Lazy Man and Money

Lending Club Performance Update

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I decided to take a minute or two today to look at my Lending Club (Lending Club Reviewed) account today. For the most part, I don’t log in too often. I have to admit that I made some poor choices on loans on Prosper in the past and I’ve been waiting for the shoe to drop on Lending Club. Here’s the interesting thing… Lending Club has outperformed all my other investments this year. Check out my Lending Club portfolio:

Lending Club Performance
Lending Club Performance

So you are probably asking yourself this, “What makes LendingClub different?” I’m not 100% sure, but it could be because I took loans with relatively low risk. I erred on the side of caution after realizing that I took too much risk with Prosper. I also think that Lending Club typically has stricter standards for getting a loan. Maybe I just got lucky with the loans it put me in.

In any event, 59 loans paid off or in good standing out of 60 is pretty good. Even the outstanding loan paid me for a couple of months, so it’s not total loss from that person (just close to it). Perhaps P2P Lending has some legs to it after all.

Lending Club Update

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While I was asleep at the wheel on Friday, Lending Club came through with an update on their quiet period. When we last left them, I declared Lending Club is Dead. I admit that I was going for a sensational headline, but I still maintain that I wasn’t irrational. When a start-up company says that it is A) Unable to take new business, B) Unable to talk about why it can’t new business, and C) Unable to give a time-line for when business with resume, you have to wonder.

On Friday we learned that Lending Club Filed For SEC Registration. I didn’t see a hint of how long something typically waits to get through the SEC, so I’m going to be really conservative and go with a ballpark estimate of 14 years. (Again I’m being ridiculous, but with the last of information, that’s what I’m reduced to.)

I really like Lending Club – my loans are for the most part current. I say “for the most part” because I don’t want to jinx anything. It’s a little like how you don’t mention the no hitter when a pitcher hasn’t given up a hit for the first 7 innings. My portfolio at Lending Club is doing better than it was at Prosper. In fairness I took too much risk with Prosper, so by the time Lending Club came around, I was a good deal smarter about my loans.

Let’s hope that the SEC puts a rush on things to keep the industry moving. Without competition (Loanio, Loanio, come out wherever you are, the P2P lending space has been boring.

Carnival of P2P Lending #9 – Cinco de Mayo Edition

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Happy Cinco de Mayo! In a few hours from now I’ll be having tacos and maybe a cerveza. I draw the line at doing a hat dance. Grab yourself some nachos and chew on these articles about P2P lending…

Moolanomy spectulates why Lending Club has stopped taking new lenders. Interesting thought that “If they are successful, I believe they will emerge as the industry leader.” I think Prosper already has a head start on Lending Club, so I think they’ll just emerge as a stronger #2 than before.

Not to be outdone, Cash Money Life speculates on the future of Lending Club.

Prosper Lending Review tells you how you can buy your own P2P Lending company. I’m guessing that it’s not going to come cheap.  I wonder if my credit score is good enough to get a loan on Prosper to buy it – just kidding.
Wiseclerk covers the launch of Cashare in Switzerland. It’s similar to Prosper except that you have to submit paperwork for each loan.

The Prosper Blog notes the value in social capital in getting a loan funded. I’ve got more to say about this in the future – perhaps later this week.

RateLadder says that with the Fed dropping interest rates, buy a Zopa CD. It seems like you might even be able pay your loan back at negative percent if you can convince people to help you.

Lending Club is Dead

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[Update: It looks rumors of Lending Club’s death was premature. It was actually my best investment last year. You can sign up at Lending Club.]

lendingclubrip.jpgI, like many other Lending Club members, received a distressing e-mail a couple of days ago (Lending Club Reviewed). I waited until now to sort out how I feel about things. Here are the highlights that I found interesting:

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… 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.

In other words, they are shutting down the peer-lending service. They either are not willing to or unable to explain in more detail how long this may go for. The part about Lending Club fulfilling all borrow loans themselves is concerning. What happens if people don’t pay them back, will the company go out of business? Will they have to fill every borrower’s request that comes to their door? If not, how do they choose who to fund?

The biggest question is, “How long will everyone be in limbo?” Tech Crunch suggests that they might need to obtain a broker-dealer license from the SEC that would legitimize its operations. If this is the case, it might be quite a few months. You don’t just get a broker-dealer license from the Dollar Menu. There are regulations on top of regulations.

I am incredibly disappointed by this news. I ran a contest less than two weeks ago and gave away Lending Club memberships with $50 just for signing up. I will be pulling my money out as fast as possible. It makes no sense to leave it there since you can’t lend it and it earns no interest.

I have been worked for a number of start-up companies and they had one thing in common – they are extremely fragile. A high percentage of new companies fail. Often times they do everything right and the market conditions or something else just isn’t right. In this case it looks like Lending Club has the right market conditions, but something internally just isn’t right. I’ve talked to a few other Lending Club members – smart members who probably could have helped Lending Club avoid this problem in the first place – and they said they are gone and never coming back. They feel their trust has been violated. With each day that Lending Club can’t or doesn’t say anything to justify this inactivity, the more trust is lost. I might be blowing this out of proportion, but I’d rather err to the side of being conservative until I have reason to believe otherwise.

Note: I don’t believe this affects Prosper.com. The lenders do have promissory notes from the borrowers. Furthermore, Prosper has filed with the SEC for a loan resale marketplace, which tells me they are cooperating with the SEC’s requirements.