Free Updates

Exclusive content to your inbox for FREE!

Questions and Answers: Lending Club Edition

by Peter Renton on August 20, 2012

It was a great trip out to San Francisco last week where I spent some time with Lending Club and Prosper. Before my trip I wrote this post asking for questions that you would like to pose to the management of both companies. Thanks to everyone who posted a question in the comments and for those who emailed me directly.

I ended up with a list of over 60 questions. Now, I didn’t have time to cover every single question but I tried to hit the most important ones.

Q. What efforts are being made to open up for investors in new states?

Lending Club indicated that they are expanding their legal team and will be putting more effort into this in future. They also said that some states have very challenging requirements and it will be nearly impossible to get approved in all states as things stand right now. However, while they made it clear this is not imminent, in the event of a Lending Club IPO there is a “blue sky exemption” that would allow Lending Club to open for investors in all 50 states when they are a public company.

Q. When I make an ACH transfer deposit at Prosper my money is available INSTANTLY for investment. At Lending Club I have to wait 4-5 days before I can invest. Why is that?

Lending Club is working on having some kind of instant transfer available. This is a high priority and one they realize they need to offer to be competitive.

Q. When will Lending Club introduce an API?

The Lending Club API is in beta mode right now and is currently being tested by several institutional as well as retail investors. There is no firm date for a release.

Q. Does Lending Club have any plans to introduce 1 year notes?

No.

Q. When will Lending Club offer the ability to sign in to multiple accounts with one email address?

This is a major project that is in progress. It is a significant change to the architecture and it will be a major upgrade to the site when it is implemented. They would not give a timetable other than to say it is a high priority for the development team.

Q. I would like to know if there are any plans for a major FolioFN makeover – it really, really needs some better filtering and sorting tools… really badly. It’s terrible.

When I asked this exact same question about FolioFN over a year ago they did make some minor changes. But they agree the trading platform as it stands today is not very friendly to investors. Enhancements to FolioFN is a project that is also in the queue but again they would provide no timetable. They did say this, though. They have recently hired a new Chief Technology Officer (CTO) and one of his priorities is greatly expanding the development team – this should lead to changes happening faster in the future.

Q. I would say a major change that should be implemented is a net gain/loss metric either instead of the total interest paid or get right of the total interest paid on the main page completely. It’s very misleading to investors that have had a few defaults.

It is a good idea. When the change for linking multiple accounts is implemented there will also be a change to the main accounts page to provide more useful information for investors.

Q. I’d like to review available notes and mark some as Recheck later, or hide permanently, or whatever.

This is not high on the priority list.

Q. Why is the web user interface of LC so mediocre and so stagnant? Why isn’t it a work in progress with ever increasing Web 2.0 goodness?

The CTO agrees that the user interface could do with some updating. This will definitely be included in one of the next upgrades to the site.

Q. Does LC have any plans to increase maximum loan amounts for certain well qualified borrowers to a higher amount such as $50k?

Not for a first loan. But recently they allowed borrowers to take out a second loan so the total in loans can now be $50K.

Q. I Would like to see better transparency on what is happening with payments and collections.

I was not able to speak with the collections manager when I visited but this is a question I hear a lot. So I have organized to speak with someone there soon and will have a detailed post about Lending Club collections out in a couple of weeks.

There you have it. This probably doesn’t satisfy everyone but at least many of these issues are now in the forefront of the minds of Lending Club management. Now, we will see how long it takes to implement what was discussed.

{ 39 comments… read them below or add one }

Marc August 20, 2012 at 3:08 pm

Thanks, Peter, for getting some answers to these questions.

Reply

Sarah August 20, 2012 at 4:38 pm

Some of the answers are a bit disappointing, but it’s helpful that you asked so we can make more informed decisions. Thanks!

Reply

Danny S August 20, 2012 at 6:12 pm

Overall, good questions, and “ok” answers. Seems like a number of items will be addressed “coming soon” … whenever that may be.

Disappointed in their lack of interest to offer 1year notes. I think this is a potentially large market that LC is missing out on.

Reply

Peter Renton August 20, 2012 at 9:03 pm

Danny, They said the APR’s just don’t work for borrowers. With the origination fees APR’s could end up being over 30% for some loans and that just doesn’t sit well with them.

Reply

Dan B August 21, 2012 at 4:12 am

And since there aren’t any early payment penalties, disciplined borrowers can shorten their payment time frame to pretty much anything they’d like. So…………..

Reply

Em August 20, 2012 at 7:21 pm

A lot of this stuff has been “high priority” for years.

To paraphrase Inigo Montoya, “They keep using that word. I do not think it means what they think it means.”

Reply

Dan B August 20, 2012 at 7:28 pm

At least they didn’t say that the suggestions were “under active consideration” or were “being thoroughly examined”. Or that changes would be made “at the appropriate juncture” or “when the moment was optimal”. :)

Reply

Dan B August 20, 2012 at 7:43 pm

Oh I’m sorry, perhaps I’ve said too much. Somebody over at LC might be copying these down for later use. :)

Reply

Peter Renton August 20, 2012 at 9:05 pm

I agree and I told that to them. The only thing I can say is that there is a renewed focus on engineering going forward. They realize they are behind and that Prosper has a lead on them in many areas as far as user interface and ease of use. I would be surprised if we don’t see movement on some of these things sooner rather than later. As in I don’t think we will be here next August still wondering when they are going to implement most of these things.

Reply

Em August 20, 2012 at 9:29 pm

The only job opening they have up on their site is for a “Senior Financial Analyst”. I guess that means their IT department is all staffed up and ready to go! HOORAY!

http://www.lendingclub.com/public/work-here.action

Reply

Peter Renton August 20, 2012 at 9:36 pm

I don’t think the IT jobs made it to the site. On Friday the CTO had to leave the meeting with me to go and interview a software engineer so I know they are hiring for more than a financial analyst.

Reply

Dan B August 20, 2012 at 7:22 pm

Thanks for asking my instant transfer & 1 email account questions.

Reply

Peter Renton August 20, 2012 at 9:06 pm

You’re welcome. The email account thing has been bugging me for years. I have four accounts that I would love to be linked.

Reply

Rich August 25, 2012 at 8:31 am

Yes, thanks for asking after instant transfer. Very annoying and LC loses a lot of “impulse” buyers.

Reply

Dan B August 25, 2012 at 9:11 am

Rich…………..Well it’s hardly “impulse” buyers, since an impulse buy implies unplanned buying based on some sort of an emotional stimulus. In fact this “instant transfer” thing is investors who just want to not have their money waiting in transit from their account at the bank to their account at Lending Club………………after a sober decision has been made to invest.

Prosper recognized (over a year ago) that investors ought to have access to their money instantly once they initiate this transfer while Lending Club still makes us wait for 4-5 days. It is certainly a competitive mismatch & one that Lending Club is dragging their feet to correct for whatever reason.

I realize that most people here understand all this, but I’m clarifying for the new reader who may misconstrue the previous comments as being accurate, which they clearly are not

Reply

Rich August 28, 2012 at 10:11 pm

Speak for yourself, sometimes I see a bargain on Folio, and I want to buy it right away! Prosper instant transfer makes it possible to scratch that itch.

Reply

Dan B August 28, 2012 at 10:55 pm

Rich………..I stand corrected & I can see now that I definitely don’t speak for you.

But then, how do you know that LC, & I quote “loses a lot of impulse buyers”?? Do you in fact know that there are any other investment note impulse buyers out there other than yourself? And if there are, how would you know whether LC loses or doesn’t lose them? Do you, Rich, speak for other buyers? Perhaps you too should just speak for yourself. :)

Rich August 29, 2012 at 10:48 am

I am making an informed generalization based on my own experience, just like you did about investors who don’t want money sitting around.

Dan B August 29, 2012 at 9:18 pm

Rich………..I see. So you mean there are investors who, unlike what I claimed, would rather have their money sitting around not earning interest? Who prefer that transfers take days instead of seconds? Really? Wow!
I bet you believe in unicorns as well.

Rich August 31, 2012 at 12:05 pm

I am not suggesting that isn’t a reason investors would prefer instant transfer. The delay annoys me too, although given what even savings accounts bear right now the lost interest is trivial.

What I am saying is there are other reasons LC may want to offer instant transfer, including allowing a trader who sees a good buy to jump on it even if his or her account doesn’t have the cash. I end up doing that a lot on Prosper (on impulse, but with discretion over the buy) all the time, and I suspect other buyers would like to do the same.

Frankie August 20, 2012 at 10:44 pm

Long timer reader, first time commenter here, just saying this is a good stuff. Glad to see they would answer some questions. I don’t think the LC site is that bad actually, but I agree that FolioFn is a disaster. If I was a buyer on there instead of a seller I would pull my hair out. Was there any filtering questions? I’d love to be able to filter by income.

Reply

Peter Renton August 21, 2012 at 8:33 am

Welcome Frankie, thanks for chiming in. I asked that exact question because income is one of my top filters. Inclusion of an income filter is also “on the list” so I didn’t bother mentioning this separately from the other IT questions. It will be included at some point, but probably not for several months would be my guess.

Reply

Andrew August 21, 2012 at 11:33 am

Wow, I have never heard a more vague and indefinite response to questions in my life. The answer to everything was “This may or may not be in a future update”

Reply

Dan B August 21, 2012 at 5:00 pm

There’s a strong possibility that I’m likely to agree or disagree with your statement. :)

Reply

DT August 22, 2012 at 9:53 am

Thanks for the information. Very helpful.

Reply

Velvet D August 22, 2012 at 4:44 pm

Peter, thanks a lot for taking our questions to the folks at Lending Club. It’s nice to know they are at least willing to sit down and talk about everything. Your efforts are much appreciated!

Reply

Linda August 22, 2012 at 6:04 pm

Peter,
Thank you very much for your work and for sharing the answers with us.
I really like the box on Prosper listings of prior borrowers where it gives a record of their prior loans. Is LC going to do anything like that? Meanwhile, how do I find prior LC borrowers?
Thanks

Reply

Peter Renton August 22, 2012 at 9:48 pm

Linda, There is no way to know which borrowers on Lending Club have taken a previous loan. Sometimes you will see it in the loan description but there is no flag on LC like there is on Prosper. In my conversations they have made it clear they have no intention of adding this feature.

Reply

Frankie C August 22, 2012 at 8:59 pm

Peter, thank you for acting as the voice of the community and relaying LC’s answers.

I have to agree with Dan B’s sarcasm. Not a lot of commitment from LC. This reinforces a feeling I started getting when I read the comments to the original post. We the community quickly went from asking questions to expressing pain points to straight complaining. Rightfully so. And as much as I love p2p lending as an economic system, LC / Foliofn is not a great p2p platform. It’s just the biggest in a 2-player market thank to timing, luck and marketing. If there were 10 players in this market, LC would not be a leader.

Time for me to try Prosper.

Reply

Peter Renton August 22, 2012 at 9:49 pm

Frankie, I agree that having a duopoly like we have in p2p lending is not good for competition. If there were 10 players in the market I think we would have seen a great deal more innovation than what we have now. But Lending Club know they have fallen behind Prosper in many areas and it will be interesting to see how soon they address some of these investor concerns.

Reply

Roy S August 23, 2012 at 10:21 am

It is interesting that you have stated twice that LC believes they have fallen behind Prosper in many areas. Yet, there is still a lot of growth on LC, and it doesn’t look like Prosper is going to gain on them anytime soon. I’m wondering what is giving LC this perception. Are they receiving specific feedback from investors stating that they are moving their (future?) investments to Prosper’s platform and their reasons for doing so? I am actually tempted to move over to LC, but I think it is a bit premature to move from one platform to the other. LC does have a greater loan volume than Prosper, but I still feel that both are early in their developmental stage (possibly due to the lack of competitors) that I’m waiting for dramatic differences between the two prior to making any moves. Of course, for others it may just be an incentive to diversify their investments between the two platforms as you have, Peter.

Reply

Peter Renton August 23, 2012 at 3:50 pm

Roy, The main areas that I have been talking about is the investment platform. LC are ahead of Prosper in many areas and both companies know it but when it comes to the retail platform and user interface Prosper is the leader in my opinion and many people at LC agree.

For example, Prosper has Automated Quick Invest, at Lending Club you have to login every time you want to invest (unless you have a PRIME account). Prosper has more complete filters, LC only allow you to invest via the platform in a subset of available filters (which is why I invest in LC through Excel). Only a small thing but Prosper allows you to invest any amouny after $25, LC demand multiples of $25. This is a subjective thing, but the look of Prosper’s interface is more appealing.

Reply

Em August 23, 2012 at 11:49 pm

Requiring multiples makes no sense. Maybe it made more sense when they were focused on the “Social” aspect of Social Lending.

But anymore requiring any kind of minimum investment at all makes no sense — other than making it harder to calculate their “1% fee” on payments I suppose. Have you ever gotten a 2 cent payment on one of your notes? Suddenly that “1% fee” becomes 50%!

Charlie H August 23, 2012 at 12:12 pm

I know the IRS is on the ambigious side of this but…

I would like to see some changes on how LC reports Total Interest Earned – Fees – charge Offs .

Reply

Peter Renton August 23, 2012 at 3:51 pm

Agreed. LC should be a better job overall in tax reporting. Many investors will get a shock if they are ever audited and they have just entered taxable income as the amount stated on LC’s 1099.

Reply

Linda August 23, 2012 at 6:46 pm

I’m not sure what you mean about how one reports taxable income. Perhaps I’ve been doing it wrongly. Do you have a blog post or something on what we are supposed to report?
Thanks

Reply

Peter Renton August 23, 2012 at 8:21 pm

Here is the article that I wrote about taxes – this should answer your questions:
http://www.sociallending.net/peer_lending/a-guide-to-filing-your-lending-club-and-prosper-taxes/

Reply

Charlie H August 24, 2012 at 8:06 pm

You have to enter every note you sold as a long term gain or loss
You have to enter every loan that was chartered off.
The 1099 LC sends you is wrong.

Reply

Em August 24, 2012 at 11:05 pm

There’s another 1099 on Foliofn down at the bottom of the My Account page. It specifies every sale as either long term and short term. It’s not in a format that’s super easy to import into a tax program but not impossible e.g. you can copy and paste the text into Excel, then take out every line that doesn’t begin with “Note”. Mine was almost 40 pages long.

http://taxes.about.com/od/capitalgains/a/Reporting-Capital-Gains-And-Losses-On-Schedule-D-And-Form-8949.htm

Leave a Comment

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post:

Real Time Analytics