit underwriting is a core element of online marketplace lending, and one of the sources of innovation that holds the most promise and risk. While data-driven algorithms may expedite credit assessments and reduce costs, they also carry the risk of disparate impact in credit outcomes and the potential for fair lending violations. Importantly, applicants do not have the opportunity to check and correct data potentially being used in underwriting decisions.

2. There is Opportunity to Expand Access to Credit: RFI responses suggested that online marketplace lending is expanding access to credit in some segments by providing loans to certain borrowers who might not otherwise have received capital. Although the majority of consumer loans are being originated for debt consolidation purposes, small business loans are being originated to business owners for general working capital and expansion needs. Distribution partnerships between online marketplace lenders and traditional lenders may present an opportunity to leverage technology to expand access to credit further into underserved markets.

3. New Credit Models and Operations Remain Untested: New business models and underwriting tools have been developed in a period of very low interest rates, declining unemployment, and strong overall credit conditions. However, this industry remains untested through a complete credit cycle. Higher charge off and delinquency rates for recent vintage consumer loans may augur increased concern if and when credit conditions deteriorate.

4. Small Business Borrowers Will Likely Require Enhanced Safeguards: RFI commenters drew attention to uneven protections and regulations currently in place for small business borrowers. RFI commenters across the stakeholder spectrum argued small business borrowers should receive enhanced protections.

5. Greater Transparency Can Benefit Borrowers and Investors: RFI responses strongly supported and agreed on the need for greater transparency for all market participants. Suggested areas for greater transparency include pricing terms for borrowers and standardized loan-level data for investors.

6. Secondary Market for Loans is Undeveloped: Although loan originations are growing at high rates, the secondary market for whole loans originated by online marketplace lenders is limited. RFI commenters agreed that active growth of a securitization market will require transparency and significant repeat issuances.

7. Regulatory Clarity Can Benefit the Market: RFI commenters had diverse views of the role government could play in the market. However, a large number argued that regulators could provide additional clarity around the roles and requirements for the various participants.

In order to encourage safe growth and access to credit through the continued developments of online marketplace lending, this white paper introduces the following recommendations to the federal govern­ment and private sector participants:

1. Support more robust small business borrower protections and effective oversight;

2. Ensure sound borrower experience and back-end operations;

3. Promote a transparent marketplace for borrowers and investors;

4. Expand access to credit through partnerships that ensure safe and affordable credit;

5. Support the expansion of safe and affordable credit through access to government-held data; and

6. Facilitate interagency coordination through the creation of a standing working group for online marketplace lending.

In addition, this white paper identifies potential trends that will require ongoing monitoring. These include the evolution of credit scoring, the impact of changing interest rates, potential liquidity risk, increasing mortgage and auto loans originated by online marketplace lenders, potential cybersecurity threats, and compliance with anti-money laundering requirements. The business models and data-driven algorithms supporting this industry have largely developed in favorable credit conditions. Treasury believes it is important to consider policies that could minimize borrower risks and increase investor confidence in a less favorable credit environment. Continue reading

Lending Club CEO Renaud Laplanche Resigns

Today’s news that Renaud Laplanche, founder of Lending Club, resigns came as a surprise for me and I think pretty much everybody else in the industry. Renaud Laplanche steered Lending Club from launch to the position it as the largest marketplace lending service for consumer loans in the US.

The board has reportedly asked for his resination after an investigation into a sale of 22 million US$ in loans to  an institutional investor that mismatched the investor’s criteria. The loans were subsequently repurchased by Lending Club.

Today’s press release states:

Lending Club conducted a review, under the supervision of a sub-committee of the board of directors and with the assistance of independent outside counsel and other advisors, regarding non-conforming sales to a single, accredited institutional investor of $22 million of near-prime loans ($15 million in March and $7 million in April). The loans in question failed to conform to the investor’s express instructions as to a non-credit and non-pricing element. Certain personnel apparently were aware that the sale did not meet the investor’s criteria.

In early April 2016, Lending Club repurchased these loans at par and subsequently resold them at par to another investor. As a result of the repurchase, as of March 31, 2016, these loans were recorded as secured borrowings on the Company’s balance sheet and were also recorded at fair value. The financial impact of this reporting is that the Company was unable to recognize approximately $150,000 in revenue as of March 31, 2016, related to gains on sales of these loans.

The review began with discovery of a change in the application dates for $3.0 million of the loans described above, which was promptly remediated. The board also hired an outside expert firm to review all other loans facilitated in the first quarter of 2016 and the firm did not find changes to data in these or other Q1 loans.

The review further discovered another matter unrelated to the sale of the loans, involving a failure to inform the board’s Risk Committee of personal interests held in a third party fund while the Company was contemplating an investment in the same fund. This lack of disclosure had no impact on financial results for the first quarter.

Given the events above, the Company took, and will continue to take, remediation steps to resolve the material weaknesses in internal control over financial reporting identified in the first quarter of 2016 — one related to the sales of non-conforming loans and the other to the failure to disclose the personal investment interests — and to restore the effectiveness of its disclosure controls and procedures. These remediation steps included the termination or resignation of three senior managers involved in the sales of the $22 million of near-prime loans.

Scott Sanborn will continue in his role of President and will become acting CEO.

The LC stock is currently trading 25% down following the news.