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LendingClub CEO Resigns Following Loan Sales Review
- spking 10y agoNo paywall: http://www.cnbc.com/2016/05/09/lending-club-shares-tumble-after-ceo-resigns.html http://www.cnbc.com/2016/05/09/lending-club-shares-tumble-af...
- teh_klev 10y agoNo paywall...no annoying auto-play video: http://archive.is/vh3yl http://archive.is/vh3yl
- blairanderson 10y agothis should be a top level comment
- cpdean 10y agothanks!
- zymhan 10y agoAlso this one I submitted first... https://news.ycombinator.com/item?id=11659278 https://news.ycombinator.com/item?id=11659278 http://www.nytimes.com/2016/05/10/business/dealbook/lending-club-leading-online-lender-says-its-chief-resigns.html http://www.nytimes.com/2016/05/10/business/dealbook/lending-...
- psychometry 10y agoDoes everyone on HN pay for the WSJ or something? I don't understand why anyone upvotes these submissions.
- gumby 10y agoYou can get around the paywall by copying the headline and then doing a google search of site:wsj.com <the headline you just pasted> WSJ wants to have a paywall but doesn't want to lose inbound google news traffic so they allow incoming traffic from google (probably they have the theory that you'll come for one article, see ads for other articles you'd like to read, and sign up. Given how web-clueless most people are it's not a terrible theory). I think they also feel that being left out of "the conversation" in favor of AP or Buzzfeed is worse than losing a bit of revenue. Probably a bit of referrer-fu would work too but I rarely find the wsj worth reading so couldn't be bothered to see what they check for.
- ultramancool 10y agoThere is a solution: https://addons.mozilla.org/en-US/firefox/addon/paywall-pass/ https://addons.mozilla.org/en-US/firefox/addon/paywall-pass/ Basically just messes with the referer on an automatic basis for a few websites.
- gefh 10y agoThey even had the cheek to complain I was using an ad blocker. Which I'm not - I just don't autoplay flash.
- jraby3 10y agoYou can generally just type the headline of a wsj article in Google and read the whole article.
- brobinson 10y agoClick the "web" link under the title and then click the first Google result to bypass the paywall.
- TwoFactor 10y agoWow, been on HN for years and never realized that haha. Thanks!
- jordhy 10y agoHe was a cofounder, chairman and CEO so it's a big, and sadly a very negative, event.
- CameronBanga 10y agoWho is this big and sad for? The loan buyer? It isn't sad for retiring CEO Laplanche is it? I mean, it looks like they cooked the books, and now he's quitting before having to deal with the repercussion. My guess is that he was forced out, but I'm not sure it matters if it was under his own will or not. Either way, it's definitely not sad for him or LendingClub.
- bluejekyll 10y ago"never attribute to malice that which is adequately explained by stupidity" We probably don't know enough yet to be clear what the real details for the departure are. It could be that all of this is due to poor oversight, and not malice.
- tsunamifury 10y agoAll I know is when I started getting mailers DAILY from lendingClub with magical terms I figured it was some sort of pyramid scheme. I worked in finance during the recession, you can smell a desperate entity a mile away trying to cover its books.
- shostack 10y agoWhat does it typically look like when they try to cover their books?
- tsunamifury 10y agoIncreased marketing for deals on terms so favorable to the client that there is no way they could make a profit. Usually when they rope in these clients, they then book 'future revenues' on them against their current losses.
- shostack 10y agoDepending on the risk of what is being sold here, is this always necessarily a bad deal for the clients? Or could they try to cover their losses on one product by marketing favorable terms on a different product that might perform well? Not sure if that's worded the best way--still learning about how the accounting for this works.
- tsunamifury 10y agoIf you're buying a product, sure you can make out like a bandit. But in this case its a contract that can stretch into unforeseen consequences. For example you get a loan on X terms with Y seller. Y seller goes out of business (due to being a pyramid scheme) and now your contract is sold to the highest bidder to satisfy investors in bankruptcy court. You now hold X contract with Z seller who may be strongly incentivized to take advantage of any terms in your contract that allow for changes. In order to make out you need to satisfy the terms of Y seller's contract before they fold -- and balancing the incentives vs unknown risk of Z at unknown time, its probably not worth your time. The exception to that is: You have enough capital to sign a contract so big it actually forces Z event, then have the political clout to make sure the court rules in your favor rather than the investors. All the while also buying insurance against Z event. Then you have something similar to Goldman Sachs' profitable moves during and after the Great Recession.
- ipsin 10y ago"the application date on $3 million of those loans had been altered to make them comply" I'm curious whether the initial discovery of this problem came from API users noticing the discrepancy, or from a more traditional route, like a whistleblower.
- mnml_ 10y agoThe stock is way undervalued tho. They have a solid growth.
- elecengin 10y agoAn interesting tidbit embedded in the news is that $22mm in loans was sold to a single investor - the model they talk about on the website is peer to peer, but this appears more peer-to-institutional-buyer (which I always kind of suspected, but this clarifies it)... An article on the trend: http://qz.com/355848/wall-street-is-hogging-the-peer-to-peer-lending-market/ http://qz.com/355848/wall-street-is-hogging-the-peer-to-peer...
- vosper 10y agoI think a lot of their volume is peer-to-peer, though, and there's nothing saying this $22m was from an institution and not a rich individual (though an institution seems more likely). I imagine this is more of a case of "I have a lot more money than your normal customer so I want special treatment" and Lendingclub then abusing that to take advantage of the investor. I wonder if the investor had taken their $22m to the automated web platform and setup their investment criteria if this would never have occurred.
- morgante 10y agoI think you're dramatically underestimating the degree to which institutional investors are involved in peer-to-peer. There are entire software startups selling analysis software to hedge funds for peer-to-peer lending. It almost certainly was not a single wealthy individual.
- CPLX 10y ago> I think a lot of their volume is peer-to-peer, though, and there's nothing saying this $22m was from an institution and not a rich individual From the original article: "The investor that initially bought the LendingClub loans in question was Jefferies LLC, according to people familiar with the matter."
- ryetoasthumor 10y agoThe language around the industry has changed over the past year as institutional investors began to make up more of the loan buying volume-so the name changed from "P2P" to "Marketplace Lending"
- vosper 10y ago> Other platforms, such as Prosper Marketplace Inc., Avant Inc., or On Deck Capital Inc. have reported either slowing investor demand for loans or a drop in lending volume this year, the result of investors’ skepticism of future returns on online loans and because they see greater opportunity in other bonds. So where is the smart money going? Lendingclub and Prosper have had reasonable returns for me, and seem like a good way to diversify my investments a bit.
- cm2012 10y agoTheoretically, this is the best time for small investors to buy LC loans. The hedge funds have backed out, so you can get better yield loans for much more competitive pricing. This is unless you think the institutional investors know something you don't, as opposed to just rebalancing their portfolios.
- vosper 10y agoI'm not very strong on finance at all, but if the hedge funds have pulled their money out of the Lendingclub platform then shouldn't that reduce the amount of money that Lendingclub has to lend and therefore drive up the cost of taking a loan from them, assuming demand for their loans hasn't dropped as well? Like a basic supply and demand thing?
- deleted 10y ago[deleted]
- adanto6840 10y agoYes, exactly. What I think the poster was suggesting is that, in theory, now is a good time to be investing in LC loans -- because the rates will be driven up due to the lower availability of capital on the platform. If he was suggesting something else then I'm in the same boat as you, hehe. ;-) I do tend to think that the institutional investors/hedge funds are quite likely to "know more than you do" however, which could instead mean that this is an early signal & would be a foolish play.
- 10y ago
- cm2012 10y agoMy condolences to all the LC employees. By all accounts Renaud was a well liked CEO, and he was there since the start. This must be such a morale killer :(
- sgwealti 10y agoI lend on Prosper but I am worried that there are borrowers who have figured out how to game the system. If you look at the borrower applications they are clearly not filled out by real people. When I first started lending there in 2007 you could tell it was a real person applying for the loan because the application form contained more information about the borrower and they actually answered questions. It seems pretty sketchy to me but I haven't pulled my money out just yet.
- vosper 10y agoI have some money in Prosper too, and this concerns me if it's true. Is there any further discussion of this that you could point me to?
- sgwealti 10y agoI have tried without success to find discussion of this issue. I have just noticed that the borrower/loan profiles are getting more vague over time. It used to show a user id and the user ids were all really similar like mrhomeimprovement_67 and dental_bills99 but I see that now they don't even show that much information. I could be completely wrong about this.
- deleted 10y ago[deleted]
- nugget 10y agoIn what case would you be able to fool Prosper or LendingClub but not a traditional credit card company? Couldn't they just adopt similar lending standards? I always viewed p2p as just a more efficient way of mimicking the lending and interest-collecting functions of a bank/credit card company.
- pbreit 10y agoExcept some of the decision making is being performed by amateurs.
- yalogin 10y agoWhat happened? Why is lendingclub doing bad? From the outside it looks like a good business model. One that should do better I thought.
- phamilton 10y agoLending club is an experiment that had never been tested in anything but a booming economy with near zero interest rates. Any change in those circumstances is an unknown.
- partytran 10y ago> a booming economy This seems to be a bit of hyperbole; I disagree that the economic consensus is that the period of LC's existence has been an economic boom. U.S. stock and housing prices indeed recovered from 2008 lows - real economic growth (jobs, industrial output, new home construction) has been tepid at best. The Bay Area may have been flooded with new jobs and investment, but the rest of the country certainly has not been.
- joosters 10y agoIt's a good business model for Lending Club, but maybe not for investors. LC is responsible for grading the loans and calculating the risk of each borrower. However, it does not take any of the risk of the loans being traded on its platform. So there's a big concern that LC may not be very scrupulous about the borrowers it accepts. It's a similar situation to the last financial crisis where companies were happily accepting risky mortgage applications, doing little or no checking, and then selling them on for a quick profit.
- partytran 10y ago> So there's a big concern that LC may not be very scrupulous about the borrowers it accepts. I haven't read this anywhere else other than your comment. Do you have any other evidence for this claim?
- 10y ago
- matt_wulfeck 10y agoI stopped investing in lendingclub once I realized the taxes on my gains. Interest is basically counted as income, which makes capital gains in stocks much more attractive. What I did notice that I was pretty bad at picking notes. Lots of handpicked ones flopped and a lot of random/automatic ones are still going.
- baccredited 10y agoYou can invest in Lending Club via a tax deferred account like an IRA. You won't be taxed on gains that way. Agree that handpicking is a waste of time. Let the autoinvest feature work for you.
- hatred 10y agoYou can also use 3rdparty API's like LendingRobot that promise higher returns than LendingClub's own auto-investing feature.
- bduerst 10y agoWhat's the avg return on autoinvest with lending club?
- pmorici 10y agoIt really depends on what type of loan grades you tell it you want to invest in but the median returns of LC investors is about 7% and depending on how you setup the auto investor but returns of 5-10% are typical. You can look at LC investor returns on their website... https://www.lendingclub.com/info/statistics-performance.action https://www.lendingclub.com/info/statistics-performance.acti...
- seibelj 10y agoHopefully my side business won't tank! Plug for LendingClub mobile apps: iOS: https://itunes.apple.com/us/app/lendingclub-order/id1046114132?mt=8 https://itunes.apple.com/us/app/lendingclub-order/id10461141... Android: https://play.google.com/store/apps/details?id=com.jamesys.lendinglightning&hl=en https://play.google.com/store/apps/details?id=com.jamesys.le...
- dang 10y agoPeople downvoted and flagged this, but I think a comment like this is ok when the author is a regular user, doesn't do it often, and is up-front about it.
- seibelj 10y agoThanks dang, I thought the community was OK with self promotion provided they followed those guidelines.
- 1123581321 10y agoShouldn't the comment have something in it besides two app-store links and one sentence about those links?
- dang 10y agoI don't think so, if the links are relevant enough and it isn't overdone. If someone's using HN primarily for this purpose, that's a different story. But seibelj's most recent comments include housing, transportation infrastructure, freenet, and software licensing. Sounds like a real community member to me. :)
- 11thEarlOfMar 10y agoLending Club is building a two-sided marketplace, which is always hard. I've been lending on the platform for almost 3 years now. It was always difficult for me to find loans that met my criteria. Borrowers have 14 days to get their loans funded by lenders and loans were typically funded by lenders within 1 day. So lenders were outnumbering borrowers. Starting in January this year, however, loans started taking longer and longer to fund. Recently, I've seen them timing out. This means that in the marketplace, the balance shifted and borrowers outnumbered lenders. Another indication that Lending Club was experiencing a shortage of lenders: they began offering bonuses up to $2,000 for new accounts. Finally, this earnings release indicates that loan originations, while still growing, has slowed considerably. That is the formal evidence confirming a significant slowdown in new lenders. I suspect that there was a lot of pressure internally for sales personnel to bring in new capital through either retail of commercial lenders (they've served both markets for quite a while), and, someone or some group got too aggressive. Whether LaPlanche knew and ok'd the deal, or whether he was just 'person in charge' and has to take the fall, I don't know. But this will be a major wound. It's really sad that it is self-inflicted.
- forgetsusername 10y ago>So investors were outnumbering borrowers. A microcosm of the global economy: we're awash with capital, hence no one is willing to pay much in the way of interest rates.
- loceng 10y agoInteresting idea perhaps of capital that has an accelerating half-life - invest it or lose it. I can imagine technology and society would develop at a much faster pace.
- msandford 10y agoToo bad the capital stock isn't determined by individuals but rather the Fed; who knows what the interest rate would be in real life if there wasn't massive money printing. Sorry, "quantitative easing"
- matt_wulfeck 10y ago> The Wall Street Journal reported last month that Jefferies was working with the company on a sale of bonds backed by LendingClub loans to less creditworthy borrowers. Ah! So we're back in the derivatives market. Buy up crap, package and obfuscate it, then sell it off as "high quality" crap to investors desperate for yield.
- hammock 10y ago"Buy up crap, package and obfuscate it, then sell" is properly called securitization. http://www.investopedia.com/ask/answers/07/securitization.asp http://www.investopedia.com/ask/answers/07/securitization.as...
- minimax 10y agoThere are no derivatives here. Jefferies was going to sell bonds backed by the loans. The payments on the loans would effectively flow directly to the bondholders. A derivative (e.g. a CDS) would be more like a side bet between two (possibly unrelated) parties based on the performance of those bonds.
- vostok 10y agoThis is actually a pretty typical example of a derivative. You can buy these bonds to get exposure to the loans without having to worry about managing them directly. A CDS would be a derivative on a derivative. It would allow you to get exposure to these bonds without worrying about being long or short a particular issue.
- kwikiel 10y agoLending Club is definitely not two-sided marketplace. In marketplace there is always notion of price - to manage demand and supply. LC is just scoring loans and then selling a "product".
- mathattack 10y agoUngated -> http://www.wsj.com/articles/lendingclub-ceo-resigns-over-sales-review-1462795070 http://www.wsj.com/articles/lendingclub-ceo-resigns-over-sal...
- kingnothing 10y agoIf LendingClub were to go bankrupt, what would realistically happen to all of the outstanding loans?
- partytran 10y agoThe quarterly report states that the investigation found this was an isolated event that affected only $3M of the $22M in the sale. "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." From the quarterly report: http://ir.lendingclub.com/QuarterlyResults.aspx?iid=4213397 http://ir.lendingclub.com/QuarterlyResults.aspx?iid=4213397