Archive

We are pleased that we have recently earned the Better Business Bureau’s designation as a Reliable Online Business, certifying that Lending Club meets the BBB’s high standards for ethical online business practices.

We are committed to providing a safe and transparent platform where you can conduct business as borrowers and lenders. As a proud Reliable Business, Lending Club abides by the BBB Code of Online Business Practices and is dedicated to the principles of sound online advertising and selling practices that are exemplified by participants in this distinguished program. These principles include a strong commitment to truthful and accurate communications, full disclosure about Lending Club transactions, stringent privacy and security practices to safeguard personally identifiable information, and excellent customer service.

For more information, we encourage you to read about these principles in greater detail on the BBB website.

Better Business. Together.

We are focused on making our person-to-person lending site as simple and reliable as possible. As Barron's wrote this weekend, Lending Club and other P2P lending sites strive to be "highly automated, remarkably transparent, and employ Web 2.0-era ways of matching borrowers to lenders." To that end, we are releasing a series of improved and clarified pages starting with our statistics and lender ranking pages.

The intent of these pages was to provide a measure of current performance, similar to what you get on an online trading Website like Etrade or Schwab. Feedback from several of our lenders indicate that the ROI section was in some cases interpreted as a projection of future performance. With the amount of data we have gathered other the last 6 months, we cannot offer projections of future performance in a meaningful and reliable way. Faced with the risk that some current and potential lenders would use the ROI section as projections, we took that entire section down and will keep it that way until we have sufficient data to make reliable projections of future ROI. We have put up a new statistics page and lender rankings page to clarify the statistics and make our help page more helpful. This is an intermediary step that fixes a couple of statistical issues and clarifies the help file content.

We will release another version of the statistics page in the next few weeks that shows more details, including late loans as percentage of loans issued for more than 45 days and a breakdown of late loans by age. Thank you to all for your continued input and suggestions. We look forward to hearing from you on these improvements.

In free markets, prices vary with supply and demand, and Lending Club is no exception. Until now, the Lending Club social lending community has enjoyed a near-perfect equilibrium of supply and demand, with funds available to lend slightly exceeding qualified loan applications.

The relaunch of our Facebook application and the addition of other online communities in early December, immediately followed by a National Launch with new loan applications flowing in from California, Texas, Illinois, Michigan and a few other states has increased demand (loan applications) faster than supply (lenders’ lending capital). As a result, we will increase our base rate tomorrow from 6.80% to 7.30%. This page will update to reflect the new rates: http://www.lendingclub.com/info/how-we-set-interest-rates.action.

As an example, a borrower with a 705 FICO score and a 20% DTI currently pays an interest rate of 12.17% for a $20,000 loan. Starting tomorrow, that same borrower would pay 12.67% for a new loan of the same size.

All Lending Club loans are fixed-rate, so the rate hike will only apply to new loan listings. The average return of all Lending Club lenders after 6 months now stands at 12.2% after fees and losses. Monday’s half-point rate hike will help lender returns while maintaining the high percentage of borrowers getting fully funded (currently at about 90%).

As we continue to collect more data and understand the platform’s behavior in different circumstances, the rate-setting mechanism will be established systematically based on real-time supply and demand.

We believe tomorrow’s rate hike is good for both lenders and borrowers: lenders will earn a better return and borrowers’ loan listings should get funded faster. The rate paid by Lending Club borrowers remains on average 25% lower than the average credit card rate, which stands at 15.24%.

Better rates and better returns. Together.

And here we are… Lending Club is finally available in California! Well, not just California. In fact we went National today, 6 months after the launch of our Facebook application and 3 months after the limited opening of our public website at www.lendingclub.com. In the last 6 months, Lending Club was not available to borrowers in California, Michigan, Illinois, Pennsylvania, Oregon and Nevada, and was only partially available in Texas and Ohio. We did the math: that’s about 108 million more Americans who can now borrow and lend directly among each other and get better rates.

So this is really good news…first, because my neighbor in the quaint town of Los Gatos, CA will finally stop asking “Dude, when can I use your site?” and second, arguably more importantly, because in the current climate of tightening lending practices from the banks, people in every community across America are looking for alternatives to help meet their financial needs, and being available nationwide will help us serve our community better.

As we pointed out last weekend, affinities and connections among Lending Club members get most of the credit for the remarkably low defaults recorded by Lending Club borrowers over the last 6 months. The ability for Facebook users and members of Lending Club’s partner alumni and professional associations to connect across all 50 states will make the Lending Club network even more efficient and help us deliver even more value to both lenders and borrowers.

Better Rates Nationwide. Together.

Renaud from Lending Club

When a group of major social networks - pretty much all those that matter other than Facebook - announces the adoption of open standards, that is effectively good news for all parties involved: good news for users, for developers and for the networks themselves.

We can debate how “open” the standard really is in this case, and how deeply the OpenSocial APIs will let application developers reach into the social graph, as compared to the Facebook API. Looking beyond the initial uncertainties, however, it is fair to say that open standards are generally good news, and the quasi-anonymous support for OpenSocial will help social networking sites and application developers offer applications that are not only easier to develop, but truly more useful for their members.

Take Lending Club for example: OpenSocial offers the ability to retrieve information about a user, and get distribution, across many social networks. What it means is that Lending Club borrowers will be able to leverage their network of connections more broadly, that lenders will be presented with better opportunities to invest in people they trust and feel more comfortable with (such as friends of friends), and that a broader distribution will help find better matches between lenders and borrowers.

(click graphic to enlarge)

The user profiles of both lenders and borrowers will also be more complete and accurate: there is a lot of information in my Linkedin profile for example (such as my work history) that is not in my MySpace profile.

We believe person-to-person lending will grow faster and become a credible alternative to banks more surely in an environment where people feel connected to each other. That was the main reason for launching Lending Club on Facebook last May, and another good reason to announce our extension to universities and alumni associations last week.

This morning we announced our commitment to build a person-to-person lending application that leverages the OpenSocial APIs. By doing so, we are hoping to contribute to making social networks more useful, by helping users leverage their existing social-network relationships at the time they need them the most: to cover medical expenses, finance a new business venture or take advantage of an investment opportunity.

Not as entertaining as sharing pictures, but possibly more useful.