Last June at the LendIt Conference Lending Club made a groundbreaking announcement that two commercial banks, Titan Bank and Congressional Bank, had joined the Lending Club platform. Both banks were investing in loans issued by Lending Club and, in the case of Titan, also offering personal loans to their banking customers through the Lending Club platform. There had been so much chatter that p2p lending was disrupting the traditional banking sector so it was positive news to see the two sides working together in partnership.
In early December, Lending Club CEO, Renaud Laplanche, gave an update on Lending Club’s banking partnerships when he testified before Congress that Lending Club now has seven banks participating as investors. Naturally, we were curious about what other banks had joined the platform.
Earlier today Banco Santander’s US division, Santander Consumer USA, launched an IPO in the US. Santander Consumer USA is best known as a provider of auto financing to Chrysler after they replaced Ally Financial (the old GMAC) as the retail and commercial financing arm for Chrysler. What is less well known is that Santander Consumer USA is one of the larger investors on Lending Club’s platform. Note, while Banco Santander is one of the largest banks in Europe, their US subsidiary is not technically a bank.
As you can see in Santander Consumer USA’s S-1 (IPO) filing, they made a major long term commitment to Lending Club when, in March 2013, Santander Consumer USA agreed to purchase up to 25% of Lending Club’s total origination for a period of three years. According to Santander’s website, they also have the right to purchase nonprime loans (probably policy code 2 deals). This is a huge deal that has been low profile to date.
Now that Santandar Consumer USA has gone public, we may receive more transparency on their Lending Club deal including possibly quarterly updates on their earnings calls. Yesterday, I reached out to Lending Club for comment on this investment commitment from Santander Consumer USA. Here is what they said to me:
- The 25% is simply a cap – we commonly do this with our large investors to ensure loan availability for all buyers.
- A material part of their purchasing (and their expertise) is in the pilot program reaching the expanded policy segment (policy code 2).
- We can’t disclose individual investors’ purchase commitments
- They are one of our whole loan buyers and compete against the others on an equal footing
- They began purchasing in Spring of 2013