Lending 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.
I refinanced two credit cards for what I thought was a large amount ($9k + I included the LC fees) and I was honestly skeptical that it would even get funded.
It was funded by a single investor in less than two hours.
I've often thought about investing in the platform but I've always been skeptical of the ability to make consistent returns on it - it seems like a platform where unless you have significant capital invested, one or two defaults above what you expect and you could be wiped out.
It is important to lend to many borrowers. Lending Club recommends at least 100. That normalizes the risk. My returns have been consistently 9.5-10.5%, net of defaults.
I started with an experiment: $2,500 loaned $25 at a time to 100 borrowers. Lending Club forecasts the default rate based on their own credit rating. It went well and the actual return was about 1% higher than they forecast.
I was lending on LendingClub back in 2008 and 2009, diversified among at least twenty or thirty loans. Result: -7% (default included). It's not all roses when the market is in a downturn.
That "normalizes" the risk, but the real world risk is not gaussian. A .com bubble, 9/11, housing crisis, type of event will wipe you out... Seems like every decade we get a one in a million type of event...
A housing crisis type of event would increase the default rate substantially, but not to 100%. I'd expect that rather than a +10% return, I might see -10% to -20% return during the event. Many stocks dropped 40% - 60% during the crisis, so for my money, stocks are far riskier.
They have an option to automate the lending, so it is possible to get good returns as s novice. The automated feature spreads the dollars over many loans.
However, this is really new as a way for retail investors to earn a return, so they really should get comfortable with its structure before putting money in.
Take my advice ... forget about it for a while, and check back in in a few months :) Generally speaking, first payments tend to come in ... it's not until later that lates and defaults happen ;)
You should check out municipal bonds in your state. I'm in Cali and they do monthly dividends which are tax free. The dividends are ~5% annualized (examples: MUC/MYC/NVX). I've been up 8-10% in value too on each as I buy quality ones at a discount to net asset value.
You can buy and sell like a stock. Much less risky than LC and alternatives and almost 100% tax free if you buy muni bond funds from your state. Plus you can get out when you want and lock up any gains outside of dividends.
In general, you should not be investing in Muni Bonds unless you clearly understand how much value the bond will gain or lose with changes in interest rates.
> I've been up 8-10% in value too on each as I buy quality ones at a discount to net asset value.
This could be partially correct, but it is more likely that the OP just doesn't understand what percent of change in bond value came from his/her ability to pick bonds and what change in bond value came from other factors like interest rate risk.
Investing is really hard and deceptively complex. The best advice is to diversify and index whenever possible. Buying some muni bonds as part of your portfolio should be fine, but they should be balanced with equity exposure, corp bond exposure etc. In every case, try to index to gain more diversification with less fees.
Good points but the same can be said about the stock market. How can you ascertain what news, speculation or any other factor will do (or did) to an equity at any given time?
Nobody knows interest rate trajectory. The value doesn't drop as much as you would think. If interest rates rise and the bond price drops, the yield increases and you or others will buy more. There aren't a lot of safe options right now and people are nervous with the election and the market.
I agree on doing bond funds and diversification. I put a good chunk in muni bonds and cash. I max out a 401k but that's it for the market because I think it's highly overvalued and I don't like putting most of my money where I have no control. The rest goes into my own companies and real estate.
> Good points but the same can be said about the stock market. How can you ascertain what news, speculation or any other factor will do (or did) to an equity at any given time?
I would use this logic to also argue against investing in individual stocks.
> Nobody knows interest rate trajectory.
Agreed
> The value doesn't drop as much as you would think.
If the interest rate the market is willing to pay for a particular muni bond rises, that bond will be worth less and that difference is extremely easy to calculate.
> If interest rates rise and the bond price drops, the yield increases and you or others will buy more.
The fact that rate is rising means that investors are not giving as high of a value. The better way to think about this is that investors decide the Muni bond and other fixed income assets are worth less so they pay less so the yield rises. It is kind of opposite of how you are thinking about it.
> There aren't a lot of safe options right now and people are nervous with the election and the market.
Muni bonds are no more 'safe' than other investments.
> I agree on doing bond funds and diversification.
Bond funds can also be highly risky and have large durations which can also mean high interest rate risks.
> I put a good chunk in muni bonds and cash. I max out a 401k but that's it for the market because I think it's highly overvalued and I don't like putting most of my money where I have no control. The rest goes into my own companies and real estate.
It sounds like you are highly exposed to interest rate risk in your portfolio and you should work really hard to understand it more clearly.
> If the interest rate the market is willing to pay for a particular muni bond rises, that bond will be worth less and that difference is extremely easy to calculate.
I think you are thinking of individual bonds and I agree, but the fixed income muni bond funds are not as easy to calculate and don't fluctuate as much.
> The fact that rate is rising means that investors are not giving as high of a value. The better way to think about this is that investors decide the Muni bond and other fixed income assets are worth less so they pay less so the yield rises. It is kind of opposite of how you are thinking about it.
Not the opposite at all. If a bond fund is paying 30 cents per share each month and investors value the bond less causing a price drop, the yield goes up as I mentioned and becomes more attractive. The drop isn't as significant as you would think. The funds are diversified across various bonds with different maturities. If investors devalue a fund too much after an interest rate hike, I'll buy more at a higher yield.
> Muni bonds are no more 'safe' than other investments.
I don't agree here. Muni bonds are a debt obligation with a lower level of default compared to other bonds. If they weren't safer than other investments very few people would care about them. The stock market is just legalized gambling. The article is about LC and I've proposed an alternative. Do you not think muni bonds are safer than other bonds or LC?
> It sounds like you are highly exposed to interest rate risk in your portfolio and you should work really hard to understand it more clearly.
I'm not that exposed to interest rate risk. I have more in cash than muni bonds. I buy cash flow positive properties and have a fixed rate mortgage. Most of my money is in my companies and I have two successful ones (one in tech services and one highly profitable subscription model business). They're the only investments I trust.
Bonds are not nearly as liquid as stocks. You can buy and sell, but the spread and fees will be high and not transparent. A good alternative is to buy a bond fund or ETF. Vanguard has a bond fund specific for CA munis. You also get diversification for free (as much as you can diversify within a CA muni bond fund).
I see a few in NJ over 5%: MUJ, MYJ, NXJ. NXJ is at a 10% discount. I've been basically doing those Nuveen & Blackrock equivalents in CA.
I usually go for discount to net asset value so I feel like it has room to appreciate so I can lock in a gain outside of the monthly dividends. And if they go down you can always scoop up more which will then have a higher annual dividend yield.
They are state tax free if they are issued in the state you live in. If they are federally tax free, they are tax free in any state. Be aware that not all MUNIs are federally tax free.
You would not get the state tax free benefit of a California bond if you live in New Jersey. But you would get the federal tax free portion.
I suggest that you confirm with your brokerage's fixed income team before proceeding.
LC rate was about 14% (average according to their terms) - they've since sent me mailers offering 8% or lower, not including the origination fee which was in the $400-500 range. This was on the 36-month loan that was paid off in 25 months so I'd have to do the math to tell you how much interest I actually paid.
Credit cards were 28.99% and 24.99%, so even with the origination fee quite a bit of savings.
Is that a US thing? I have several credit cards, yet the interest rates tend to "only" be around 10-13% on them (not that I use the actual credit part -- I pay them off each month).
You think that's bad? Interest rates on credit cards here in Uruguay are insane if you don't pay them in full, from 42% to 99%. Inflation is about 10%, so they're ridiculously profitable.
Of course, like a good 3rd world country, we have massive defaults about once a decade, so that wipes out most of the profits for the CC companies.
A startup called TuTasa is trying to build a South American LendingClub, but I don't think they're taking off yet:
Note the "default risk" part of that. I had a credit card that was at a very reasonable interest rate, then due to a series of unfortunate events, I missed a payment.
The interest rate immediately shot up to >25%, and I was told it wouldn't come down for more than a year.
I guess it depends on what your idea of significant capital is but you can get the advertised returns by investing as little as $2,500 just make sure you never put more than $25 into any single loan.
This is why I have always been skeptical about peer to peer lending. There aren't that many type of investors in the system. I can think fundamentally of four with big volumes.
1. Banks who have lots of depositors, who are retail investors, but who do not wish to take any risk. They see their deposits as quasi-cash. So the bank takes the risk if a loan goes bad, which is why most of the loans are secured on property (mortgages). And why a smaller fraction will be invested in unsecured loans.
2. Pension funds, again investors with very little appetite for risk, who do not make investment decisions themselves, you just let your pension fund invest the money for you, and they are not in the business with taking big risks.
3. Insurance companies, who invest the proceeds from the premium paid on insurance contract until a claim is made. Again not in the business of taking massive risks.
4. Asset managers, which can manage investment from retails clients, but for who the majority of clients do not manage their portfolio actively and rely on asset managers to make the decisions for them.
All 4 are massive and constitute the backbone of the financial system. All 4 have in common that the ultimate investors (depositors, pension contributors, insuree and retail investors) do not make any investment decision themselves.
For p2p lending to make more than a tiny dent in this market, they need these investors to fundamentally change their behavior, to stop relying on someone else to analyse the risk, and to start actively doing their own due diligence, choose a p2p company, trust them with their money, and start reviewing credit profiles and underwrite the loans. Sure, there are some active retail investors who spend their days on online broker websites, who read lots of articles and research. But in term of volumes, not many. I just can't see where the money would come from for p2p lenders to make a difference.
> I suspect that there was a lot of pressure internally
> for sales personnel to bring in new capital through
> either retail of commercial lenders
If this is the case it would be another notch in the 'incentivize without adequate controls' poison pill that seems to kill off AdTech companies and executives regularly.
It's a significant problem for companies that grow too fast. Groupon and Yelp come to mind. Both got into trouble for allegedly over-aggressive sales practices.
It has to be difficult to both on-board the personnel at a high rate, and, keep them educated and mindful of the ethical aspects of their activities. Bad practices take a long time to recover, particularly with respect to market perception.
> Borrowers have 14 days to get their loans funded by investors and loans were typically funded by investors 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.
I'd really like to see some different terminology here. Everything you describe is perfectly compatible with there being one lender, or any other number.
Not sure what terms to use. Each loan is funded by multiple lenders, sometimes more than 100. And each lender loans to multiple borrowers. It's not a one-to-one matching.
It would be more precise to make the statement in terms of dollars rather than 'borrowers and lenders'. I don't know whether the average lender has invested more or less in Lending Club than the average borrower has borrowed.
In dollar terms, the total dollars being invested is less than the loans being offered, which is a shift as of January, 2016.
I did edit out 'investors', perhaps that was what you meant. Thanks.
Interesting 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.
"A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe."
Too 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"
I 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.
> [... I am worried that there are borrowers who have figured out how to game the system]
I thought this as well, but on LendingClub.
Out of all of my notes that have defaulted, they all seem to share the same pattern:
They make about 4 perfectly on-time payments then never make another payment again.
I believe the loans were taken out by real people, but I feel like they were people who knew that they were ultimately going to file for bankruptcy anyway, so they figured they might as well grab some quick cash before doing so. This is just my guess. It just seems too odd that all of my defaulted notes look pretty much the same. Maybe the 4 on-time payments were done to avoid any claims of fraudulent intent?
My fear was that there was some Reddit thread or something which was instructing people on how to do this.
They could have done the same thing with a credit card, but with LendingClub, you end up with actual cash, and I bet it's easier to get a loan funded on LendingClub than it is to apply for a credit card of the same amount.
[EDIT]: To add, apparently, if someone obtains a loan immediately before filing for bankruptcy, the creditor can move to basically have the loan un-wipable if they can prove that the loan was taken after the person already knew they were going to file for bankruptcy. However, I doubt LendingClub goes through this trouble for each note, which could make the platform more attractive for this type of fraud.
If someone were to decide they were going to file bankruptcy, they likely have already been missing mortgage, credit card, auto loan or other payments. Missing payments hammers your FICO (credit) score. Lending Club requires a minimum 660 FICO, which you're not going to be able to hold on to very long if you're missing payments. I am sure there are people who do this, but I doubt it is rampant.
Hmm, I'm not seeing that on my account. Of the last 20 charge-offs, all but one of them had at least 12 months of payments. The one made 6 payments and then disappeared (unable to contact; loan sold to third party debt buyer).
Why pay back some of the money at all then? If you are knowingly scamming the system (and the lender) you don't take out a $2,000 loan, just to pay back $400 before declaring bankruptcy.
My guess is to avoid the possibility of the creditor claiming that you took out the loan after already knowing that you were going to declare bankruptcy.
The 4 on-time payments make it look like you tried to pay the loan back but just couldn't afford it.
If no payments were made at all, it would be easier to prove that there was intentional fraud. If such is proven, it may be impossible to wipe the loan during bankruptcy.
And further, how do credit card or other lending companies avoid this (if at all)? Is there additional information or red flags they collect that LendingClub does not?
In 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.
> In 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?
Traditional credit card lending standards are adopted because the issuer is the lender, and directly bears the default risk. On a peer-to-peer service, the money being lent is Other People's Money, and Other People bear the default risk. The incentive, then, is to leave it to those Other People to set lending standards that will protect their money.
Traditional card companies have an additional defense. Particularly now that there's very few big card issuers (chase, wellsfargo, citi, cap1, barclay, boa, usbank, amex, discover), they have blacklists if you include them in a bankruptcy. Amex and citi are 10 years I think. This can make re-establishing credit far more painful.
There are obviously alternatives such as debit cards and credit unions, but those will not come with the same benefits as the cards from national issuers.
I don't think being blacklisted from Prosper or LendingClub for IIB will serve as much of a deterrent.
LC does. I'm widely diversified on their automated system, but I have occasionally seen a credit for about 10% of a given loan that had been charged off, along with maybe 10% of that charged as a collections fee to me.
> I always viewed p2p as just a more efficient way of mimicking the lending and interest-collecting functions of a bank/credit card company.
How? Seems less efficient to me.
In any case, I thought one of the advantages (perhaps the biggest advantage) of borrowing through these companies is that they have less stringent standards than banks and credit cards.
I 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.
> 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.
There 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.
This 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.
I guess it depends on your definition. It would seem that, from a layman's perspective, ETFs and ABSs are both derivatives. If we look at GGP's comment
> Buy up crap, package and obfuscate it, then sell it off as "high quality" crap to investors desperate for yield.
> 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.
Theoretically, 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.
I'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?
Yes, 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.
Yeah. The Lending Club loan would still need to compete in the broader market, which means that there is a point where the borrower would opt to not take the more expensive loan.
The difference between LC and a Junk corporate bonds is that with LC you are investing in hundreds of loans at $25 each. You can't get the same kind of diversification corporate bonds.
> The difference between LC and a Junk corporate bonds is that with LC you are investing in hundreds of loans at $25 each. You can't get the same kind of diversification corporate bonds.
I assumed we were talking about investing directly in the bonds. Even if you do an index fund though that 4.79% is ignoring fees. The LC returns being talked about are after fees.
An 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)...
The 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"
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 (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.
I 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.
But how many loans was that? If that's $25 in 1 million loans, then there are other peers on each loan. Whereas if it's 22 thousand 1k loans, it's definitely just an alternative route to institutional lending.
I 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.
Yeah, I learnt about it from a fellow co-worker and have been using it for the last 6 months. It's pretty seamless to get started with it and has offered better returns for me then the LC's own auto investing strategy.
It 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.
One way to convert future interest income to capital gain is to buy notes on primary platform and sell notes on secondary platform at a small markup. I am able to turnover about 15% of my Lending Club portfolio this way and generate capital gains in lieu of foregoing future interest income.
All 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.
Increased 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.
Depending 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.
If 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.
Really great explanation--thanks for sharing. Are there any good sources you'd recommend for reading up more on this, or search queries I might want to try?
Saw The Big Short movie--does the book go into much more realistic (ie. non-Hollywood) technical detail?
Will check out Margin Call.
What about outside of huge industry shifts like The Big Short portrayed? I'm most interested in how this plays out in the day-to-day when there isn't a huge industry-wide scandal at play.
People 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.
I 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. :)
It'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.
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.
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.
"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.
My 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 :(
"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.
Lending 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".
The 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."
You 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.
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.