Questions and Answers: Lending Club Edition

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.

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Marc
Aug. 20, 2012 3:08 pm

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

Sarah
Sarah
Aug. 20, 2012 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!

Danny S
Danny S
Aug. 20, 2012 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.

Dan B
Dan B
Aug. 21, 2012 4:12 am
Reply to  Peter Renton

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…………..

Em
Em
Aug. 20, 2012 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.”

Dan B
Dan B
Aug. 20, 2012 7:28 pm
Reply to  Em

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”. 🙂

Dan B
Dan B
Aug. 20, 2012 7:43 pm
Reply to  Dan B

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

Em
Em
Aug. 20, 2012 9:29 pm
Reply to  Peter Renton

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!

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

Dan B
Dan B
Aug. 20, 2012 7:22 pm

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

Rich
Rich
Aug. 25, 2012 8:31 am
Reply to  Dan B

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

Dan B
Dan B
Aug. 25, 2012 9:11 am
Reply to  Rich

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

Rich
Rich
Aug. 28, 2012 10:11 pm
Reply to  Dan B

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.

Dan B
Dan B
Aug. 28, 2012 10:55 pm
Reply to  Rich

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
Rich
Aug. 29, 2012 10:48 am
Reply to  Rich

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
Dan B
Aug. 29, 2012 9:18 pm
Reply to  Rich

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
Rich
Aug. 31, 2012 12:05 pm
Reply to  Rich

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
Frankie
Aug. 20, 2012 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.

Andrew
Andrew
Aug. 21, 2012 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”

Dan B
Dan B
Aug. 21, 2012 5:00 pm
Reply to  Andrew

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

DT
DT
Aug. 22, 2012 9:53 am

Thanks for the information. Very helpful.

Velvet D
Velvet D
Aug. 22, 2012 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!

Linda
Linda
Aug. 22, 2012 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

Frankie C
Frankie C
Aug. 22, 2012 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.

Roy S
Roy S
Aug. 23, 2012 10:21 am
Reply to  Peter Renton

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.

Em
Em
Aug. 23, 2012 11:49 pm
Reply to  Peter Renton

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
Charlie H
Aug. 23, 2012 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 .

Linda
Linda
Aug. 23, 2012 6:46 pm
Reply to  Peter Renton

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

Charlie H
Charlie H
Aug. 24, 2012 8:06 pm
Reply to  Linda

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.

Em
Em
Aug. 24, 2012 11:05 pm
Reply to  Charlie H

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.

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

Michael
Michael
Jan. 30, 2017 9:11 am

For simple math, if $10,000 is invested in lendingclub, and you have and adjusted return showing 10%, would the net gain over 1 year be $1,000. This is what I assume actual returns would be.

I have been an investor for a little over 6 months and my actual returns seem to be lower than what I expected, despite LC saying I’m getting roughly a 10% return. Am I missing something?