Jun
Lending Club SEC Update During the Quiet Period
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Lending Club just sent an update via email about their latest filing with the SEC. Unfortunately, they are still in a quiet period so they do not say much about the ongoing outlook, but it seems they may be one step closer to completing the requirements to return to P2P lending. So maybe Lending Club will survive.
The filing was posted to the SEC website at 5:30 PM eastern time toiday (Friday June 20th) and I am writing this less than an hour later.
Link to the Lending Club filings documents. I have not had the chance to read through the whole filing yet but I did find the attached useful graphic included in the file.
Text of the email from Lending Club making the announcement:
We filed with the SEC earlier today. You can read the registration statement on the SEC Website at www.sec.gov. This is an important step in the process that we announced on April 7. Until the registration process is complete, we continue to be in a quiet period and are not at liberty to disclose more details on the process and timing. Please find below the text of our press release.
Kind Regards,
Patrick Gannon
Lending Club Files Registration Statement with the SEC
SUNNYVALE, CA - June 20, 2008 – Lending Club announced today that it has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933 relating to its social lending platform.
The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member. Lender members will direct Lending Club to apply the proceeds Lending Club receives from the sale of each series of Notes to fund a particular consumer loan selected by the lender member originated through the Lending Club platform.
A series of Notes will be issued only if and when the corresponding member loan closes and is funded. Lending Club will have an obligation to make payments of principal and interest on the Notes only to the extent that Lending Club receives payments on the corresponding member loan. The terms of the Notes, including interest rate and initial maturity, will correspond to the terms of the corresponding member loans but will reflect a four business day lag on payment dates and maturity to allow the platform to confirm payments received on the corresponding member loan.
Lending Club will offer the Notes only through its website directly to lender members.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but it has not yet become effective. Copies of the Lending Club registration statement can be accessed on the SEC website: http://www.sec.gov/. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.
I did a quick skim of the SEC prospectus. Scary stuff:
Information supplied by borrower members may be inaccurate.
Borrower members supply a variety of unverified information that is included in the borrower member loan listings on our website. We do not verify this information, and it may be inaccurate. For example, we do not verify a borrower member’s stated social affiliations (such as educational affiliations), home ownership status, job title, employer or tenure, and the information borrower members supply may be inaccurate. Borrower members may misrepresent their intentions for the use of loan proceeds. Unless we have indicated otherwise in a loan listing, we do not verify a borrower member’s stated income. For example, unlike most traditional banks, we do not verify borrower member paystubs, IRS Forms W-2, federal or state income tax returns, bank and savings account balances, retirement account balances, letters from employers, home ownership or rental records, car ownership records or any records related to past bankruptcy and legal proceedings. The identity of borrower members is not revealed to lender members, and lender members also have no ability to obtain or verify borrower member information. Potential lender members may only communicate with borrower members through Lending Club website postings, and then only on an anonymous and unverified basis. If you rely on misleading or unverified information supplied by borrower members in deciding to purchase Notes, you may lose part or all of the purchase price you pay for a Note. Consequently, lender members should not rely on unverified information provided by borrower members.
Posted the above without adding my thoughts that LC appears like it will be doing minimum work for its 1% service fee. I will really have think hard about committing any more funds there in the future.
I read most of the filing today. The “risks” section is scary in ANY S-1 filing. Go back and look at Google’s. It’s intentionally as worst case scenario as possible to cover legal butts.
As for minimum work…well, technological platforms that manage thousands of micro-payments from thousands of different members don’t just invent themselves.
Thanks for stopping by and commenting on Lending Club’s SEC filing.
Evelyn, I agree that it sounds scary, but it also sounds similar to what Prosper does on their loans. Most of the stuff you see on the screen there is not verified. The confirmation is spotty of information provided and there is absolutely no way to know if the person will use the loan as described. Well, I guess Fynanz is trying to enforce what the loans are used for, but money is always fungible.
As Debt Kid said, Lending Club likely must show worst case scenario in the SEC filing. The pudding proof is in what they put on their website and what they actually do. I don’t expect them to validate 100% of the details on every loan, but check a few details on each one to know if everything looks kosher. IMO, the most important thing is to verify the person’s identity in some way. That way lenders know at least that the credit score and details are correct. The rest of the stuff is almost always easy to fake.
I am still holding out (like most readers here) that Lending Club will survive!
I have spoken to Rob Garcia at LC several times and know that some new enhancements to the site are in the works. I am truly hoping that LC will offer better ways of contacting borrowers to discuss listings with them (perhaps similar to the way that Prosper has profile pages for all members). Photos help also. Watch list capability is also important, as it is tedious to do searches everytime one is looking for a listing to bid on. I will ask Rob, next contact, about the borrower verification process. I know that Prosper does not verify all info about borrowers, but I believe that loans above a certain (unknown) limit do have income, bank account info and identity (via drivers license) verification processes.
I started at LC using their portfolio plans to search out my bids for me. Certainly, at both LC and Prosper, I learned quickly how important is to look at each listing, not only by the numbers, but to try and get a feel for borrower’s honesty and credit-worthiness. My late loans at both sites are results of portfolio bidding. So I truly hope that LC will enhance capabilities when they reopen to allow “educated” and experienced bidders to investigate deeper into the listings.