I have been reviewing through a large number of Lending Club loans and noticed some humorous descriptions of the reasons why people want the loan. These should serve as advice for anyone who is planning to write up a Lending Club loan application. Remember that most all lenders are investors and want their money back with interest. The main reason that people loan borrowers money is not because you need it but because they believe that you can and will pay back the loan.

Loans are similar to requesting a tourist visa to come to visit the US — the person deciding whether to give the potential visitor the visa wants to know the reason you want to visit mainly to see that it is reasonable. The main thing that they want to know is that you plan to return to your country after you visit.

• You need to say SOMETHING in your loan reasoning. Loans numbered 76775, 89258 have the description field left entirely blank and even the subject line does not give any indication of what the money is for. Loan 76775 was not funded but the other one was.
• A loan should not be an income supplement. “I just need something that can help me supplement my income a little” People do not loan you money for your day to day income. If you cannot make your current obligations, how are you going to pay off the loan? Loan 74288 was not funded.
• Don’t mention that a good portion of the money is to pay your debt to your therapist. At best, it looks like you may be allowing someone to take advantage of you by putting you that much in debt. At worst, it makes you look like you might be unstable. Loan 81682 was not funded.
• Don’t mention that you are not going to change your free spending ways and will continue to spend money that you don’t have. “$3,000 to pay off credit cards with insanely high rates, and $2,000 just so I can go on vacation with my friends and not have to stay at the hotel because I can’t afford to do anything.” Did you think that maybe you should tell your friends you can’t afford go on vacation. Loan 77680 was not funded. I wonder if he want on vacation anyway.
• If your want a business loan, at least tell lenders what the business is and how you plan to make money: “Initial cashflow to jump-start operations on small scale.” Loan 94517 did not fund.
• Do not mention that it is for a down payment on an item without mentioning how you are going to pay for the rest of the item. “down payment on a Pony!” This is not an excerpt from the application — it is the full description. Loan 76597 did fund in July 2007 and is current.
• Don’t mention that your parents will not cosign on the loan for you because it makes me think that your parents believe that you cannot pay back the money. “…and my parents refuse to help me by cosigning.” Loan 77915 did not fund and was removed.
• Don’t beg for the money — Desperation for the personal loan makes you sound like a poor credit risk. “I desperately need this loan.” Lending Club Loan number 103810 expired without being funded.

I hope that these examples of mistakes in personal loan applications might help you make a better description on your application which should help you have a greater chances of receiving funding for your loan.

• Another Late Lending Club P2P Loan
• Kiva.org Goes Wanting for Borrowers! $1 Million Loaned this week!
• Kintera to Connect Alumni with Lending Club
• Review My First Prosper Loans and Win a Book!
• Top Ten Referrers and Posts for the First Half of 2008

Since I posted that I am excited about the Lending Club IRA and plan to invest in the Lending Club IRA, I wanted to hear what your opinion is on the topic. The first question is what do you think overall of the idea of the Lending Club IRA and the second asks if you personally plan to invest in a Lending Club IRA>

Please vote and share your thoughts in the comments below.

• Lending Club IRA: Why it is good for your retirement
• More Time for P2P Lending Advice
• Where Should I Invest My Next $500? You Decide
• Vote for Uncrunch America at Change.Org One More Time
• Poll: Will Lending Club Survive the Quiet Period?

I am thrilled to hear about the new Lending Club IRA account to allow peer to peer lending in an retirement account. EntrustCAMA, part of the Entrust Group, is the account administrator. I heard of the Lending Club IRA only a few weeks ago through the comments by a beta tester on my initial review of Lending Club post.

Why is this the Lending Club IRA Big News?

• Tax Deferred status: Interest is normally treated as income which is taxed at a higher rate than capital gains which means that personal loans were handicapped as investment class against stock market investing over the long term. The Lending Club Individual Retirement Account changes that!
• Reduced Volatility: Stock market investors have learned a recent painful lesson in volatility. Volatility hurts your investment over the long run because investments earn a rate of return from the geometric average and not a simple average due to the volatility. I link to an an example below that explains the difference, but essentially all things equal consistent returns are better than volatile returns in the long run. I strongly believe that overtime Lending Club loan returns will have significantly less volatility than the stock market, with similar average returns, over the long term.

P2P Lending IRA Proposed by me in 2007
I have been hoping for a Prosper or Lending Club IRA since performing an analysis of the tax impact on P2P loans versus stock market investing. In the four scenarios outlined, a tax protected peer to peer lending portfolio beat all the other options including investing in the stock market in a Roth IRA. I published a spreadsheet with all the data examples showing you why the Lending Club IRA can likely make your retirement account grow significantly in the long run. If I have not explained volatility well enough for you — here is a link to the mathematics behind volatility.

Graph of the Results:

The graph and article mention a Prosper retirement account but the same information applies to a Lending Club account.

How do you invest in a Lending Club IRA?
First, you must meet the lender requirements which include being eligible in the state where you live. Secondly there are income and net worth requirements. Both are outlined on the Lending Club website. Sign up and mail Lending Club a check before the April 15th IRA deadline to invest under the 2008 limit. (Unfortunately, I cannot invest for 2008 because I already maxed out my Roth IRA.) Of course, you can always start investing for 2009.

Sign up for Lending Club Now

Will I invest in the Lending Club IRA? YES!
My original plan for 2009 was to load up on stocks at this point in time because I strongly believe that the current market provides a tremendous long-term buying opportunity. However, now I will add a Lending Club retirement account to help reduce volatility in my total portfolio in the long run.

Standard disclaimer: I know about finance but not about your personal situation. Consult your own financial adviser before acting upon this information. Thanks.

Your thoughts on the Lending Club IRA?
What do you think? Answer the poll questions and respond in the comments below.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.
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• Advice for Potential a New Peer-to-Peer Lender
• Where Should I Invest My Next $500? You Decide
• Lending Money via Prosper to Increase Returns
• Lending Club ROI Bonus: 5% extra return as a “Thank You!”
• Zopa Closes: More Negative P2P Lending News

I made a quick video demonstrating how to purchase loans on the Lending Club secondary market with FolioFN. In is very easy to purchase these — It only took a few minutes to purchase. There are a few things to keep in mind when purchasing Lending Club loans via FolioFN:

• You must meet certain income and net worth requirements
• It is not available in every state
• Even if your state does not allow you to directly buy loans through the primary market, you can likely participate in the secondary market.
• You pay no fees as a buyer — the seller pays a 1% fee
• You can resell the loan on FolioFN when you wish (less a 1% fee)

An additional item that I should have demonstrated in the video is how to drill into the loan. If you click on the loan status field (contains “issued”, “current”, etc) it shows a few details on the loan, but not as many details that I would like to see. I wish it contained all the loan information that the original lender was able to see. Here is the screen shot of the details available (click to enlarge):

Lending Club Secondary Market Loan Details

My quick thoughts on purchasing loans through FolioFN:

• The website is a little slow.
• Your account balance should be at the top of the page where you are shopping for the loans. You can see that I fumbled around a bit looking for the balance in the video.
• It would be much better if you could see the original loan details including the description and Q&A information.

I will offer this loan for sale on the secondary market to create another video. I’ll post it when it is available.

Several months ago, I made a video demonstration of using the Lending Club portfolio purchase feature if you are interesting in seeing how to purchase loans in large quantities.

• Lending Club Secondary Market for Loans Requirements
• Lending Club Quiet Period: Is a Secondary Loan Market Coming?
• Prosper.com Correlations: Late Loans and Interest Rate Caps
• Poll: Will Lending Club Survive the Quiet Period?
• Review of My First Loans with Lending Club

When signing up for FolioFN to buy and sell Lending Club notes (loans) on the secondary market, there is a series of questions that you must answer to be eligible. You must give your social security number, Income, Liquid Net worth, and Net Worth. It is now somewhat like a hedge fund where you must meet certain requirements to participate in the market. Although, the requirements at FolioFN are lower than those of a hedge fund. According to the FAQ, “the current State and Financial Suitability conditions” (the income and net worth requirements) are:

individual lenders who are residents of states other than California must (a) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000. Individual lenders who are California residents must (a) have an annual gross income of at least $100,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $100,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000.

The prospectus for the Lending Club secondary market can be found on Lending Club’s website.

I have signed up and I am working on a video to show you how easy it is to purchase loans on the secondary market. I’ll post the video when it is available.

Below is the text of the forms that you must go through to become trader in the secondary market.

Before you can resell or trade Notes you must become a trading member.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you.

Are any owners or minors on this account employed by a stock market, the FINRA, or a firm that is a member of either one? If an owner or minor is only associated with one of these entities, please select “No” below.
No: Yes:

Are you a director, 10% or above shareholder, or executive who makes policy at a public company?

Income
Liquid Networth
Net Worth

Customer Agreement

Our customer agreement describes how we will handle your account and trades, and what you agree to do as a customer of FOLIOfn. Please read the agreement carefully.

We draw your attention to the fact that FOLIOfn does not recommend any securities transactions or investment strategies to you based on an assessment of your financial needs, goals, and current financial situation.

Full Name Social Security Number
Under penalties of perjury, I certify that:
The number shown on this form is my correct taxpayer identification number, and
I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the IRS that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
Certification Instructions

You must uncheck the second box above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest or dividends on your tax return.

The IRS does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.
Electronic Signature

By typing your name here, you have electronically signed your customer agreement and agree to the following:

“I agree to resolve all disputes through arbitration and not the courts as required on the last page of FOLIOfn’s customer agreement. I agree that FOLIOfn does not recommend any securities or investments to me.”

I agree to the terms and conditions of the Customer Agreement:

Before you agree to opening this account, you must review and accept the Lending Club Member Dependent Notes Trading Platform Disclosures.
You acknowledge the following:
Compliance with Federal and State Securities Laws

* The securities services relating to the Trading Platform for Lending Club Member Payment Dependent Notes are provided by FOLIOfn Investments, Inc. (“FOLIOfn”) Although FOLIOfn provides securities services to Lending Club members who also are customers of FOLIOfn, FOLIOfn is not an affiliate of Lending Club and the services provided by FOLIOfn are not sponsored by Lending Club. Lending Club disclaims all liability for the services provided by FOLIOfn and all activities conducted by you on any FOLIOfn website.
* Lending Club is not a registered national securities exchange, securities information processor, broker, dealer or investment adviser.
* All state and federal securities laws (including the anti-fraud and anti-manipulation provisions) apply to any offer made or transaction consummated using the Trading Platform.
* The registration requirements of the federal securities laws apply to all offers and sales through the System, absent an available exemption.
* To the extent that a participant regularly buys and sells Notes on the Trading Platform, he or she may be deemed a “dealer” under the federal securities laws. You should consult counsel if you buy and sell Notes on the system with any degree of regularity.

Lending Club Member Payment Dependent Notes

The Notes are highly risky and speculative. Read more.

FOLIOfn makes no recommendation with respect to the Notes offered or sold on the trading platform.
Underlying Borrower Information, Loan Grades, Interest Rates, FICO Scores
Underlying Borrower Information, Loan Grades and Interest Rates

For each Note listed for sale on the Lending Club trading platform Lending Club has provided certain information about the corresponding member loan related to that Note. This information includes the payment history on the corresponding member loan since origination and an updated credit score range for the borrower member. See “FICO Score Range” below. The payment history and updated credit score range do not affect the interest rate or the original loan grading of the Notes listed on the Lending Club Trading Platform.

For trading members’ convenience, Lending Club also provides borrower member’s profile from the original loan listing. Much of this information was supplied by the borrower member prior to the original issuance of the Note and was not verified by Lending Club. It may have been inaccurate or intentionally false at the time it was supplied or it may have become inaccurate with the passage of time. Lending Club has not updated the borrower member information.
FICO Score Range

Periodically, on a 30-day cycle, Lending Club obtains updated information about the credit score of an underlying borrower of a Note and displays an updated credit score range for each borrower member under “Credit Score Trend”. The updated FICO score, however, has no effect on the loan grade or interest rate assigned to an outstanding Note. The loan grade and interest rate are not changed after loan origination.
Offers on the Trading Platform

Offers made on the Trading Platform do not represent “firm quotes.” All prices are determined solely by the seller of a Note. The Trading Platform displays the Notes a seller has offered or desires to sell, and the price at which the proposed transaction would occur. Any offer on the Trading Platform may be withdrawn at any time prior to purchase. FOLIOfn does not assure any seller that any particular transaction will occur; transaction execution is contingent on acceptance of the terms by a buyer on the system.
Participants on the Trading Platform

* All participants of the Trading Platform must be lender members of Lending Club.
* Any person that is an associated person of a broker-dealer (or who has a state securities license) is required to identify that fact to FOLIOfn at the time of account opening. In the event that such person becomes associated with a broker-dealer or obtains a state securities license anytime after account opening, such person also must promptly identify that fact to FOLIOfn.

Service Charge

The Notes offered and sold on the Trading Platform were initially issued by Lending Club. At the time of issuance, each original Note purchaser designated the proceeds to fund a corresponding member loan originated through the Lending Club Internet-based social lending platform to an individual consumer who is a borrower member.

In addition to issuing Notes, Lending Club services the corresponding member loans on an ongoing basis. Lending Club will continue to service all member loans corresponding to the Notes offered and sold on the Trading Platform. Lending Club will pay to the holder principal and interest on each Note in an amount equal to the Note’s pro rata portion of the principal and interest payments, if any, Lending Club receives on the corresponding member loan, net of Lending Club’s service charge of 1.00%. Lending Club also will pay to the holder any other amounts Lending Club receives on each Note, including late fees and prepayments, subject to the 1.00% service charge, except Lending Club will not pay any unsuccessful payment fees, or collection fees charged by Lending Club or any third-party collection agency. Accordingly, prior to making any payments on the Note you purchase on the Trading Platform, Lending Club will deduct a service charge equal to 1.00% of the payment amount. The service charge will reduce the effective yield on your Notes below their stated interest rate.

• Lending Club’s SEC S-1 Risks
• Lending Club SEC Update During the Quiet Period
• Buying Loans on Lending Club’s Secondary Market
• More Lending Club Quiet Period Announcement Links
• Prosper Marketplace Enters Quiet Period

I mentioned earlier that I had one Lending Club loan fall behind, but the loan recovered in less than 30 days. I now have one Lending Club loan more than 30 days late.

I had my doubts when I bid on it because the person sounded too desperate to get out of town. However, the loan was only for $800 with a monthly payment of just over $27, so I figured that they could handle the payment regardless of moving cities. If a person does not have intentions of paying a loan back, they would certainly ask for more than $800.

The loan details:

Lona Number: 189524
Amount $800
Rate 13.43% (E1)
APR 14.82%
Location Las Vegas, NV
Funding Received $800 (100.00% funded)
Lenders 17 people funded this loan
Loan Status Late (31-120 days)
Loan Submitted on 12/15/07 12:32 PM

Credit Rating E1
Home Ownership RENT
Current Employer Mainstreet Host
Tenure 1 year 3 months
Gross Income $2,167 / month
Debt-to-Income (DTI) 0.00%
Monthly Payment $27.13 / month

Credit Score Range: 640-659
Earliest Credit Line 06/2006
Open Credit Lines 1
Total Credit Lines 1
Revolving Credit Balance $0.00
Revolving Line Utilization 0.00%
Inquiries in the Last 6 Months 2
Accounts Now Delinquent 0
Delinquent Amount $0.00
Delinquencies (Last 2 yrs) 0
Months Since Last Delinquency 0
Public Records On File 0
Months Since Last Record 0

Loan Request Description:

I have lived in Las Vegas for 5 years since 2002 when my parents moved here from New York and Ive been trying to escape ever since but everytime I have the money something comes up and im stuck for another 6 months or so and I just cant take it anymore!!!

PLS HELP!!

This probably won’t be my last loan to be late, but it is disheartening that someone cannot pay a $27 per month payment. Besides this loan, my Lending Club portfolio still seems to be performing well.

• My first late loan at Lending Club
• P2P Borrowers Waste Time and Money with Early Payoffs
• Would you lend money to Britney Spears?
• What NOT to say in your Personal Loan Application
• Change in Lending Club Cash Burn Rate Due to Quiet Period

According to NetBanker, Lending Club has a $500,000 per month burn rate. That is lower than my earlier estimation my estimate of the monthly cash burn rate delta due to the quiet period. As some of the commentators on my site mentioned, it seems to have been reasonably easy for Lending Club to find other lending institutions to extend the loans to cover the gap during the quiet period. The error in my estimation was further compounded by the Lending Club loan volume significantly dropping during the Quiet Period despite the fact that Lending Club offered to keep funding all loans meeting the requirements.

Since I do not want to read through the entire filing, I will defer to NetBanker… Per NetBanker’s analysis of the S-1, the S-1 filed includes among other things the following interesting pieces of information:

$6.4 million of the loans made through the platform have been to “retail lenders” and not peer funded. Later in the S1, Lending Club discloses that it has funded $7 million of the $15 million loaned through the platform as of March 31, and then $1.6 million of the $3 million loaned after March 31. That leaves Lending Club holding $8.6 million of the $18 million loaned through the platform.

More filing statistics are available at NetBanker. Those stats include:

• Of the $18 million in loans funded through the site, $8.6 million were funded by Lending Club.
• Lending Club spent $1.8 million spent on marketing. $270,000 was advertising.
• Lending Club had 150,000 website visitors in the month of March, 2008.

• Change in Lending Club Cash Burn Rate Due to Quiet Period
• More Lending Club Quiet Period Announcement Links
• Lending Club SEC Update During the Quiet Period
• Prosper Marketplace Enters Quiet Period
• Poll Results: Lending Club will Survive

In Lending Club’s S-1 filing in relation to the quiet period, Lending Club listed many risks. (See the S-1). The risks listed are similar, but not exactly like the financial risks Lending Club earlier posted on their website.

The following risk list is from the SEC S-1 filing in which there are more details, but the following list is a good, short description of the risks facing a potential P2P lender.

The risks listed sound rather scary. Although, as I think about them for a moment, none of these listed risks are things that I have not already considered. They are the basics such as “interest rates may change”, “diversify your portfolio”, “bankruptcy can happen”, etc.

RISKS RELATING TO THE NOTES AND THE CORRESPONDING MEMBER LOANS ON WHICH THE NOTES ARE DEPENDENT

You may lose some or all of your initial purchase price for the Notes because the Notes are highly risky and speculative. Only lender members who can bear the loss of their entire purchase price should purchase our Notes.

Payments on the Notes depend entirely on payments we receive in respect of corresponding member loans. If a borrower member fails to make any payments on the corresponding member loan related to your Note, you will not receive any payments on your Note.

The Notes are special, limited obligations of Lending Club only and are not secured by any collateral or guaranteed or insured by any third party.

Member loans are not secured by any collateral or guaranteed or insured by any third party, and you must rely on Lending Club and our designated third-party collection agency to pursue collection against any borrower member.

Borrower member credit information may be inaccurate or may not accurately reflect the borrower member’s creditworthiness, which may cause you to lose part or all of the purchase price you pay for a Note.

Information supplied by borrower members may be inaccurate.

While we take precautions to prevent borrower member fraud, it is possible that fraud may occur and adversely affect your ability to receive the principal and interest payments that you expect to receive on those Notes.

We do not have significant historical performance data about borrower member performance on Lending Club member loans. Default rates on the member loans may increase.

Default rates on the member loans may increase as a result of economic conditions beyond our control and beyond the control of borrower members.

If payments on the corresponding member loans relating to your Notes become more than 30 days overdue, it is likely you will not receive the full principal and interest payments that you expect to receive on your Notes due to collection fees, and you may not recover any of your original purchase price.

The member loans on which the Notes are dependent do not restrict borrower members from incurring additional unsecured or secured debt, nor do they require the borrower member’s debt-to-income ratio to remain fixed during the term of the member loan, which may impair your ability to receive the full principal and interest payments that you expect to receive on a Note.

The member loans do not contain any cross-default or similar provisions. If borrower members default on their debt obligations other than on the member loans, the ability to collect on member loans on which your Notes are dependent may be substantially impaired.

Borrower members may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of your Notes.

Federal law entitles borrower members who enter active military service to an interest rate cap and certain other rights that may inhibit the ability to collect on loans and reduce the amount of interest paid on the corresponding Notes.

The death of a borrower member may substantially impair your ability to recoup the full purchase price of Notes that are dependent on the member loans to that borrower member or to receive the interest payments that you expect to receive on the Notes.

The Lending Club platform allows a borrower member to prepay a member loan at any time without penalty. Borrower member loan prepayments will extinguish or limit your ability to receive additional interest payments on a Note.

Prevailing interest rates may change during the terms of the member loans on which your Notes are dependent. If this occurs, you may receive less value from your purchase of the Notes in comparison to other ways you may invest your money. Additionally, borrower members may prepay their member loans due to changes in interest rates, and you may not be able to redeploy the amounts you receive from prepayments in a way that offers you the return you expected to receive from the Notes.

If you do not diversify your Note purchases by buying Notes dependent on the member loans of multiple borrower members, you will increase your risk of losses on the Notes.

The interest rate on lender member funds placed in a Lending Club lender member account is less than the interest rate on member loans on which the Notes are dependent.

The Notes will not be listed on any securities exchange, are not presently transferable and must be held only by Lending Club lender members. You should expect to hold the Notes you purchase until they mature.

The U.S. federal income tax consequences of an investment in the Notes is uncertain.

• Lending Club SEC Update During the Quiet Period
• Lending Club Secondary Market for Loans Requirements
• My First Lending Club Payments All on Time
• Prosper: Cease and Desist or Cease to Exist?
• Speech on P2P Lending for Toastmasters

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.

• Prosper Marketplace Enters Quiet Period
• Lending Club’s SEC S-1 Risks
• Lending Club Secondary Market for Loans Requirements
• Lending Club Quiet Period Burn Rate Update
• More Lending Club Quiet Period Announcement Links

Congratulations to Lending Club for winning a Webby Award. Other recipients included David Byrne, will.i.am of the Blackeyed Peas, Stephen Colbert, Lorne Michaels, Michel Gondry, and Tim and Eric. Many, many other organizations won awards including the Peace Corps which won a Webby award for a government website.

Lending Cub gave a tongue-in-cheek acceptance speech for their 2008 Webby award, but it seems to have been the only words available to a company under the a SEC imposed quiet period. That is the speech was completely silent:

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“Can’t Say Anything! Quiet Period”

Photo credit: Webby Awards

It may have been silent, but the length was spot on for the Webby awards according to tradition. Five words is the limit. As the NYT reported in 2005:

One of the more charming idiosyncrasies of the Webby Awards, the annual awards for achievement in Web creation, requires that recipients use five words, and five words only, to make their acceptance speeches.

A short video about the Webby Awards which does not include Lending Club since finance is not as cool as bunny rabbit animation or McCain Girl:

Technorati Tags: Webby Awards, Lending Club

• Speech on P2P Lending for Toastmasters
• Lending Club Quiet Period Announcement: A Blog RoundUp
• Change in Lending Club Cash Burn Rate Due to Quiet Period
• Lending Club Referral Program is Currently Dead…
• Prosper Marketplace Enters Quiet Period

A few months ago, I posted a poll asking readers if Lending Club would survive the quiet period. Readers believe by a large margin (31 votes to 11 votes) that Lending Club will survive the quiet period.

I hope that Lending Club will survive as is. I like the P2P lending platform that they built and so far my Lending Club P2P loans are still performing great. Although, I do have my fingers crossed on the loan that was late temporarily.

More interesting than the results are some of the comments received about why Lending Club will survive:

Mike @ Prosperous Land says that despite Lending Club spending a large sum of money during the quiet period keeping the lending side unaffected, they can use those loans as assets:

The main reason I think they’ll survive is that when you loan money to a person, it’s now an asset. What do you do with assets? You take out loans against them.

Lending Club can go to a bank and say “these people owe me money. Can I take out a loan against that?” and I’m pretty sure that they’ll be able to convince at least one or two banks to let them provide the loans as collateral if LC provides some headroom for some loans to go bad (as in, they only borrow 80% of the amount locked up in loans, or something similar).

Tom @ Prosper Lending does not think that they will run out of money (comment link) and think that in the long term it is going to be good for borrowers that Lending Club also has skin in the lending side of the business (link).

A few other visitors were not as positive on Lending Club’s survival.

The poll is open until July 14th: Will Lending Club Survive the Quiet Period?

Update: Daniel @ Step 3 Prophet also thinks that Lending Club will be back.

• Poll Results: Investing Next $500 with Lending Club
• Poll: Will Lending Club Survive the Quiet Period?
• Where Should I Invest My Next $500? You Decide
• Change in Lending Club Cash Burn Rate Due to Quiet Period
• Investment in Prosper Loans – My Next $500

While looking up the details on the loan that I had reported as late, I noticed the Lending Club Promissory note text. I thought I would capture this for comparison purposes in case it changes after the quiet period.

The text “goodkarmaplease” in the Promissory note intrigued me so I searched for that on google, but only 11 pages show up in the search results (114 pages if you choose to make similar pages appear in the search results.) None of the search results have anything to do with Lending Club. In fact, goodkarmaplease seems to be someone’s YouTube user ID.

The Lending Club Promissory Note text as of June 8, 2008 at 11PM central time:

Promissory Note for $25
PROMISSORY NOTE

$25

February 08, 2008

For value received, I (“Borrower”) promise to pay to the order of WebBank or any subsequent holder (“you” or “Lender”) of this Promissory Note (the “Note”) the principal sum of $25 with interest set forth below. Borrower will make payments by automatic debit from the Borrower’s bank account previously provided to Lender. I intend to be legally bound by this Promissory Note (the “Note”). I have read, understood, and agreed to all of the terms of this Note.

This Note bears interest during each calendar month from the date hereof until paid, at a fixed rate of 11.08 (%) annual percentage rate. In no event is the interest rate to be higher than the maximum lawful rate. Interest is calculated on a monthly basis upon the unpaid balance with each date representing 1/12th of a year.

Principal and interest is to be paid during and throughout the period of thirty-six (36) months in the following manner:

Payments of principal and interest in the amount of $0.81 are to be made by the Borrower to the Lender commencing March 07, 2008 , and on the same day of each successive month thereafter until February, 2011 , when the full amount of unpaid principal, together with unpaid accrued interest is due and payable. If the monthly anniversary is on the 29th, 30th, or 31st of the month, and the following month does not have a 29th, 30th, or 31st day, the monthly payment will be due on the last day of the month in which the payment was due. The last payment might be of a slightly different amount to adjust for rounding.

All payments on this Note are to be made in immediately available lawful money of the United States. Borrower may make monthly payments by automated withdrawal from an account designated by Borrower using an automated clearing house or electronic funds transfer or by check. This authorization does not affect the Borrower’s obligations to pay when due all amounts payable under this Note, whether or not there are sufficient funds therefor in such accounts. The foregoing authorization is in addition to, and not in limitation of, any rights of setoff Lender may have. With regard to payments made by automatic withdrawal, Borrower has the right to stop payment of automatic withdrawals or revoke Borrower’s prior authorization for automatic withdrawals by notifying his financial institution at least three (3) banking days before the scheduled date of transfer. Borrower will notify Lender of the exercise of Borrower’s right to stop a payment or revoke Borrower’s authorization for automatic withdrawals at least three (3) banking days before the scheduled date of transfer. All payments are to be applied first to the payment of all fees, expenses and other amounts due to Lender (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal; provided, however, that after an Event of Default (as defined below), payments will be applied to the Borrower’s obligations as Lender determines in its sole discretion.

If your payment is more than 15 days late, Lender may charge a late fee in the greater of 5.00% of the outstanding payment or $0.05, to the extent permitted by applicable law. Any such late fee assessed is immediately due and payable. Any payment received after 3:00 P.M. on a banking day is deemed received on the next succeeding banking day.

When an automatic debit from Borrower’s account fails and is rejected by Borrower’s bank, or when a check drawn on Borrower’s account is returned unpaid by Borrower’s bank, an unsuccessful payment fee is charged to Borrower. Each attempt to collect a payment is considered a separate transaction, so an unsuccessful payment fee will be assessed for each failed attempt. The amount of each unsuccessful payment fee is $0.05.

Borrower may make any payment early, in whole or in part, without penalty or premium at any time. Any partial prepayment is to be applied against the principal amount outstanding and does not postpone the due date of any subsequent monthly installments, unless Lender otherwise agrees in writing. If Borrower prepays this Note in part, Borrower agrees to continue to make regularly scheduled payments until all amounts due under this Note are paid. Lender may accept late payments or partial payments, even though marked “paid in full”, without losing any rights under this Note.

Borrower will use the proceeds of the loan from Lender primarily for personal, family or household use and not for commercial purposes. Borrower certifies that the proceeds of the loan will not be used for the purpose of purchasing or carrying any securities.

Borrower will be deemed in default (each, a “Event of Default”) if Borrower: fails to pay any amount due under this Note; files or has instituted against it any bankruptcy or insolvency proceedings or makes any assignment for the benefit of creditors; dies or makes any material misrepresentation in this Note or any other documents, applications or related materials delivered to Lender in connection with this Note.

Upon the occurrence of an Event of Default, Lender may exercise all remedies available to Lender under applicable law, including demand upon Borrower to immediately pay all amounts owed under this Note. Lender may assign this Note without notice to Borrower. Borrower may not assign this Note without the prior written consent of Lender. This Note inures to the successors, permitted assigns, heirs and representatives of Borrower and Lender.

Borrower hereby waives demand, notice of non-payment, protest, and all other notices or demands whatsoever, and hereby consents that without notice to and without releasing the liability of any party, the obligations evidenced by this Note may from time to time, in whole or part, be renewed, extended, modified, accelerated, compromised, settled or released by Lender.

Any changes to this Note must be in writing signed by Borrower and Lender. Notices will be mailed electronically to the addresses provided.

This Note has been executed and delivered in the state of Utah and is deemed a contract made under such state’s law. The unenforceability of any provision of this Note shall not affect the enforceability or validity of any other provision of this Note.

STATE LAW NOTICES:

CALIFORNIA RESIDENTS ONLY: A married applicant may apply for a separate account. If you take any adverse action as defined by § 1785.3 of the California Civil Code and the adverse action is based, in whole or in part, on any information contained in a consumer credit report, I have the right to obtain within 60 days a free copy of my consumer credit report from the consumer reporting agency who furnished you my consumer credit report and from any other consumer credit reporting agency which complies and maintains files on consumers on a nationwide basis.

CALIFORNIA AND UTAH RESIDENTS: As required by California and Utah law, I am hereby notified that a negative credit report reflecting on my credit record may be submitted to a credit reporting agency if I fail to fulfill the terms of my credit obligations.

MARYLAND RESIDENTS ONLY: You elect to make this loan pursuant to Subtitle 10 (Credit Grantor Closed End Credit provisions) of Title 12 of the Maryland Commercial Law Article only to the extent that such provisions are not inconsistent with your authority under federal law (12 U.S.C. § 85, § 1463(g), or § 1831d, as appropriate) and related regulations and interpretations, which authority you expressly reserve.

MASSACHUSETTS RESIDENTS ONLY: Massachusetts law prohibits discrimination based upon marital status or sexual orientation.

GEORGIA RESIDENTS: I waive any right to require you to take action against the principals as provided in O.C.G.A. §10-7-24.

IOWA RESIDENTS (If the principal amount of this loan exceeds $20,000) AND KANSAS RESIDENTS: IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.

MISSOURI AND NEBRASKA RESIDENTS: ORAL LOAN AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF SUCH DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER(S) AND THE LENDER AND ANY HOLDER OF THIS NOTE FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

NEW JERSEY RESIDENTS: The section headings of the Note are a table of contents and not contract terms. Portions of this Note with references to actions taken to the extent of applicable law apply to acts or practices that New Jersey law permits or requires. In this Note, actions or practices (i) by which I am or may be permitted by “applicable law” are permitted by New Jersey law, and (ii) that may be or will be taken by me unless prohibited by “applicable law” are permitted by New Jersey law.

NEW YORK, RHODE ISLAND and VERMONT RESIDENTS: I understand and agree that you may obtain a consumer credit report in connection with this application and in connection with any update, renewals for extension of any credit as a result of this application. If I ask, I will be informed whether or not such a report was obtained, and if so, the name and address of the agency that furnished the report. I also understand and agree that you may obtain a consumer credit report in connection with the review or collection of any loan made to me as a result of this application or for other legitimate purposes related to such loans.

OHIO RESIDENTS ONLY: The Ohio laws against discrimination require that all creditors make credit equally available to all credit-worthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights Commission administers compliance with the law.

WISCONSIN RESIDENTS ONLY: For married Wisconsin residents, my signature confirms that this loan obligation is being incurred in the interest of my marriage or family. No provision of any marital property agreement (pre-marital agreement), unilateral statement under § 766.59 of the Wisconsin statutes or court decree under § 766.70 adversely affects your interest unless, prior to the time that the loan is approved, you are furnished with a copy of the marital property agreement, statement, or decree or have actual knowledge of the adverse provision. If this loan for which I am applying is granted, I will notify you if I have a spouse who needs to receive notification that credit has been extended to me.

UTAH BORROWERS: As required by law, I am hereby notified that a negative credit report reflecting on my credit record may be submitted to a credit reporting agency if I fail to fulfill the terms of my credit obligations.

goodkarmaplease

BY: LENDINGCLUB CORPORATION
ATTORNEY-IN-FACT FOR BORROWER
(SIGNED ELECTRONICALLY)

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