Lending Club sent an email today that first surprised me because a quick reading of a few details sound rather ominous. However, if you read past the “you can withdraw uncommitted funds” sections of the email, or rather stick to the important stuff in the first paragraph, this email exciting news for P2P lending.
I believe that this means that Lending Club is going to succeed at making a secondary market for loans. If this works, you should be able to buy and sell Lending Club loans that are already “in progress” — this will provide liquidity to the market. If the interest rates stay the same, this will make the loans a much more attractive investment.
It is also interesting that Lending Club is going to be eating their own product (funding all borrowers’ loans) during the quiet period. That is certainly going to give Lending Club more skin in the collections side of the business.
The quiet period email:
Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.
The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.
Q&A:
Q1. What about money I have begun moving, but is still in transit to Lending Club?
A1.1. If you are in the process of verifying your bank account, you will be able to complete that verification but will not be able to add new funds
A1.2 If you have initiated a transfer, the funds will be displayed in your Lending Club account balance as soon as those funds are available.
A1.3 If you have uncommitted funds, you may request that Lending Club return those funds via the same method used to load the funds. For example,
• If you have initiated an ACH to add funds, these funds will be transferred into your Lending Club account but you will not be able to lend these funds out. You can go into your Lending Club account once the ACH transfer has been completed and withdraw funds back into your linked bank account..
• If you’ve wired funds into your Lending Club account and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to wire these funds back to you at no charge.
• If you’ve sent funds by check, and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to send you a check by mail for the same amount at no charge.… [see separate post on the suspension of the referral program]…
Sincerely,
Patrick Gannon
Senior Vice President
Lending Club
440 N Wolfe Road
Sunnyvale CA 94085
www.lendingclub.com
Good luck Lending Club! I hope this works out.
I was hoping that Rob was going to stop by and comment on my posting about the possibility of a small penalty for early loan payoffs, but that does not look likely for a while now.
Technorati Tags: quiet period, lending club, promissory notes, p2p lending, secondary market
I read this to mean that they won’t be working through a 3rd party bank to process loans. Direct to/from consumer.
Either by Lending Club request (increased efficiency), or by bank’s request (too many $$’s for a small bank).
-John
The more I read it, the more I don’t know what the heck it means. Especially since Prosper has not had any issues with their regulatory filing (links to related articles in the Lending Club Quiet Period RoundUp). I am starting to wonder if LC ran afoul of a regulator.
I don’t see this as meaning a secondary market is coming at all. I think the key phrase is “may be offered and sold to lenders through our site in the future.” It says “to lenders”, not “by lenders.” I believe they’re just getting their ducks in a row for the regular primary P2P marketplace.
The more I have thought about it, the more I am uncertain of what it means. It does make one think that a legal team really screwed something up otherwise they could have continued the current process while making the necessary changes – regardless of what positive changes might be coming.