I've used Lending Club on both sides of the marketplace (Lender and Borrower) and I really love the platform. So much easier than dealing with banks and the rates have always been fair. It's a shame they've made these missteps, but ultimately I think they'll come out stronger.
I use it as a borrower. I was able to get better rates than banks to do some consolidation. I like the platform from this side. I just worry who my loan will get sold to if they tank.
I wouldn't too much about that. The new noteholder would still need to honor the provisions of the original agreement, and you could involve the Consumer Financial Protection Bureau if you ran into problems with the servicing of the note.
EDIT: I rescind my statement. If LC fails, both lenders and investors are going to have a bad time.
"From their prospectus:
Our arrangements for backup servicing are limited. If we fail to maintain operations, you will experience a delay and increased cost in respect of your expected principal and interest payments on the Notes, and we may be unable to collect and process repayments from borrowers. We have made arrangements for only limited backup servicing. If our platform were to fail or we became insolvent, we would attempt to transfer our Loan servicing obligations to our third-party back-up servicer. There can be no assurance that this back-up servicer will be able to adequately perform the servicing of the outstanding Loan. If this back-up servicer assumes the servicing of the Loan, the back-up servicer will impose additional servicing fees, reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to our back-up servicer may result in delays in the processing and recovery of information with respect to amounts owed on the Loan or, if our platform becomes inoperable, may prevent us from servicing the Loan and making principal and interest payments on the Notes. If our back-up servicer is not able to service the Loan effectively, investors’ ability to receive principal and interest payments on their Notes may be substantially impaired."
I guess I really don't. According to the comment above the terms can't change. So long as the terms stay the same and I can pay online it wouldn't really impact me.
Aren't they being accused of misrepresenting over $20 million worth of loans to institutional investors? It sounds like they are dealing with some serious fraud allegations. How will they survive? It looks to me like the company is imploding right now.
No, it was 3 million. They originate over $100 million per month in loans so it was a very small amount and the data they fudged was not related to the credit quality. The only reason to be concerned is if you believe this is only the tip of the iceberg. Those fears were put to rest yesterday though when the new CEO released a letter stating that they engaged an accounting firm to audit their entire portfolio and found no additional discrepancies.
The total amount of loans sold to the client was $22 million but only $3 million of those didn't conform. The issue at the heart of this is the legal language in the agreement that was shown to the loan applicant when they applied for the loan. It was really a stupid thing for them to fudge and the returned loans have already been snapped up by other clients.
As with anything financial, there's always a lot of grey. Litigation will get drug out, a fine will be levied, business will resume. DOJ probe is a CYA move by the feds.
