What’s Up With LendingClub?

by Dual Income No Kids on April 17, 2008 · 0 comments

Hi All,

As frequent readers of our blog know, we do a little bit of money lending on the side. Mostly we do this through two websites, Prosper.com and LendingClub.com. Well, a few weeks ago, LendingClub.com put a cryptic announcement on their site saying they wouldn’t be accepting any new lenders for an unspecified period of time.

The general consensus around the blogsphere appears to be that LendingClub is undergoing some sort of official regulatory action as means of expanding their business.

In fact, LendingClub has applied for a waiver for Regulation D Exemption. If my reading of meaning of the regulation D exemption is correct, it means that LendingClub is asking the SEC to let them out of the requirement that that says one can only sell securities to accredited investors (e.g. rich people who have a million dollars in net worth or $200,000 in annual income).

What does this mean? Well, if the rather cryptic language on their website is any indication – ” 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. ” (Clicky), then LendingClub is planning on setting up a platform for buying and selling P2P loans.

If so, prosper.com should watch out. For example if you want to get out of your loans on prosper you essentially have to wait until your loans mature – there isn’t any way to access the value of your asset. However, if LendingClub is planning what I suspect, then you may soon be able to buy and sell these types of loans on an open market.

Buying and selling this kind of asset is an attractive feature. In our case we had a number of our loans on prosper default. If the option to sell our loans instead of holding them available, we probably would have done so and walked away with more cash. Instead, we were “left holding the bag”.

Of course, LendingClub still needs to get SEC approval. They also have several user friendliness and website navigation issues to work out. But, all in all, this could potentially be very exciting.

For more info on the regulation D exemption click here and here.

Best,

James

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