Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: brycemason on August 18, 2013, 11:20:08 AM

Title: Fairer Solutions to Excess Investor Demand
Post by: brycemason on August 18, 2013, 11:20:08 AM
The purpose of this thread is to accumulate and to discuss the merits of potential solutions to the problem defined below. Solution proposals shall be in bold for easy reading, and no other use of bold shall be made. Discussion not on topic will be deleted. I want LC to have a clean thread for the sum of our ideas.

Only a handful of weeks have passed since I had hypothesized in this thread (1) that institutions were buying free time options and sitting on large chunks of notes to the time when we have two other threads (2) and (3) where the concept is blowing up into retail investor fury.

If LC cares about the retail, individual investor, then they need to address this issue because using the website as it is now is untenable. At a technological disadvantage, individual retail investors are left with the cream of the crap a few moments after loan release.

Solution: Stricter Whole & Fractional Pools by Investor Type
LendingClub could code every account as either institutional (LP, LLC, etc.) or retail individuals. X% and (100-X%) of new applications would randomly go into market spaces designated for each type of account for 24 hours. Account types cannot cross into the other space, but after 24 hours, a loan moves into a general pool available for everyone. $Y max fraction on the retail space.

Funds would be less likely to abuse this system because (a) at least one account associated with the fund would need to be an individual, giving a liability opening in their corporate structures, and (b) the trading fees moving individual purchases to a fund account via the secondary market would eat up much of the alpha they generate (especially after their fees). Downsides to LC seem minimal, as any funding delay is at maximum 24 hours above what it is now (which is instantaneous for the loans in question).

Eager to hear more ideas!

(1) http://www.lendacademy.com/forum/index.php?topic=1348.0 (http://www.lendacademy.com/forum/index.php?topic=1348.0)
(2) http://www.lendacademy.com/forum/index.php?topic=1453.0 (http://www.lendacademy.com/forum/index.php?topic=1453.0)
(3) http://www.lendacademy.com/forum/index.php?topic=1455.0 (http://www.lendacademy.com/forum/index.php?topic=1455.0)
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: GS on August 18, 2013, 11:48:10 AM
I like your idea.

Another idea would be a stricter enforcement of the 70% rule.  For the first 24 hours, 30% of each loan in the "fractional pool" must be filled by orders of $100 or less, from different accounts. 

So, if someone jumps in with a 70% order in the first millisecond, that loan is closes to only $100 orders for the next 24 hours.  LC can keep the whole loan program as is.  This solution would require very little tinkering.

Edit:  To clarify, I mean a hard 70% cap on the sum of investments larger than $100.  To use the example of a $10,000 loan, and two large investors both submit $5000 orders (50% each), only the first $5000 order would be accepted.  The other investor would have the option to reduce his order to $2000 to get in under the 70% cap.  From there, for the remainder of the 24 hours, all orders would have to be $100 or less.

This edit was made to clarify based on Core's comment, below.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: core on August 18, 2013, 11:57:40 AM
So, if someone jumps in with a 70% order in the first millisecond, that loan is closes to only $100 orders for the next 24 hours.  LC can keep the whole loan program as is.  This solution would require very little tinkering.

Just 2 investors could lock up 50% pieces using the shopping cart loophole and take the entire thing.  As long as both pieces were locked before the first order was finalized it would work.  As long as the shopping cart locks notes it is pretty easy to game most anything that gets put in place.

Get rid of the shopping cart note lockup.  Allow partial fills when the final order is placed.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: Randawl on August 18, 2013, 12:18:05 PM
Solution: Dollar amount restriction per loan fraction (Investment limit per loan, per SSN).
Investors are limited to loan fractions of X amount of dollars, allowing for hundreds of investors to participate in a particular loan.


This would stem the tide, but only for a short period of time.  If the fraction restriction was set to $100, even on a $35,000 loan it could still be theoretically fully funded by just 350 investors.  This may seem like a good idea now, but it won't be long before thousands and tens of thousands of investors want the same note.  This is a Band-Aid solution and investors will find themselves with the same hyper-competitiveness as this asset class continues to grow.

Solution: Round Robin.
Loans are released and investors have 24 hours (or longer) to choose the loans in which they want to invest.  If there are more investors than possible fractions after a set time period, a randomized system leaves the investor with their "fair share" of notes for their loan selections of the day.
 

I believe LC will eventually switch to continuous posting of new loans as they become submitted instead of four daily batches which will further necessitate having loans be available for selection for a set time period.

The Real Solution: Combine Investment Limit per Loan Fraction, a Round Robin System, and Stricter Whole & Fractional Pools by Investor Type as detailed above
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: nonattender on August 18, 2013, 03:02:43 PM
If LC cares about the retail, individual investor

Last I checked, LendingClub was not managed or directed by Mother Teresa and the Sisters of Mercy - almost the polar opposites, in fact...
That's not a value judgment, by the way.  I think it's a killer business model.  I'm just not sure why you think they care, now, about retails?

I think the best that can be hoped is that a mechanism emerges which allows investors to fund borrowers whom they themselves acquire.
Prosper had that, at launch, in 2006, as well - "groupmembers" would get first bite on loan requests made by any borrower within groups.
(Does LC have a similar mechanism in place to allow the credit unions who feed their members to be serviced by LC to buy member loans?)

It's all "meet the new boss, same as the old boss" and "everything old is new again", to me... I'm not sure why this is surprising anyone...

You're sort of asking "how do we get LC to retard their growth rate so that a few vocal retail investors can continue making big profits?"...

(Is there a binary option I can buy that will pay me if they don't "care" to do that?)
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: brycemason on August 18, 2013, 03:53:39 PM
If LC cares about the retail, individual investor

Last I checked, LendingClub was not managed or directed by Mother Teresa and the Sisters of Mercy - almost the polar opposites, in fact...
That's not a value judgment, by the way.  I think it's a killer business model.  I'm just not sure why you think they care, now, about retails?

Common logical error. I didn't say I thought that. I just proposed an antecedent. Although Peter tells us on many occasions that they claim to.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: GS on August 18, 2013, 04:10:35 PM
I think it would be short sighted of lending club to turn their backs on individual lenders.  As more P2P options become available, and saturate the lending side, and as LC tries to expand the borrowing side into much larger business and secured loans, keeping ALL their investors happy will be more of a priority.  I think LC knows this, and will take some action to level the playing field.  If they handle this properly, "P2P lending" could become as synonymous with retirement investing as "stocks" and "bonds".  I would not be surprised if an entity like Etrade tried to buy Prosper or LC.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: SeattleSun on August 18, 2013, 04:13:57 PM
"LendingClub could code every account as either institutional (LP, LLC, etc.) or retail individuals."

I am not sure this distinction is as clear cut as you think/propose.  Myself and two of my "business partners" are operating our P2P account as an LLC.  We have an account balance of less than $100k and have never made a loan above $100 and consider ourselves as just three reatail individuals joined at the hips.  We do this to allow shared management duties by like thiniking individuals allowing for time off like vacations, etc for the others partners.  Of course we could always set up three individual accounts.  P2P is not the only small venture we manage this way.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: storm on August 18, 2013, 05:03:37 PM
You're sort of asking "how do we get LC to retard their growth rate so that a few vocal retail investors can continue making big profits?"...

How does giving small investors a chance retard growth?  The loans are funding within seconds.  Whether it is a bunch of small investors or a few big investors, the loan is still funded.  We small investors have thrown in a few of our hard-earned bucks into LC the lat 5-6 years to see what happens.  Now the big guys see we are doing alright, and they want to come play in our new playground too.

I am all for investment controls to give small lenders a chance, but that is just a small fix.  The long term problem is finding enough borrowers to meet the demand of the investors (and vice versa).  What is currently retarding growth is that there are not enough borrowers.  That, and it takes too long for LC to verify the applicant's information and issue the loan.  Maybe we should be asking if Laplanche wants LC to grow that big that fast, and what, if anything, he is doing about it.  I doubt we would get a straight answer, but maybe an idea of how much effort LC is putting in to attract more borrowers right now.  With all the options that prime borrowers have to get money, I think the best way to promote P2P lending is through word-of-mouth.  Allowing small "retail" investors to directly fund the loans is an edge that LC has over the banks, and can potentially lead to that many more referrals.  That is why I think it is a mistake to allow the big investors to squeeze us out.  If this situation continues much longer, there aren't going to be as many happy customers.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: flyp52 on August 18, 2013, 07:15:01 PM
I'd rather see LC create a new instrument that is a basket of loans and allow me to buy shares in that.  For example they could offer a basket of $25M Sep 2013 E Grade loans and line up investors to purchase a piece of that.  I'm thinking have an offering window and give each investor, big or small, that signs up an opportunity to purchase an equal share in the basket.  The unpurchased amounts from all the investors that don't purchase their entire allocation is allocated equally among the remaining investors that want more, etc. etc. until all shares are purchased. 

In the limit case if 1M investors sign up, each investor gets to purchase a $25 share.  If 10,000 investors sign up, each can purchase $2,500.  Smaller investors that can't or don't purchase $2,500 take their fill, and the rest of their allocation is offered to investors that want more.  This guarantees that any small investor that wants a share gets one and only the large investors may not get as much as they want.

I can imagine all sorts of variations to meet different investors needs - baskets that have a minimum purchase requirement, different kinds of indices, etc.

As a retail investor that is still picking loans manually, the biggest advantage is not having to compete for individual loans - I would be perfectly happy purchasing an index.

Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: berniemadeoff on August 18, 2013, 07:32:26 PM
If LC cares about the retail, individual investor

Last I checked, LendingClub was not managed or directed by Mother Teresa and the Sisters of Mercy - almost the polar opposites, in fact...
That's not a value judgment, by the way.  I think it's a killer business model.  I'm just not sure why you think they care, now, about retails?

Common logical error. I didn't say I thought that. I just proposed an antecedent. Although Peter tells us on many occasions that they claim to.

Only way to get their attention is to impact their IPO.  I assure that's all there care about now.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: core on August 18, 2013, 08:44:04 PM
Only way to get their attention is to impact their IPO.  I assure that's all there care about now.

Let's all short the stock and then go on the mass marketing campaign to tell the real story about what's going on and how it's not now p2p, if it ever was.  It ain't stock manipulation if it's the truth.  Salting someone else's well is fun, but it's more fun to make some bank in the process.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: DanB on August 18, 2013, 08:52:14 PM
Brycemason..............As I told Peter some months ago, I'm not commenting on the "forum" anymore but I'll make an exception today.



Stating that "using the website as it is now is "untenable", seems a bit extreme. Shouldn't it instead be, using the website as it is now is untenable imo, or perhaps..................using the website as it is now is untenable to those users who rely on pick services such as mine or services that in one way or another channel users collectively to the same loans? Or users who essentially do nothing more than copy other users?  Would that not be more accurate?

I use LC daily for multiple accounts. Sure it's tougher these days & I've had to make a few minor adjustments, but isn't life itself about making adjustments? .......................Because, unlike you, I'm pretty far from saying "untenable". Then again, I don't use any pick services, & I don't even care what others "filter" for, much less copy what they do.  And no, I don't set my alarm clock, nor do I consistently wake up before 10 am.............or sometimes even noon.

So if one were to accept the flow of the conversation here, I must either be lying or getting totally crap loan choices.  Or perhaps you think LC is setting aside some "special" loans for me..................you know because of my consistently supportive behavior towards them  :)   
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: berniemadeoff on August 18, 2013, 10:38:08 PM
Only way to get their attention is to impact their IPO.  I assure that's all there care about now.

Let's all short the stock and then go on the mass marketing campaign to tell the real story about what's going on and how it's not now p2p, if it ever was.  It ain't stock manipulation if it's the truth.  Salting someone else's well is fun, but it's more fun to make some bank in the process.

Hell ya!!!
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: mo on August 19, 2013, 01:35:15 AM
Brycemason..............As I told Peter some months ago, I'm not commenting on the "forum" anymore but I'll make an exception today.

Why not?
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: investforfreedom on August 19, 2013, 01:47:45 AM

Why the assumption of "Perpetual Excess Investor Demand" in the first place? Perpetual? Really? Seems like a rather bold assumption. What is your definition of perpetual, I hasten to ask?


I agree with DanB on this occasion, even though I disagree with him on previous ones.  I don't believe we can make the assumption that the excess investor demand is "perpetual."

First, there is certainly excess investor demand on loans with higher risks right now.  And we also see an increase in demand for lower risk loans, but it is much less dramatic.  There is still an abundance of these lower risk loans, especially on the Prosper platform, i. e., AA and A loans.

Second, if this new industry is as "disruptive" as it is claimed to be (by those speakers at the LendIt conference), I surmise that the traditional banks and credit card companies will be forced to compete by lowering their rates at some point in the future.  This will in turn push down the borrowing rates offered by the lending platforms such as LC and Prosper.  In fact, we have already seen the borrowing rates on these two platforms come down in the past year or so, much to the chagrin of those of us who want to maintain higher double-digit returns.  Rates could come down to a point where it may no longer be as attractive as they still are now.  Investor demand could soften as a result.

(C) On the other hand, if investor demand tempts the two platforms to lower the underwriting standards in order to originate more loans, it would only lead to higher rates of default.  (And it seems that there have been more loans with "major delinquencies" and "public records" coming onto the LC platforms after they changed things at the end of last year. How these loans pan out remains to be seen.)  And higher default rates will dampen investor demand eventually. 

However you look at it, the market will find some kind of supply and demand equilibrium somehow.  Excess investor demand is not perpetual. 

The way I see it, rates and ROI will come down regardless of whether a fair mechanism is in place--even though as a small investor I am all for a fair solution.


Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: DanB on August 19, 2013, 03:18:32 AM
Brycemason..............As I told Peter some months ago, I'm not commenting on the "forum" anymore but I'll make an exception today.

Why not?

Because Peter & I have rather different views on the functions, general comportment & acceptable tone of a "forum" & this is his forum. But despite our differences on this & other topics, I consider Peter to be a friend & as such, have no desire to make our differences on a "forum" some major point of contention. Therefore I voluntarily decided to not be a "regular" poster on the forum & only post when I feel something that hasn't already been mentioned really ought to be mentioned (like tonight & a few weeks ago with Core's locked account situation). This works great for me & of course I still post regularly on the blog itself...............where I feel no constraints & can better accomplish what I want to accomplish.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on August 19, 2013, 10:12:41 AM
I've updated the title to remove the word perpetual. I guess I have a flair for the dramatic. It was immaterial to the discussion points anyway.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: RollWave on August 19, 2013, 10:23:47 AM
So if one were to accept the flow of the conversation here, I must be getting totally crap loan choices.

yes, that's the jist.  and without using an automated system, an investor may not even realize that he is only looking at a small fraction of loans as compared to other users.

--

I agree with others who have suggested some variant of the 'limit x% of each loan to $y max investment size per user for z hours'.  These variables are somewhat arbitrary, but it's probably the best way to ensure that the maximum investor pool has access to the maximum number of loan offerings.
Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: Rob L on August 19, 2013, 10:39:21 AM
The first order of business is to make LC aware that the 75% rule is not working as they initially intended (promised), and find out if they are interested in fixing it.

I think we are having this discussion because we believe the 75% (70%?) rule as it was envisioned by LC does not work. LC may disagree, but several ways around this rule for larger investors have been discussed. Many of us believe these methods and perhaps others we haven't imagined are being used today to skirt the rule. My understanding is that LC put this rule in place specifically for the benefit of the small retail investor in the spirit of compromise at the same time they implemented the whole loans program for the benefit of large investors. All we are asking LC to do is to fix the 75% rule to prevent its circumvention and abuse by larger investors. We are not asking for anything new; only something that works as LC intended in the first place.

LC is drinking from a fire hose of investor demand and growing like crazy. There's that IPO thing out there and I agree that if anything is to be done LC must see it as very low risk and not a chance to mess up the good thing they have going. Only if LC is even willing to engage in a discussion concerning the broken 75% rule need we take the next step and propose solutions. I do believe that a few simple changes as suggested in this thread and perhaps others, would go a long way toward restoring the operation of the rule as LC intended in the first place.

Title: Re: Fairer Solutions to Excess Investor Demand
Post by: DanB on August 19, 2013, 10:46:09 AM
Peter.................Isn't it a code of conduct violation for a person (Rollwave) to use the "quote" function & then delete a  word  within that quote in order to change the meaning of that quote?? Or is that acceptable behavior around here?

Title: Re: Fairer Solutions to Excess Investor Demand
Post by: SBryantMS on August 19, 2013, 10:55:32 AM
Peter.................Isn't it a code of conduct violation for a person (Rollwave) to use the "quote" function & then delete a  word  within that quote in order to change the meaning of that quote?? Or is that acceptable behavior around here?



+1
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Zach on August 19, 2013, 01:21:40 PM
Peter.................Isn't it a code of conduct violation for a person (Rollwave) to use the "quote" function & then delete a  word  within that quote in order to change the meaning of that quote?? Or is that acceptable behavior around here?



DanB, you are correct that it would be acceptable usage only to quote a user with no modifications of any kind to their text. I have sent a reminder email to Rollwave with this information as well.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: wiseclerk_com on August 19, 2013, 04:25:12 PM
Other p2p lending services have used waiting queues for automatic bidding profiles. Once a bid was made the lender moves to back of the queue again. (example Isepankur.com, and I believe their also was a UK one).
Or broader if you dont want to use the word "queue" then call it first in first out. Of course that makes only sense if all automatic bidding by standing orders is applied before any individual bids.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: kitono on August 19, 2013, 05:31:26 PM
I have a simple yet effective solution.
Why not simply allow everyone to make purchases on a new loan within 6 hours (or however long it takes for credit/income verifications/etc to process). These people can say how much they're willing to put into the loan in increments of $25 including institutional investors.
At the end of 6 hours, the loan is funded starting with the smallest increments at a time and then works its way up to larger investors.
For Example:
Retail Investor A $25
Retail Investor B $50
Institution C $3000
Institution D $5000

Say the new Loan is $3000 then:
First Round $25:
ABCD
Money Left - $2900
2nd Round $25:
BCD
Money Left - $2825
X Round - $2825 then becomes an even split between the remaining two largest investors, priority for that remaining $25 can go to whichever of the two largest investors purchased first.

This way, LC Keeps all its investors and it really is in their best interest to "force" diversification for a less risky portfolio and through that, better avg returns and higher PR/Reviews
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: yojoakak on August 19, 2013, 05:31:38 PM
The only fair way would to be some kind of auction. Something like...

LendingClub sets an initial rate for a loan. If that loan fills up before you get a piece, you can offer a lower rate.

Once the loan gets filled up the borrower can accept the loan at any time, or wait the full 2 weeks to see how low the rate will go.

Maybe each note would gets its own rate, but the borrower might just see an average rate.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: kitono on August 19, 2013, 05:39:21 PM
Yojak that method proved to fail a few years ago, no? I think I recall people outbidding each other to the point of losing money.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: AnilG on August 19, 2013, 05:53:24 PM
Yep, Prosper 1.0 used auction-style and failed miserably during the 2008 downturn mostly due to lack of risk assessment and management capability of retail lenders on the platform. A better alternative will be Zopa style.

Yojak that method proved to fail a few years ago, no? I think I recall people outbidding each other to the point of losing money.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 19, 2013, 05:57:52 PM
Say the new Loan is $3000 then:
First Round $25:
ABCD
Money Left - $2900

If you did this then the institutions would take their bat & ball and go home.  LC is not going to do this because of that alone.  It would also affect non-institutional individuals with medium to large balances... it would be difficult if not impossible to get large amounts invested in any reasonable time frame.

The rest of this isn't directed at you, Kitono.  But I was just noticing while reading all these...

Some of the posts in these threads the past few days have sounded alarmingly close to socialism.  Why does 'fair' have to mean "everyone gets their 'fair share' of notes"?  Where else have we heard the phrase 'fair share' recently?  Fair means a level playing field, it does not mean rationing and bread lines to make sure everybody gets a little something.  That didn't work out too well for the commies.

Title: Re: Fairer Solutions to Excess Investor Demand
Post by: GS on August 19, 2013, 06:14:07 PM
Kitono,

That's a really cool idea, but LC has spent the last year enticing large institutional investors to join, and given them special tools that allow them to instantly grab the lion's share of any note they want within seconds of being posted, as well setting aside whole loans for them to purchase.  Some people believe it is the influx of cash from these institutions that is making LC profitable, and LC is not likely to "level the playing field" to the point of giving individual investors anywhere near the same access that institutional investors have.  As much as I would like to see a solution like what you proposed, the reality is that anything that doesn't allow the institutions to grab a big chunk of any loan they want isn't going to fly.

[I didn't see Core's response when I started typing, but the same sentiment.  LC will not do anything to make their institutional clients doubt LC's commitment to tilting the field in their favor.  I'm just asking for less tilt.]
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on August 19, 2013, 06:20:50 PM
Here is little more evidence of the problem as I see it (as a small retail investor).
The following loans were fully funded within 30-45 seconds of being posted at the 2pm upload today:
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818233 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818233)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6838231 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6838231)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6875185 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6875185)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818368 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818368)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6817600 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6817600)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6808229 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6808229)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818411 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6818411)
https://www.lendingclub.com/browse/loanDetail.action?loan_id=6837992 (https://www.lendingclub.com/browse/loanDetail.action?loan_id=6837992)
In summary 152 new loans were posted and 23 were gone within the first 5 minutes. 12 were gone within the first minute.
I really wish SarahV were here to comment on the quality of these. The last time I did this she nailed every one. If she's really gone gone I will miss her. I hope she reconsiders.
I don't know how many were other loans were put up and fully funded before I had a chance to look. You have to be moderate in your bandwidth demands on the LC web site or they will throttle you back. That said however, they are providing amazingly transparent access to their data and should be roundly applauded for it!

And I see Core just added a post while I was pontificating. I make it a point in my life NEVER to use the word fair. It conveys no meaning. By definition people using the word fundamentally disagree. Fair is in the eyes of the beholder.

Meanwhile I repeat; my view is that the 75% rule isn't working and I would like LC to fix it. If they don't agree nothing will be done. I'm not asking for different or more, just what they said they would do in the first place.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 19, 2013, 06:25:57 PM
I make it a point in my life NEVER to use the word fair. It conveys no meaning. By definition people using the word fundamentally disagree. Fair is in the eyes of the beholder.

Good point.  I probably shouldn't have used the word either except as part of a quote.  It is, however, right there in the subject of this thread.

You have to be moderate in your bandwidth demands on the LC web site or they will throttle you back.

This I was not aware of, at least not "throttling".  Can you explain this in a bit more detail?  Are we talking API or web site?  I make it a point to never use the word "moderate", it conveys no meaning.  Moderate is in the eye of the beholder.  :)  Everything is relative.  Are we talking about a human checking the site too often, or automation running at 20 times a second?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on August 19, 2013, 06:31:45 PM
Quote
I really wish SarahV were here to comment on the quality of these. The last time I did this she nailed every one. If she's really gone gone I will miss her. I hope she reconsiders.
I reached out to her after she left the forum.  She seems like she is really gone gone -- which is very sad :( 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on August 19, 2013, 08:13:42 PM
By "fair," I mean to the extent LC cares about their retail investors, they should have more equal access to notes of all qualities.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on August 19, 2013, 08:39:56 PM
Sorry to flame about the "F" word; just a very personal thing (stuff in my life). Obviously I have no hang-ups with the word moderate (verb or adverb) and there isn't any difference.

Like a lot of other things I remember reading this but can't recall exactly where. I'm talking about automation banging on the website more than once every 15 seconds becomes less than moderate. This is for the website itself, not the API, and probably depends what you are doing and the demands that places on LC's servers. For data collection purposes I only look every 20 seconds just to be sure I don't incur the wrath of LC. Actually that's much slower than I could do it manually so I don't think it is particularly burdensome. If they are throttling my requests that's fine; just slows the collection intervals a bit. With 20 second intervals I can get a pretty good idea what's what, but I will miss things that come and go more quickly than that. I've been collecting release data for months now with no complaints from LC so I guess I've been compliant with the rules of the road.

As for the API my understanding is that there is also a limit beyond which you will be throttled. However, that limit is "TBD" so I don't know where the boundaries are there.

Rawraw if you can reach out to SarahV after a bit of time has passed maybe she will reconsider. She has earned the respect and admiration of a lot of us here and is missed.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: kitono on August 19, 2013, 09:49:47 PM
Thanks for the responses to my post. Here's a question. If LC caters so heavily in favor to institutions, doesn't that disqualify it from calling itself P2P? isn't the whole point for average joe to lend to average joe? That's what brought me in at first.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 19, 2013, 10:00:59 PM
If LC caters so heavily in favor to institutions, doesn't that disqualify it from calling itself P2P?

It most certainly does disqualify it.  That's why LC has been shying away from calling itself that lately, and in at least one interview has said flat out that they are not P2P lending.  In the lead-up to the IPO though, they are going to say whatever they think people want to hear, whatever will drive the stock higher.  In the coming months I suspect we'll hear how they were sent down from heaven by the almighty Himself to conquer big bank corruption.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 19, 2013, 10:58:23 PM
If LC caters so heavily in favor to institutions, doesn't that disqualify it from calling itself P2P?

It most certainly does disqualify it.  That's why LC has been shying away from calling itself that lately, and in at least one interview has said flat out that they are not P2P lending.  In the lead-up to the IPO though, they are going to say whatever they think people want to hear, whatever will drive the stock higher.  In the coming months I suspect we'll hear how they were sent down from heaven by the almighty Himself to conquer big bank corruption.

I love it!   ;D
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: wiseclerk_com on August 20, 2013, 12:47:06 PM
Found it.

Zopa is using the "queue system" too:
http://talk.zopa.com/topic/8749-the-order-of-lending-under-safeguard/
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: RollWave on August 20, 2013, 02:34:40 PM
how did my quote change the meaning of danb's sentence at all?  because i removed the possibility that he was lying?  and removed the possibility of LC setting aside loans for him.  Why would you give any credence to those suggestions? 

its completely reasonable that when a poster suggests 3 alternatives, to accept the most likely and respond to by calling him correct.
Title: Fairer Solutions to Excess Investor Demand
Post by: Peter on August 20, 2013, 06:44:21 PM
Really interesting post. Thanks for starting this thread Bryce.

First, Rollwave, it is standard practice on this and pretty much all forums when using the Quote function to leave the quote untouched. If you don't feel like doing that then don't use that function.

There are some great ideas here and I will certainly bring this thread to the attention of LC although they are probably already aware.

One point that has not yet been mentioned on this thread is that institutional investors are also complaining about the lack of supply. They face the same problems we face just on a larger scale.

I had a long conversation with Scott Sanborn (their COO) last week about the investor problem among other things.

In my discussion with Scott we talked about several ideas about how to help all investors. A couple of the ideas mentioned here were part of the discussion although I can't disclose which ones.

I don't expect change to come quickly here but at least they are thinking about solutions.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: RollWave on August 20, 2013, 07:23:59 PM
First, Rollwave, it is standard practice on this and pretty much all forums when using the Quote function to leave the quote untouched. If you don't feel like doing that then don't use that function.

I'm sure you would agree and Zach already conceded via pm that when quoting, cutting down the length of a post is acceptable. The forum would be unreadable if people were quoting 5 paragraph essays left and right untouched.  And that is exactly what i did.  Danb is just trolling you guys with the complaint.  I did not change his words or meanings.  My quote didn't put words in his mouth.  All i did was cut down the length of a long post so that I could agree with a specific point he made.

That last part seems like an important point.  That I was agreeing with him.  It's not like I cut out relevant material to misrepresent him and make him look wrong.  I removed unrelated material from his post in order to respond to a single point that I felt was correct and important.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on August 20, 2013, 07:35:28 PM
Really interesting post. Thanks for starting this thread Bryce.

First, Rollwave, it is standard practice on this and pretty much all forums when using the Quote function to leave the quote untouched. If you don't feel like doing that then don't use that function.

There are some great ideas here and I will certainly bring this thread to the attention of LC although they are probably already aware.

One point that has not yet been mentioned on this thread is that institutional investors are also complaining about the lack of supply. They face the same problems we face just on a larger scale.

I had a long conversation with Scott Sanborn (their COO) last week about the investor problem among other things.

In my discussion with Scott we talked about several ideas about how to help all investors. A couple of the ideas mentioned here were part of the discussion although I can't disclose which ones.

I don't expect change to come quickly here but at least they are thinking about solutions.

Peter,

Thanks for sharing.  However, in my world, what Scott shared with you may be considered an MNPI (Material Non-Public Information). 

The rule about MNPI is: SEC regulation FD ("Fair Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large. In the case of an unintentional disclosure of material non-public information to one person, the company must make a public disclosure "promptly."  (http://en.wikipedia.org/wiki/Insider_trading#SEC_regulations)

Fortunately, LC is not a public company yet.  Once it becomes public, it must be wary of selective disclosures of MNPI.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: DanB on August 20, 2013, 08:30:30 PM
Rollwave...........But you did not just "shorten" the quote, you deleted within the part that you quoted.

Your version of what I said was..............So if one were to accept the flow of the conversation here, I must be getting totally crap loan choices.

What I actually said was...............So if one were to accept the flow of the conversation here, I must either be lying or getting totally crap loan choices. Or.....etc etc.

You don't get to change what someone else says & still try to pass it off as their "quote". And if you think that the actual quote & your version mean exactly the same thing then I respectfully suggest you revisit English 101.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on August 20, 2013, 09:41:23 PM
Move this thread crapping to a different thread. I posted my rules up front--off topic posts get deleted!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: DanB on August 21, 2013, 01:22:52 AM
Move this thread crapping to a different thread. I posted my rules up front--off topic posts get deleted!


I was not aware that topic starters now had the power to delete posts,  or to threaten deletions. I was under the impression that only the owner or moderator of the site had that type of authority. Am I mistaken or are you now a part owner of Lend Academy?  If that is the case then congrats are in order!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on August 21, 2013, 09:30:09 AM
One point that has not yet been mentioned on this thread is that institutional investors are also complaining about the lack of supply. They face the same problems we face just on a larger scale.
That's exactly why I'm afraid some of them (particularly  the smaller ones) would skirt the 75% rule for access to more supply; and it is "skirtable".
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on August 21, 2013, 10:40:29 AM
One point that has not yet been mentioned on this thread is that institutional investors are also complaining about the lack of supply. They face the same problems we face just on a larger scale.
That's exactly why I'm afraid some of them (particularly  the smaller ones) would skirt the 75% rule for access to more supply; and it is "skirtable".

I fail to see why we need to concern ourselves with the institutional investors complaints.  All we are asking for is a level playing field. 

Bryce, can you move this along to LC?   
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on August 21, 2013, 10:49:01 AM
Peter,

Thanks for sharing.  However, in my world, what Scott shared with you may be considered an MNPI (Material Non-Public Information). 

The rule about MNPI is: SEC regulation FD ("Fair Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large. In the case of an unintentional disclosure of material non-public information to one person, the company must make a public disclosure "promptly."  (http://en.wikipedia.org/wiki/Insider_trading#SEC_regulations)

Fortunately, LC is not a public company yet.  Once it becomes public, it must be wary of selective disclosures of MNPI.

While I am not a securities lawyer I can't imagine that discussing potential ideas and soliciting feedback with one person could possibility violate SEC rules. Scott wasn't telling me what Lending Club is going to do and to keep it to myself, it was more of a brainstorming session. Surely that is above board.

But anyway, we should stick with Bryce's request and stay on topic now.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: p2p2p2p2p on August 21, 2013, 01:12:13 PM
I noticed that rates or return dropped this month at the institutional level also. I and others are starting to see opportunities elsewhere becoming almost if not more attractive than LC. Before totally bashing the "Institutions" bear in mind that they are the ones primarily enabling this entire system. Without someone to hoover up all the unfilled notes across the board ( especially A-B) this site would not be able to exist.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 21, 2013, 02:56:52 PM
A LendingClub implemented auto-investment tool that distributes notes in a "fair share" sort of way before the remainder of the loan is posted for sale.

"Fair share" is the hard part. Very hard. More on that below.

I have some comments on previous proposals and other considerable thoughts:


The real difficulty is deciding what a "fair share" means (and if it can even be ethical to make such a judgement). I think:

After considering all the points above, I propose that "fair share" means (ideally):

So, someone figure out how to approximate that outcome without the abuse. My brain is starting to hurt, I'll come back to it later.

EDIT:
Actually, processing lenders so that they take turns, one at a time, buying a note, seems like a pretty good approximation, and easy. I have to think it through more.

The main problem with auto-investing, I think, is that I don't get to review my notes and reject the ones I don't want. So as a related but separate issue I'd like to see a feature in such a tool so I can do some manual screening (which I haven't thought through very carefully yet, but sounds good prima facie).

Allow the auto-invest tool to be used to put notes into your shopping cart.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 21, 2013, 03:12:22 PM
Quote
In other words: (Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

Since notes cannot be written for less than $25 (at present, and they are unlikely to decrease that), this will have one of the following side effects depending on how it's implemented.

1. Your $3.67 "share", for example, will be rounded down to zero and you'll get nothing.  Every time.
-- or if you round up to $25: --
2. The small investors will get the lion's share at $25 each, quite probably leaving no large notes. Institutions cry like little girls.

Title: Re: Fairer Solutions to Perpetual Excess Investor Demand
Post by: TonySaunders on August 21, 2013, 03:14:30 PM
Solution: Round Robin.
Loans are released and investors have 24 hours (or longer) to choose the loans in which they want to invest.  If there are more investors than possible fractions after a set time period, a randomized system leaves the investor with their "fair share" of notes for their loan selections of the day.
 

This is really good and doesn't require an auto-invest tool like I was thinking. But instead of a randomized system I'd prefer to see:

(Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

or an approximation thereof.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 21, 2013, 03:17:26 PM
Quote
In other words: (Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

Since notes cannot be written for less than $25 (at present, and they are unlikely to decrease that), this will have one of the following side effects depending on how it's implemented.

1. Your $3.67 "share", for example, will be rounded down to zero and you'll get nothing.  Every time.
-- or if you round up to $25: --
2. The small investors will get the lion's share at $25 each, quite probably leaving no large notes. Institutions cry like little girls.

I mentioned this caveat but didn't offer any solutions, which I think there are many good ones. I propose that the $25 and less notes are pooled together and distributed in $25 notes randomly (or roundly) to the investors who wanted them. Some lenders get left out (which we know must happen one way or another). This particular solution doesn't mess with the ratios, but has some caveats of it's own.

EDIT: Also, such a strategy needn't be implemented in this purist mathy manner. I think... but I don't have details hashed out.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: thezfunk on August 21, 2013, 03:37:02 PM
I think one point that is missing here is something the platforms seemed to be talking about at the Lendit conference.  I wasn't able to watch the whole thing but I caught good portions of much of it.  One thing the platforms were talking about, especially for future, was the ability for anyone to 'instantly' get a loan. 

For example, I am at the store and need a new appliance.  In seconds or minutes I can apply and receive my loan all from a mobile device.  In that idea or model there is no 'time' for these time frames or limits that are being suggested in this thread.  They don't want people to have to wait 24 hours or 6 hours or whatever.  They would like this to be as instantaneous as possible.  I think it will be real hard to sell the platforms on these time frame ideas.

(I am not saying they are bad ideas just hypothesizing on how the platforms might view these ideas.)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: nonattender on August 21, 2013, 03:51:10 PM
Yes, any "solution" will have to be easy to code, easy to understand, and, most importantly, not retard LC's growth trajectory by
impacting the ultimate goal of "realtime" approval/fulfillment...  So, any "auction-like algorithmic solution" must be instantaneous.

If you look at how Goog's adwords auctions are run in real-time that's the sort of speed that they're ultimately trying to hit here.
So, no matter what, you're going to have to have your orders in before the notes are posted so that the algo can fulfill very fast.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: GS on August 21, 2013, 03:56:44 PM
I think one point that is missing here is something the platforms seemed to be talking about at the Lendit conference.  I wasn't able to watch the whole thing but I caught good portions of much of it.  One thing the platforms were talking about, especially for future, was the ability for anyone to 'instantly' get a loan. 

For example, I am at the store and need a new appliance.  In seconds or minutes I can apply and receive my loan all from a mobile device.  In that idea or model there is no 'time' for these time frames or limits that are being suggested in this thread.  They don't want people to have to wait 24 hours or 6 hours or whatever.  They would like this to be as instantaneous as possible.  I think it will be real hard to sell the platforms on these time frame ideas.

(I am not saying they are bad ideas just hypothesizing on how the platforms might view these ideas.)

It would be quite an adjustment for LC to get to "Instant Loan" territory.  The reports from the borrowing side is that they are very slow and inefficient.    That said,  it could be that in the future you may have an option to put your money into "blind pools" where "instant loans" are granted.  Last Christmas I opened a Home Depot Credit Card  and HH Gregg Credit card, which were granted on the spot, (to take advantage of no interest for 6 months, or whatever), and they were both 29% APR, so maybe it's worth it.  It would be pretty cool if a P2P lender struck a deal with a major retailer to issue instant credit.

But really, this is an example of a solution to the overall problem.  The real problem is that LC needs to find a way to expand the lending side of the their business.  In the past, they've talking about $50,000 personal loans, $200,000 business loans, and getting into secured loans (Helocs, car loans?).  If they don't do it, someone else will. 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on August 21, 2013, 03:57:54 PM
Bryce et al,

I have just got off the phone with a senior manager at Lending Club and they wanted me to convey to everyone here that all the ideas here have been read and noted. They appreciate all the creative thoughts and some of the ideas are under active consideration.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 21, 2013, 04:16:24 PM
We wouldn't even be having this discussion if there were plenty of borrowers.   End the 4 days of interrogation, the 15+ minute phone interviews, and let the market decide which loans deserve to be funded.  I have no problem with FICOs under 660.  Create a new loan grade, say 'H', for people that are turned away and charge them 24% interest.

Enough people would be all over that, even with the increased risk, that the whining would be lessened.  Maybe the whining would instead shift to defaults on these, but hey then it turns into a game of SKILL rather than sitting here waiting for someone to hand you what you perceive is your "fair share".
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on August 21, 2013, 04:51:50 PM
Glad to hear it!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: New Jersey Guy on August 21, 2013, 05:06:22 PM
"Create a new loan grade, say 'H', for people that are turned away and charge them 24% interest."

Ummm, how do you suggest they do that when we can't even get a decent supply of "G's" approved?
Opening the floodgates to hard-up's isn't the answer.

It comes down to consumer awareness.  Despite the mailers and advertising by LC, most normal people still don't know about P2P.  Personally, I don't think the concept has even saturated but a small percentage of the population.  Even if they are aware of it doesn't mean that they need a loan today.  They may next year, but not today.

Lending Club may be posting record loans, but personally I think the whole concept is still evolving.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on August 21, 2013, 05:15:24 PM
Core, it seems we agree much of the time but not here. I freely admit I do not have the skill to determine the proper grade or set the appropriate interest rate for a loan. I am completely dependent on LC to do that job, and do it well. I further depend on P2P-Picks to recommend loans that have an edge on random selection, but I would rather have no loans at all than those poorly underwritten by LC. It's good to know what you don't know, and what you suggest is something I know don't know how to do.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 21, 2013, 05:22:27 PM
Despite the mailers and advertising by LC, most normal people still don't know about P2P.

You are probably correct.  I know LC has a referral bonus program for investors, but what about one for borrowers?  (I haven't yet checked.)  It may be a small step but if I knew I could make a percentage of these origination fees by doing some "creative marketing", I'd sure invest some of my time in it.

It's good to know what you don't know, and what you suggest is something I know don't know how to do.

I have no clue how to do it either.  But I guarantee you by the time it's all done I'll either be good at it with the returns to prove it, or I'll go insane trying.  I personally would rather have the chance to excel than stagnate watching my returns dwindle because the "experts" can't keep up.  I believe it was Zig Ziglar who said "If you aim at nothing, you'll hit it every time."
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: thezinfan on August 21, 2013, 05:34:24 PM
I'm not trying to be  a jerk here, but do you guys not trust your filters? Today at both 10am and 2pm PST i was able to pick up 10 notes (20 total), each with a $100 share. If it meets my filter, it goes in the cart.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: kitono on August 21, 2013, 06:24:13 PM
Here's a CRAZY Idea.
Let's take my initial idea early and implement it as part of a three step process.
1. My Earlier Idea
2. Stop registration for new investors (atleast, on the retail level)
3. Increase advertising and awareness for Lending club to increase the amounts of notes generated.

2 of those three Ideas will benefit institutional investors more than their current average joe (e.g. me)

Sounds like a "fair" plan for all current investors.

Currently we are in a situation where we have too much supply and not enough demand, wouldn't common sense be to stop increasing supply?
2ndly, If I were lending club, I would contact a social media manager to devise a solid strategy for increasing brand awareness. I know the perfect person too!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 21, 2013, 06:41:26 PM
2. Stop registration for new investors (atleast, on the retail level)

"Sorry, Lending Club is currently not accepting new investors"

Right before the IPO?  Even during it?  You're right about one thing... that would be CRAZY.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 21, 2013, 09:46:33 PM
I think one point that is missing here is something the platforms seemed to be talking about at the Lendit conference.  I wasn't able to watch the whole thing but I caught good portions of much of it.  One thing the platforms were talking about, especially for future, was the ability for anyone to 'instantly' get a loan. 

For example, I am at the store and need a new appliance.  In seconds or minutes I can apply and receive my loan all from a mobile device.  In that idea or model there is no 'time' for these time frames or limits that are being suggested in this thread.  They don't want people to have to wait 24 hours or 6 hours or whatever.  They would like this to be as instantaneous as possible.  I think it will be real hard to sell the platforms on these time frame ideas.

(I am not saying they are bad ideas just hypothesizing on how the platforms might view these ideas.)

An auto-invest tool would meet this requirement.
Title: Re: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on August 21, 2013, 10:36:08 PM
We wouldn't even be having this discussion if there were plenty of borrowers.   End the 4 days of interrogation, the 15+ minute phone interviews, and let the market decide which loans deserve to be funded.  I have no problem with FICOs under 660.  Create a new loan grade, say 'H', for people that are turned away and charge them 24% interest.

Enough people would be all over that, even with the increased risk, that the whining would be lessened.  Maybe the whining would instead shift to defaults on these, but hey then it turns into a game of SKILL rather than sitting here waiting for someone to hand you what you perceive is your "fair share".
did you copy paste this from prosper 1.0?

Sent from my SAMSUNG-SGH-I747 using Tapatalk 2

Title: Re: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 21, 2013, 10:46:40 PM
did you copy paste this from prosper 1.0?

Yeah, I knew somebody was going to call me out on this eventually.  Notice I didn't mention bidding down interest rates though.

The difference here is that I'm only talking about giving investors the opportunity to snag loans that otherwise would have been rejected.  So this wouldn't affect returns on their normal loans at all.  Business as usual on those.  You could even limit it so you had to sign a disclaimer to get access to them, jump through some other hoops, and perhaps LC could treat these for marketing purposes as a whole separate sub-prime deal, whatever they wanted.

But hey, since I make most of my returns based solely on the fact that people have to go to Folio if they want a good selection of notes, I'm probably arguing myself right into the poor house.  I changed my mind... let's keep everything just the way it is.  You guys got me all confused.  :)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 22, 2013, 01:08:05 AM
Quote
In other words: (Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

Since notes cannot be written for less than $25 (at present, and they are unlikely to decrease that), this will have one of the following side effects depending on how it's implemented.

1. Your $3.67 "share", for example, will be rounded down to zero and you'll get nothing.  Every time.
-- or if you round up to $25: --
2. The small investors will get the lion's share at $25 each, quite probably leaving no large notes. Institutions cry like little girls.

This pro rata allocation would apply to loans with multiple bidders.  Investors would get any loan they order but may only receive a $25 share. Loans that are less desirable for whatever reason (and wouldn't be filled for days anyways under normal circumstances) could be purchased in whole - in other words during the order period  a sole bidder for 100% of the loan would receive the whole loan. 

Under this arrangement, the "hot loans" get allocated to mostly everyone who wants it.  Maybe the loan would appear "sold out" within the order period if it were fully allocated to investors at $25 a piece (for a $35,000 *white* hot loan you would end up with worst case 1,400 investors with $25 a piece and then it would be marked "sold out"). This would still create something of a race, but it still seems more rational than a 2 investor 70%/30% split that we get now.  Even a $10,000 loan would have 400 owners, even if all 400 investors tried to order 100% of the loan.

I believe this type of a system is better for investors and LC in the long run. I think under this kind of arrangement, institutional investors would be forced to select loans with lower potential return than they do now under the current feeding frenzy process.  I think the excess demand issue for low rated loans would be somewhat alleviated if the large institutions realized they could not count on sweeping up all the E,F and G in the first few milliseconds, and had to get in line with everyone else.  They would be forced to relax their filters and could actually have the effect of lowering the IRR of P2P lending for large investors that have a lot of capital to deploy because they would have to "settle" for C and D loans when they currently may only target E,F and G loans. 

I really doubt these institutions would allocate less capital to P2P lending because returns would be 6-8% vs. 8-10% on a low duration fixed income investment.  Where else are they getting these kinds of returns?

Anyways, I'm sure all of this will never be implemented because the whole P2P concept is pretty much dead.  I think that's pretty short sighted though, because it waters down the potential of P2P and likely reduces LC and Prosper to ultimately become online underwriting platforms for a bunch of hedge funds and insurance companies.  I think Lending Tree did something like this for Mortgages in the late 90's... big whoop-de-doo.  Also, nobody will read this post because most people think this is an idiotic idea from an idiot...I'm fine with that too.   ;)



Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on August 22, 2013, 01:35:18 AM
Opening the floodgates to hard-up's isn't the answer.

+1

Besides, LC claims to lend money to prime and super-prime borrowers (https://www.lendingclub.com/public/lending-club-press-2013-02-07.action).  There is not much room  for these borrowers beyond the G5 grade (which already charges 26% interest rate).

It comes down to consumer awareness.  Despite the mailers and advertising by LC, most normal people still don't know about P2P.  Personally, I don't think the concept has even saturated but a small percentage of the population.  Even if they are aware of it doesn't mean that they need a loan today.  They may next year, but not today.

I wonder if it's a good idea for LC to pay $MM for a few 30-second ads at the Super Bowl.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 22, 2013, 03:47:45 AM
We wouldn't even be having this discussion if there were plenty of borrowers.   End the 4 days of interrogation, the 15+ minute phone interviews, and let the market decide which loans deserve to be funded.  I have no problem with FICOs under 660.  Create a new loan grade, say 'H', for people that are turned away and charge them 24% interest.

Enough people would be all over that, even with the increased risk, that the whining would be lessened.  Maybe the whining would instead shift to defaults on these, but hey then it turns into a game of SKILL rather than sitting here waiting for someone to hand you what you perceive is your "fair share".

I understand the spirit of what you are suggesting. I don't think there's any real benefit to be found there because we already have plenty of access to less desirable notes at any time. There are plenty of B notes and C notes. Why get a 10% return from volatile H notes when you can get a 10% return from reliable C notes? The problem isn't that there aren't enough loans, the problem is that we all want fair access to the best ones, adding an H category won't fix that.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 22, 2013, 03:58:05 AM
I see a lot of responses that suggest ways to increase the supply of loans. More loans is always good, but it will never solve this problem. Institutional lenders are like endless bottomless pits of money that can suck up industries that are much larger than all of lending club. If we had 100 times more loans, they'd still buy them all up and lament that there wasn't more. They probably don't even take LC seriously, it's probably a trivial endeavor that only exists so they are prepared for the case that LC explodes as a hot new way to borrow money.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 22, 2013, 04:09:58 AM
Quote
In other words: (Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

Since notes cannot be written for less than $25 (at present, and they are unlikely to decrease that), this will have one of the following side effects depending on how it's implemented.

1. Your $3.67 "share", for example, will be rounded down to zero and you'll get nothing.  Every time.
-- or if you round up to $25: --
2. The small investors will get the lion's share at $25 each, quite probably leaving no large notes. Institutions cry like little girls.
...

Under this arrangement, the "hot loans" get allocated to mostly everyone who wants it.  Maybe the loan would appear "sold out" within the order period if it were fully allocated to investors at $25 a piece (for a $35,000 *white* hot loan you would end up with worst case 1,400 investors with $25 a piece and then it would be marked "sold out"). This would still create something of a race, but it still seems more rational than a 2 investor 70%/30% split that we get now.  Even a $10,000 loan would have 400 owners, even if all 400 investors tried to order 100% of the loan.

...

That's an interesting way of resolving the caveats of this strategy. One primary reason to use this formula is so that lenders who are willing to fund more of a loan (or all of it) can get a bigger piece of the loan. I think your solution violates that, and ends up divvying up a hot loan evenly among everyone who invests. It cuts big lenders out. As attractive as that is for small lenders like me, it's not any more fair than what we already have to deal with.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: thezfunk on August 22, 2013, 10:01:05 AM
Quote
In other words: (Percentage of the loan you get) = (Amount you offer to buy)/(Amount everyone offers to buy)

Since notes cannot be written for less than $25 (at present, and they are unlikely to decrease that), this will have one of the following side effects depending on how it's implemented.

1. Your $3.67 "share", for example, will be rounded down to zero and you'll get nothing.  Every time.
-- or if you round up to $25: --
2. The small investors will get the lion's share at $25 each, quite probably leaving no large notes. Institutions cry like little girls.
...

Under this arrangement, the "hot loans" get allocated to mostly everyone who wants it.  Maybe the loan would appear "sold out" within the order period if it were fully allocated to investors at $25 a piece (for a $35,000 *white* hot loan you would end up with worst case 1,400 investors with $25 a piece and then it would be marked "sold out"). This would still create something of a race, but it still seems more rational than a 2 investor 70%/30% split that we get now.  Even a $10,000 loan would have 400 owners, even if all 400 investors tried to order 100% of the loan.

...

That's an interesting way of resolving the caveats of this strategy. One primary reason to use this formula is so that lenders who are willing to fund more of a loan (or all of it) can get a bigger piece of the loan. I think your solution violates that, and ends up divvying up a hot loan evenly among everyone who invests. It cuts big lenders out. As attractive as that is for small lenders like me, it's not any more fair than what we already have to deal with.

But it is fair.  Institutions get the same chance as anyone else to get the same size of note.

This 'fair' topic has bothered me since I started reading about it.  True, you can argue that 'fair' is subjective.  I get it.  So then look at 'fair' as how would 'most' people feel about the issue.  I think most people would agree that fair means everyone (within reason) gets a chance at the same size chunk of the loan. 

Maybe it isn't a loan but a cookie.  We're all kids fighting over cookies.  How do you fairly divide a cookie four ways (as an arbitrary amount example)?  Cut it into four quarters (25%) and hand it out.  Say one of the kids is bigger than the other three.  Now, should the bigger kid get a larger share because he is bigger?  Should he get a larger share because he can bully the person handing out the cookie?  I doubt anyone besides the bully would view that as fair.

So back to loans.  The institutions might want whole loans or 70% or 75% of every loan they want.  There are more investors than chunks of any one loan (cookie) because Lending Club says that the minimum loan amount is $25 (which is fair because nobody can get a smaller chunk).  If there are more investors than available chunks of $25 notes then you hand out those notes (first come first serve, I imagine.  More on that in a bit).  Those investors (kids) go to the back of the line and the next loan (cookie) comes up for grabs.  Investors can pass on their chunk of the loan (cookie) if they don't like it (maybe you aren't a fan of oatmeal raisin, you want that next chocolate chip).  You don't have to go back to the end of the line until you get your $25 chunk.  Now, if a loan goes all the way through the line and nobody wants the rest of it, then let the big kid (investor/institution) have it.  The rest are satisfied and had their fill.  If all the loans get eaten before a big chunk becomes available then, too bad.  Everyone got an equal share or at least had the opportunity at an equal share.  If they run out of loans (cookies) that day, then you are just closer to the front for the next day.

To address the first come, first serve issue.  It's not fair to have an API that only some are allowed access to.  To make it fair, everyone should have the same access or the same process in which to buy loans.  If you want to use the API to analyze notes, that's one thing.  But to allow an automated process (that others don't have) a quicker way than the four clicks it takes me on their webpage, is not fair.  Either you provide an automated way to grab chunks of loans to everyone, or no one.

I think the only realistic way for this to happen is have filters set up that Lending Club can run your available chunk against.  If you want that personal once over, maybe you have the ability to choose that.  You get an email or some other notification (maybe even through the API) that you have X amount of time to look at this loan before it gets passed through the next investor filter.  This can all happen rather quickly and transparently.

I don't mean to steal any ones idea.  This may be exactly what others in this thread have described.  I have been reading through this thread but I forget where I see what sometimes.  I just liked the cookie example because everyone loves cookies  :)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 22, 2013, 01:16:24 PM
Quote
Maybe it isn't a loan but a cookie.  We're all kids fighting over cookies.  How do you fairly divide a cookie four ways (as an arbitrary amount example)?

America does not operate on the cookie principle.  Maybe socialists do.   In your cookie example, nobody had to pay for it, and you're dealing with little children.  Gimmie, gimmie, gimmie.

By that (and similar) logic, the 100 acres of land next to me should have been split up into 0.25 acre sections to allow more people to become landowners.  Whoever bought so much land at once must be evil.  No, in reality the seller carved up the land to maximize his profit.  If someone wanted the homestead they paid more per acre for it.  Maybe some hippie wanted the untillable section of trees.  Everyone had an equal chance to buy that land, but market forces determined how it was split up and what price was paid.

One you remove those market forces, nothing's left but to start talking about right&wrong, fair&unfair, and now you're in a mess.  Welcome to the mess.

Where did this idea come from that the more PEOPLE involved in a loan the better?  That 10,000x$25 is better than 1,000x$250?  I see all kinds of ideas from people trying to make that programatically happen without questioning that underlying premise.  You know, I always assumed finance people leaned to the right politically.  I'm really starting to question that now.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: storm on August 22, 2013, 01:33:49 PM
This 'fair' topic has bothered me since I started reading about it. 

It isn’t fair because the institutional investors most likely have the resources to develop software to access the API.  They probably have a computer programmer on the payroll or at least one on retainer.  If I understand correctly, you have to have permission from LC to purchase notes through the API.  I would be interested to know if they have or would give permission to small individual investors.

The first-come, first-serve method is fair I suppose, but when large group of people are involved, it becomes unsustainable.  The last few years, we’ve heard about people trampled to death on Black Friday to buy the after-Thanksgiving bargains.  In the online realm, there is a website called woot.com that would offer surprise grab bags for $8 with the contents often worth more than that.  The website’s server(s) would often crash because of the immense traffic it would generate.  Needless to say, downtime is not good for an ecommerce site.  To slow things down and give more people a chance, they made customers play a game or solve a puzzle to get a chance to buy the grab bag.  (Amazon bought them out a year or two ago, and “bags of crap” are very few and far between.)  American Express’ My Wishlist was similar where they were giving away cars and whatnot plus valuable coupons.  They had their own computer problems.  And there again, institutions have the resources to buy a big dedicated pipe to the Internet, and when milliseconds count, they are going to have an unfair advantage over DSL or cable Internet users.

I haven’t seen the numbers, but I bet the small investors are investing a tiny fraction of what the institutional investors are putting in currently.  At the end of the day, giving small investors a fair to slight advantage to invest is not going to put much of a dent in the institutional investments.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: storm on August 22, 2013, 01:42:34 PM
Where did this idea come from that the more PEOPLE involved in a loan the better?

First, it was to give the little guy a chance to invest in an instrument that they wouldn't otherwise have access to.  In return, borrowers pay a lower interest rate than what the banks offer.  Second, to diversify risk among many loans.  We've lost our way somehow.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: GS on August 22, 2013, 01:50:13 PM
It's not about socialism.  Not even close.  Most people are saying a system that gives large investors access to special investment tools that can be used to run over the smaller investors is not "fair"... I'm fine with LC giving their larger users API and the whole loan program.  But, some compromise should be reached to prevent the smaller investors from getting run out of the market. 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 22, 2013, 01:59:52 PM
(Amazon bought them out a year or two ago, and “bags of crap” are very few and far between.)

Hey, there's a fun idea.  Maybe LC could offer "bags of crap" if you have a limit order entered ahead of time.  Pay your $250 or whatever and you get a bag of crap.  This happens before the loans are published.


At the end of the day, giving small investors a fair to slight advantage to invest is not going to put much of a dent in the institutional investments.

Maybe it won't.  But how does it increase revenues for LC or decrease their operating expenses?  How does it increase anyone's returns taken as a whole?  What financial sense does it make?

Second, to diversify risk among many loans.  We've lost our way somehow.

That's a little backwards.  I asked why folks automatically thought more investors per loan was better, and you responded with why more notes per investor (diversification) was better.  Not directly related, at least not once the numbers are sufficiently large.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: investforfreedom on August 22, 2013, 02:10:06 PM
Economics 101 tells us that:

(1) Free unregulated market has a tendency for monopolies, or oligopolies (such as OPEC).  And we all know what monopolies or oligopolies can do to squeeze out the smaller competitors.  We are the small competitors in this p2p business, my friend.

(2) Economies of scale: Larger entities are more effective in marshaling their resources to compete in a free market economy.  Those with deep pockets can afford to have the fastest APIs and what not to grab the best loans before the rest of us do. 

(3) Free market has trouble dealing with actions that benefit the individuals but  collectively produce unintended consequences:

(a) Positive externalities.  If your neighbors keep their houses and lawns well maintained, it could elevate the resale value of your house, not just that of their houses.  There are things you don't do but you still benefit from through the actions of others.

(b) Negative externalities.  People have the right to get a driver's license and drive. That benefits the individual.  But if everybody gets their cars on the road at the same time, we have traffic congestion, increased risks of accidents and casualties, noise and air pollution, and so on.  That is no good for everyone from a collective point of view.

The question is not America v. the socialists. The question has to do with doing the right thing and ensuring that not only the big players dominate the game.  Even if I had $10 million dollars invested, I would still say the same thing. 



Quote
Maybe it isn't a loan but a cookie.  We're all kids fighting over cookies.  How do you fairly divide a cookie four ways (as an arbitrary amount example)?

America does not operate on the cookie principle.  Maybe socialists do.   In your cookie example, nobody had to pay for it, and you're dealing with little children.  Gimmie, gimmie, gimmie.

By that (and similar) logic, the 100 acres of land next to me should have been split up into 0.25 acre sections to allow more people to become landowners.  Whoever bought so much land at once must be evil.  No, in reality the seller carved up the land to maximize his profit.  If someone wanted the homestead they paid more per acre for it.  Maybe some hippie wanted the untillable section of trees.  Everyone had an equal chance to buy that land, but market forces determined how it was split up and what price was paid.

One you remove those market forces, nothing's left but to start talking about right&wrong, fair&unfair, and now you're in a mess.  Welcome to the mess.

Where did this idea come from that the more PEOPLE involved in a loan the better?  That 10,000x$25 is better than 1,000x$250?  I see all kinds of ideas from people trying to make that programatically happen without questioning that underlying premise.  You know, I always assumed finance people leaned to the right politically.  I'm really starting to question that now.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on August 22, 2013, 03:06:39 PM
I would be interested to know if they have or would give permission to small individual investors.

Yes, they do.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: storm on August 22, 2013, 04:00:48 PM
At the end of the day, giving small investors a fair to slight advantage to invest is not going to put much of a dent in the institutional investments.

Maybe it won't.  But how does it increase revenues for LC or decrease their operating expenses?  How does it increase anyone's returns taken as a whole?  What financial sense does it make?

Second, to diversify risk among many loans.  We've lost our way somehow.

That's a little backwards.  I asked why folks automatically thought more investors per loan was better, and you responded with why more notes per investor (diversification) was better.  Not directly related, at least not once the numbers are sufficiently large.

Woo wee, a few more bits a processor in a computer in far off datacenter has to process.  It is not like some accountant is doing long division and filling out a ledger with a quill and ink bottle.  The operating costs for splitting up a loan payment between two or 2,000 investors are negligible in this day and age.  LC still gets their origination fee from the borrower and 1% from the investor(s), so revenues are the same either way.

Look, I’ve been doing this since ‘08.  I didn’t come up with the idea.  I just thought it was a good idea, and it makes me feel good to help my peers get out of debt.  There are businesses that solely exist to make money.  And then there are businesses that want to make money, but also serve a need.  The latter organizations are infinitely more valuable than their balance sheet with happy employees and happy customers.  If Lending Club wants to shut out all the small investors (and referrals) and join the ranks of Lending Tree, Quicken Loans, E-Loan, and the stodgy B&M banks then so be it.  I will warn that by doing nothing at all and allowing the fat cats to dominate the platform is effectively the same.

Quote
“A person may cause evil to others not only by his actions but by his inaction, and in either case he is justly accountable to them for the injury.”
    ― John Stuart Mill
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on August 22, 2013, 05:49:23 PM
The poor platform is doing so well and yet we are so upset with them.  Things can be improved of course, but I really think to be taken seriously people should be a bit more fair in their dealings with Lending Club:

Quote
Institutional investors are taking notice. The largest single investor on the site has put in $60m. Family offices and credit funds are among those to have invested; Lending Club even has a bank on the books. Mr Laplanche says he was recently approached by a sovereign-wealth fund that wanted to put $250m onto the platform to fund loans. (He asked them to spread the investment over a two-year period, so that it did not account for too big a proportion of the site's origination capacity.)  It helps that the firm's board of directors features heavy hitters like John Mack, once of Morgan Stanley, and Larry Summers, once of the Treasury. This is a long way from the garage start-up.

Damned if they do, damned if they don't.  Just give them time -- especially since many of you want to invest in non-homogeneous notes (for some unknown reason).  I'll be happy when most of the money is pouring into a much more likely train wreck, leaving me with plenty of homogeneous credits  to choose from :)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 22, 2013, 06:56:42 PM
Things can be improved of course, but I really think to be taken seriously people should be a bit more fair in their dealings with Lending Club:

I don't care if Lending Club takes me seriously or not.  Ditto with any posts I make here.  Someone taking me seriously isn't going to add money to my bank account.  Maybe if my returns decrease I'll start "seriously" complaining.  You know something is seriously wrong when the even-tempered people are complaining about the volume of complainers.  Followed of course (you saw it coming) by complaints about the people complaining about the complainers.

Damned if they do, damned if they don't.  Just give them time -- especially since many of you want to invest in non-homogeneous notes (for some unknown reason).

Forgive my ignorance, but what in the heck is a homogenized note???  The only thing "uniform" (if that's the definition at work here) about all these notes is that each one is a different risk.  The fun of the game is make sure you're not the one holding the bag when each one defaults.  If things were truly homogenized there wouldn't be any decent returns to be made because the risk would be the same and predictable.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on August 22, 2013, 07:12:56 PM
Despite the mailers and advertising by LC, most normal people still don't know about P2P.  Personally, I don't think the concept has even saturated but a small percentage of the population.  Even if they are aware of it doesn't mean that they need a loan today.  They may next year, but not today.

Pretty good point.  I'm a fairly well educated investment guy and I actually don't recall hearing much of anything about LC as either a lender or borrower.  I probably saw something about it a few times but it never caught my attention.  I was actually looking at an unrelated site when someone gave Lending Club as a joke answer to the question "Where can I put some money for a few months where it'll be completely safe and earn a high rate of return".  It piqued my interest so I checked it out.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 23, 2013, 12:37:21 AM
Quote
Maybe it isn't a loan but a cookie.  We're all kids fighting over cookies.  How do you fairly divide a cookie four ways (as an arbitrary amount example)?

America does not operate on the cookie principle.  Maybe socialists do.   In your cookie example, nobody had to pay for it, and you're dealing with little children.  Gimmie, gimmie, gimmie.

By that (and similar) logic, the 100 acres of land next to me should have been split up into 0.25 acre sections to allow more people to become landowners.  Whoever bought so much land at once must be evil.  No, in reality the seller carved up the land to maximize his profit.  If someone wanted the homestead they paid more per acre for it.  Maybe some hippie wanted the untillable section of trees.  Everyone had an equal chance to buy that land, but market forces determined how it was split up and what price was paid.

One you remove those market forces, nothing's left but to start talking about right&wrong, fair&unfair, and now you're in a mess.  Welcome to the mess.

Where did this idea come from that the more PEOPLE involved in a loan the better?  That 10,000x$25 is better than 1,000x$250?  I see all kinds of ideas from people trying to make that programatically happen without questioning that underlying premise.  You know, I always assumed finance people leaned to the right politically.  I'm really starting to question that now.

This is not about having a bazillion owners of one note, it's about giving investors a fair shot of getting the notes they want.  Some people here believe they are God's gift to factor modeling when it comes to selecting notes that won't default.  I'm not that smart. Using some help, I just buy whatever the historical data tells me provides higher returns.  Yeah, I know AnilG scoffs at this and thinks I'm a stupid lemming, but this is how most people do it.  This leads to excessive demand for the same short supply of notes. LC has devised a flawed process to allocate these hot loans and clearly needs to come up with a better method. 

Maybe they use a lottery, round robin, reverse dutch auction or whatever... I don't think it matters.  As long as they fix this before I get nothing but "loan fully funded" messages from IR, I will be happy.

 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: ThinleyWangchuk on August 23, 2013, 12:56:48 AM
Also according to lendingclub, institutions get to purchase whole notes prior to it being released on the platform to individual investors, thus giving them a competitive advantage by allowing the to choose the loans with the best risk/reward. I love front running ::)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: AnilG on August 23, 2013, 12:57:46 AM
Where did this came from? This appears to be an unfair and personal attack. I don't believe ever called anyone stupid lemming.


Yeah, I know AnilG scoffs at this and thinks I'm a stupid lemming, but this is how most people do it.

Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 23, 2013, 01:10:42 AM
Where did this came from? This appears to be an unfair and personal attack. I don't believe ever called anyone stupid lemming.


Yeah, I know AnilG scoffs at this and thinks I'm a stupid lemming, but this is how most people do it.


This was meant to be a compliment
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on August 23, 2013, 09:33:28 AM
I think I've got a workable solution.

Don't release all the notes at four prescribed time, but rather dribble them out as they're stamped approved for fill and defer access to new notes to any mechanized process for xx minutes, I'm thinking an hour.  This levels the playing field by allowing those who are committed to the service to manually look at what is on the table at that time, and for large automated buyers to still have access to a collection of notes.  Institutional buyers can hire people to monitor the available notes and buy by hand if they want more timely access.

This eliminates mad scrambles, large automated buying of everything decent in under a minute, levels the playing field, but it does handicap the institutional buyers who want to buy en masse with an automated process.  Notes could be displayed as non-text, reducing or eliminating screen scraping or forcing the screen scrapers to do optical character recognition, which would need a lot of hardware and more time.  Or only show notes 5 or 10 at a time, and install an xx second delay between screens.

However answering a question generally requires knowing what the question is.  I don't think the question is "What's fairer", but rather "Who exactly does Lending Club want for its investing customers?".  If they want large institutional investors who wouldn't accept a more laborious process or lesser notes after they've been picked over manually, then some sort of 'fairness' system is needed, but they'd be unlikely to implement that.  If they feel that the institutional folks should be on a level playing field with the individual investor, then some compensation is needed for large companies with lots of employees and hardware to even things up with one person sitting at home with a PC.

I'd use their Prime investing system if it didn't charge extra and if they had complete filtering of all data with booleans and comparisons.  When looking at the total data, I was frankly appalled at what you DON'T see on the main LC screens.  I saw borrowers looking for 'debt consolidation' with great credit and low credit balances who had 400-500k of loans out that weren't primary mortgages and weren't reflected in the revolving credit number.  I was financing someones small business endeavor (either buying homes or other biz expenses) and not real debt consolidation, and those have VERY different default rates.

Of course, the real fix is simply broadening the field of prospective borrowers.  I could see LC becoming 'google loans' or 'facebook loans', where its a fairly obvious and ubiquitous process to lend and borrow money.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: DanB on August 23, 2013, 10:49:31 AM


 Someone taking me seriously isn't going to add money to my bank account. 


Oh, but it could, it really could........... & for some of us, perhaps it already has.  :) It really depends on who that "someone" who may be taking you seriously happens to be, don't you think?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 23, 2013, 11:16:35 AM
Notes could be displayed as non-text, reducing or eliminating screen scraping or forcing the screen scrapers to do optical character recognition, which would need a lot of hardware and more time.

That would indeed require them to spend a little extra time on developing a new bot.  Some of them wouldn't bother perhaps.  For the rest it would be a fairly simple exercise (one afternoon) as long as LC didn't skew all the text.  Heh, can you imaging trying to read a whole page of info that looks like a captcha?

This non-text idea would prevent visually impaired people from being able to use the site.  I think they would run afoul of the ADA or something.  Maybe they could require the blind to call in and have their account flagged as such and then the plain text is displayed.  LC would quickly find out that half their users are "blind".

Or only show notes 5 or 10 at a time, and install an xx second delay between screens.

A delay based on account (not IP, and not session) would certainly slow things down for them.  Maybe humans too, maybe not.  Since there's no restriction on multiple accounts I think I would just start creating more.  If the delay was 10 seconds, then 10 accounts seems like it would be enough.  Again, some people wouldn't bother, further cutting down on the bots by just a hair.  We've only eliminated the non-hardcore bots, leaving the serious ones with more prey.

I'd use their Prime investing system if it didn't charge extra and if they had complete filtering of all data with booleans and comparisons.

And the fact that you have no control over it.  If you see that it picked up a few notes that are blatant scammers, you can't even sell them!  Hope you like your 5 year ride on the notes that it selects.

When looking at the total data, I was frankly appalled at what you DON'T see on the main LC screens.  I saw borrowers looking for 'debt consolidation' with great credit and low credit balances who had 400-500k of loans out that weren't primary mortgages and weren't reflected in the revolving credit number.

Being able to filter things on different criteria is one reason people write bots in the first place.  You want better data and filtering, but you don't want other people to be able to take the initiative and develop it for themselves.  Forced least common denominator?  I'm on a slow satellite connection... can I ask LC to slow everybody else's connection down too? 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 23, 2013, 11:22:50 AM
Someone taking me seriously isn't going to add money to my bank account. 

Oh, but it could, it really could........... & for some of us, perhaps it already has.  :) It really depends on who that "someone" who may be taking you seriously happens to be, don't you think?

Meaning you got paid a hefty consulting fee by someone who read your posts on the forum?  Sure I guess that does qualify.  Congrats if you landed something big.  For me, I'd sure have to be paid a highly unreasonable fee before I started singing like a canary or developed tools for the competition.   What's the cap rate on something like that?  I wouldn't put myself out of business for less than 10 years of my expected trading income because 1) I don't want to have to go find another finance area to make money in until I'm darn good and ready, and 2) I actually enjoy doing this.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 04:57:09 PM
Don't release all the notes at four prescribed time, but rather dribble them out as they're stamped approved for fill and defer access to new notes to any mechanized process for xx minutes, I'm thinking an hour.  This levels the playing field by allowing those who are committed to the service to manually look at what is on the table at that time, and for large automated buyers to still have access to a collection of notes.  Institutional buyers can hire people to monitor the available notes and buy by hand if they want more timely access.

This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 05:01:08 PM
But it is fair.  Institutions get the same chance as anyone else to get the same size of note.

...


I'm a small investor, so I would benefit from a system that defines fairness in this way. But I disagree. I think it's just as reasonable for a big investor to expect to invest big as it is reasonable for a small investor to expect to get his share. Preventing it would essentially cut them out of LC, unable to access enough of the loans to make it a viable investment for them. Also, I don't think I'd prefer that large investors were put in a position of abandoning p2p over such a concern, because I like the philosophy of p2p lending and I want it to succeed. However, I want my piece of it too, just like the big guys.

I'm not necessarily right, it's pretty clear that defining "fair share" is a major crux of this discussion and that ethical considerations for such a task exist. I think that you and I have reached a fundamental difference of opinion on the matter.

(Edited)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: investforfreedom on August 23, 2013, 05:18:08 PM
I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can earn decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up whatever is left regardless. 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 05:25:35 PM
I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up what is left regardless.

Small investors want to optimize our return by waiting for the best notes because we have a limited supply of money.

Large investors (because they have an essentially unlimited supply of money) optimize their return by buying EVERYTHING that is expected to give them a return better than X. (Where X is the return they currently get on their money.)

So, of course they buy those notes along with the good ones, otherwise it's a missed opportunity.

You'll find small investors there too, but probably because they can't access better notes. They are settling.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on August 23, 2013, 05:30:08 PM
This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.

The truth is, there is no solution other than to increase the # of borrowers to the extent that supply exceeds demand.  But spreading it out would prevent the mad stampede four times a day.  They could also throttle people who keep hitting the site to screen scrape, or periodically shuffle things around, but the smart determined folks would just make 10,000 accounts or write more code and get by anything LC would do to level the playing field.

I actually had never seen the information about the 4 times a day dumps.  I've read a whole lot about LC for the last 18 months and never saw that information until this week when I came across this site.  Its a bit of work to sift through 58,000,000 blogs and forums that all say "I tried that LC thing...I put $100 into four notes and I picked 'small business' because I'm entrepreneurial and 'A' notes because those are probably the best kind, then one defaulted and I quit because that p2p thing isn't a good idea".   :)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 05:33:31 PM
This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.

The truth is, there is no solution other than to increase the # of borrowers to the extent that supply exceeds demand.  But spreading it out would prevent the mad stampede four times a day.  They could also throttle people who keep hitting the site to screen scrape, or periodically shuffle things around, but the smart determined folks would just make 10,000 accounts or write more code and get by anything LC would do to level the playing field.

I actually had never seen the information about the 4 times a day dumps.  I've read a whole lot about LC for the last 18 months and never saw that information until this week when I came across this site.  Its a bit of work to sift through 58,000,000 blogs and forums that all say "I tried that LC thing...I put $100 into four notes and I picked 'small business' because I'm entrepreneurial and 'A' notes because those are probably the best kind, then one defaulted and I quit because that p2p thing isn't a good idea".   :)

There will never be enough borrowers. Ever. If you think that's possible then you don't understand how large investors work. Luckily, I think there are other solutions. Like a LendingClub implemented auto-invest tool that is applied before the remainder of the loans are posted for manual purchasing. The tool can simply award notes according to some "fair share" rules instead of whoever-clicks-fastest.

EDIT: A second reason there will never be enough borrowers: If we all compete for 1 out of 10 notes now and LC increases borrowers 10-fold, then we'll all compete for 2 out of 100 notes. No matter how many borrowers there are, there will always be a desirable proportion of loans that we want fair access to and can't successfully compete for.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: investforfreedom on August 23, 2013, 05:33:53 PM
And LC likes this, since the more loans they originate--and the faster they originate, the more money they make.  They aren't going to change that.

I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up what is left regardless.

Small investors want to optimize our return by waiting for the best notes because we have a limited supply of money.

Large investors (because they have an essentially unlimited supply of money) optimize their return by buying EVERYTHING that is expected to give them a return better than X. (Where X is the return they currently get on their money.)

So, of course they buy those notes along with the good ones, otherwise it's a missed opportunity.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 05:40:54 PM
And LC likes this, since the more loans they originate--and the faster they originate, the more money they make.  They aren't going to change that.

Why would you want them to?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: dontvote on August 23, 2013, 06:26:24 PM
Originally the business plan was a peer to peer one. That's awesome but if these companies aren't really peer to peer lenders anymore. Business plans change and at the end of the day these are professionals trying to maximize returns to their owners (which we are not -- we are clients). If they want to leave a bit of space for us that's great. If they don't, they are fully aware that there is plenty of room for another 'true' p2p lender to enter the marketplace, take our money and give us a shot at similar notes. There will not be a shortage of people who need money and that supply will always go to the lowest interest rates or to the lowest credit requirements. What is the startup cost for a p2p lender like this? 10m? Probably not much more... (4m to hire some guys away from either platform, 3m for legal and regulatory, 1m for the website and 2m for advertising.)

I won't pretend my own criteria did significantly better than the IR and P2P stuff I'm blindly following (about the same with more effort), but I'm fine getting the loans I'm getting, though I share the gripes about loan selection not being in my favor. I'm fine with The difference between making XX% on my money with first choice of notes and XX-2% on the dregs that are left until TrueLenderP2PIPromise.com comes by.

If they wanted to fix the supply/demand problem, they could just reduce interest rates. That's the 'price' in our econ 101 graphs here. Borrowers would gobble the lower rates, investors would get lower returns and we would both get to pick out the loans we want. This would cause a huge pain in the ass for their institutional clients but I'll bet they wouldn't get a huge exodus for a small reduction in rates. The value proposition for a fund is still too strong.

dontvote
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on August 23, 2013, 06:42:17 PM
After 5 days of reading posts on this thread,  I no longer believe there is a valid reason for whole loans.  I don't know how many whole loans are available nor do I know if every loan is being funded,  however, even a couple more loans being made available each day to the retail investor would help.

I tried researching the whole loan subject on the LC HELP site,  but nothing came up.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Dennis on August 23, 2013, 07:20:08 PM
If they want to leave a bit of space for us that's great. If they don't, they are fully aware that there is plenty of room for another 'true' p2p lender to enter the marketplace, take our money and give us a shot at similar notes.

dontvote

There could be a real niche or opportunity for the next P2P lender now.  While Prosper and LC seem to be attracting more and more institutional money, maybe this would be a very good time for the next P2P player to come aboard with a true catering to the small investor.  They could steal a large amount of business from Prosper and LC, judging from some of the opinions here.  As more P2P start-ups undoubtedly will appear, catering to specific types of investors would distinguish one from the other and create even more opportunities for everyone.  Maybe portfolio sizes could be limited to 100k or no institutional investors allowed or some other distinguishing characteristic.  - just throwing an idea around.......
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Dennis on August 23, 2013, 08:00:24 PM

There will never be enough borrowers. Ever. If you think that's possible then you don't understand how large investors work. Luckily, I think there are other solutions.

I'm not sure that's true.  I've been with Prosper and LC for 2 years now, and for at least the first year there were quite a few more borrowers than lenders.  In fact, not only did many loans routinely go unfunded but sometimes lender interest was so poor that incentives had to be given out by both Prosper and LC to attract more funding - those were the days.  Now we're on the other side of it, with too much lender interest (from a lenders perspective), and almost all notes are getting fully funded quickly.  Certainly the dynamics of P2P could change again at any time and there could be a dearth of lenders again.  A change in interest rates could easily achieve that.  So I'd never say never (LOL). 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: TonySaunders on August 23, 2013, 09:56:08 PM

There will never be enough borrowers. Ever. If you think that's possible then you don't understand how large investors work. Luckily, I think there are other solutions.

I'm not sure that's true.  I've been with Prosper and LC for 2 years now, and for at least the first year there were quite a few more borrowers than lenders.  In fact, not only did many loans routinely go unfunded but sometimes lender interest was so poor that incentives had to be given out by both Prosper and LC to attract more funding - those were the days.  Now we're on the other side of it, with too much lender interest (from a lenders perspective), and almost all notes are getting fully funded quickly.  Certainly the dynamics of P2P could change again at any time and there could be a dearth of lenders again.  A change in interest rates could easily achieve that.  So I'd never say never (LOL).

That's a pretty good point, I remember those days too. I'm still going to bet that p2p won't be in that situation again. We'll have to see if I eat my words.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on August 23, 2013, 10:01:38 PM
Lots of people apply for credit every day, and I'll bet the p2p portion is under a tenth of a percent.  The trouble is nobody I know has ever heard of LC, as a borrower or lender.

It also takes a bit of time and financial intelligence to grasp the concept.  I guess if people had those, they wouldn't be 35k in debt at 29% interest.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Ran on August 23, 2013, 11:19:55 PM
I would think one way to address Excess Investor Demand is to increase supply. And to increase supply for C-G notes, they should
a) lower the interest rate on the note so LC will be more competitive against credit card companies and traditional banks
b) decrease or cap the application fee that borrowers pay. Consider that a borrower applies for $20k loan rated at D which is very typical, the borrower has to pay 5% * $20K = $1000 for origination fee out of pocket, not to mention ~18% interest rate. Just consider how much origination fee one pays for $200k mortgage and how much application fee one pays for credit card, 5% is simply insane. One could argue 5% for low loan amount, but not to cap the fee for high loan amount. How much paper work LC is doing compared to mortgage lender?
c) decrease service fee. The industry standard for servicing a loan is typically < .5%.

All these will effectively lower borrower's cost and help compete with traditional banks for personal loans & credit lines.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: jkm1317 on August 26, 2013, 11:22:05 AM
Is there any push for LC to offer loans from other sources?  I own a used car dealership and we sell loans to investors all the time.  These are high interest loans sold at a discount to make the IRR  even higher. They are also secured so there is a higher degree of safety.  If LC considered purchasing other loans and selling them on their platform, they could cure a ton of the existing demand. 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on August 26, 2013, 01:09:59 PM
a) lower the interest rate on the note so LC will be more competitive against credit card companies and traditional banks

No,no,no!  We are in a rising interest rate environment which will be with us for more than 3-5 years.  LC is already a more attractive "lender" to borrowers than credit cards and the traditional banks. 

As I have said several times on other threads,  LC has a marketing problem.  They are unknown to the vast majority of borrowers.  They need to expose themselves and get their message out if they want to get to the next level.

Or, maybe they are satisfied being a "wholesaler" to the institutional investor??
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 26, 2013, 02:32:37 PM
If you guys haven't noticed, LC is "engineering" its growth rate by intentionally throttling loan growth.  Why on earth would they be throwing money at marketing when the growth potential already exceeds their desired growth rate?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on August 26, 2013, 05:48:48 PM
If you guys haven't noticed, LC is "engineering" its growth rate by intentionally throttling loan growth.  Why on earth would they be throwing money at marketing when the growth potential already exceeds their desired growth rate?

They are not "throttling back" their growth rate.  At the end  of each month, they hold back from issuing loans during the last week/days and issue those loans into the next month; a cosmetic manipulation to make their Offering Prospectus look good, but it has nothing to do with "desired" growth rate. 

They will want to be able to project that they will make as much money in the future as they can based on past performance.  However, we just experienced a drop in new loans at a time when institutional investors are accelerating their position thereby creating the problem that this thread is supposed to address.

Unfortunately, the market leader must bear the cost of introducing new products/services to the national marketplace.  In this case, that's LC's burden.

 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on August 26, 2013, 06:13:28 PM
Yes, there is a big difference between throttling back and gaming the numbers in an effort to manipulate the IPO price.

I think there isn't any excess investor demand.  This illusion of a loan shortage has been carefully crafted for some sinister purpose.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Ran on August 26, 2013, 07:03:28 PM
a) lower the interest rate on the note so LC will be more competitive against credit card companies and traditional banks

No,no,no!  We are in a rising interest rate environment which will be with us for more than 3-5 years.  LC is already a more attractive "lender" to borrowers than credit cards and the traditional banks. 

As I have said several times on other threads,  LC has a marketing problem.  They are unknown to the vast majority of borrowers.  They need to expose themselves and get their message out if they want to get to the next level.

Or, maybe they are satisfied being a "wholesaler" to the institutional investor??
I beg to disagree. The D-G grade loan are carrying a interest 10 times higher than comparable duration US Treasury bonds. So they do have a lot of room to lower the rate until investors are no longer fighting on the loans. LC had en edge back 2 yrs ago when banks are reluctant to issue consume credit, but no things are different and LC has to compete on rates. However, 5% application fee is prohibitive. No one pays application fees on credit card lines and no one pay 5% origination fee on mortgages.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: storm on August 26, 2013, 07:27:28 PM
a) lower the interest rate on the note so LC will be more competitive against credit card companies and traditional banks

We are in a rising interest rate environment which will be with us for more than 3-5 years.  LC is already a more attractive "lender" to borrowers than credit cards and the traditional banks.

The Federal Reserve Federal Funds Rate has been stuck at near 0% since December 2008.  Yes, interest rates has no where to go but up from here, but the Fed has signaled the rate isn’t going to rise until well into next year or the year after that.  At two large credit unions I belong to (easy to join), you can get a new car loan starting at .74% and used car loan at 1.49%.  You would be crazy to finance a car through LC right now.  I see several borrowers with really good credit scores (mid to upper 700's) that could easily transfer their balance to a new credit card offering 0% transfer for 1 year.  Furthermore, I have a couple of credit cards that has a low variable interest rate less than what LC’s scoring model gives the borrower.  I hate to say it, but LC is not all that competitive on interest rates especially with borrowers that have stellar credit.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on August 26, 2013, 07:59:18 PM
a) lower the interest rate on the note so LC will be more competitive against credit card companies and traditional banks

We are in a rising interest rate environment which will be with us for more than 3-5 years.  LC is already a more attractive "lender" to borrowers than credit cards and the traditional banks.

The Federal Reserve Federal Funds Rate has been stuck at near 0% since December 2008.  Yes, interest rates has no where to go but up from here, but the Fed has signaled the rate isn’t going to rise until well into next year or the year after that.  At two large credit unions I belong to (easy to join), you can get a new car loan starting at .74% and used car loan at 1.49%.  You would be crazy to finance a car through LC right now.  I see several borrowers with really good credit scores (mid to upper 700's) that could easily transfer their balance to a new credit card offering 0% transfer for 1 year.  Furthermore, I have a couple of credit cards that has a low variable interest rate less than what LC’s scoring model gives the borrower.  I hate to say it, but LC is not all that competitive on interest rates especially with borrowers that have stellar credit.
Yea, you right.  Comparing secured borrowings to unsecured loans or credit card advances to LC is the way to go. . .

And have you been following the yield curve?  I'm pretty sure RLV99 has, as the yield curve has not stayed down.  There are more points on that yield curve than Federal Funds Rate.   Our investments aren't pegged to overnight risk free rates, anyway.  Check out the 10 year rate.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: berniemadeoff on August 26, 2013, 08:07:48 PM
Yes, there is a big difference between throttling back and gaming the numbers in an effort to manipulate the IPO price.

I think there isn't any excess investor demand.  This illusion of a loan shortage has been carefully crafted for some sinister purpose.

 ;D
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on August 26, 2013, 10:20:40 PM
Is there any push for LC to offer loans from other sources?  I own a used car dealership and we sell loans to investors all the time.  These are high interest loans sold at a discount to make the IRR  even higher. They are also secured so there is a higher degree of safety.  If LC considered purchasing other loans and selling them on their platform, they could cure a ton of the existing demand.

LC is focused more on origination and servicing -- that's where most of their revenues come from.

So I think FOLIOfn, rather than LC, might be a better company to talk to about your situation.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: storm on August 27, 2013, 12:52:02 AM
Yea, you right.  Comparing secured borrowings to unsecured loans or credit card advances to LC is the way to go. . .

And have you been following the yield curve?  I'm pretty sure RLV99 has, as the yield curve has not stayed down.  There are more points on that yield curve than Federal Funds Rate.   Our investments aren't pegged to overnight risk free rates, anyway.  Check out the 10 year rate.

The rising yield curve doesn't make headlines on the mainstream media, and you would have a hard time convincing me with all this cheap credit at low fixed rates floating around.  Those are the offers sitting on my coffee table and in my e-mail.  That 6.78% + origination that LC is offering doesn't look so hot in comparison.  Consumers don't care about secured or unsecured loans (unless they intend to default).  They are just looking for the best deal much like investors look for the best returns.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on August 27, 2013, 07:19:03 AM
Yea, you right.  Comparing secured borrowings to unsecured loans or credit card advances to LC is the way to go. . .

And have you been following the yield curve?  I'm pretty sure RLV99 has, as the yield curve has not stayed down.  There are more points on that yield curve than Federal Funds Rate.   Our investments aren't pegged to overnight risk free rates, anyway.  Check out the 10 year rate.

The rising yield curve doesn't make headlines on the mainstream media, and you would have a hard time convincing me with all this cheap credit at low fixed rates floating around.  Those are the offers sitting on my coffee table and in my e-mail.  That 6.78% + origination that LC is offering doesn't look so hot in comparison.  Consumers don't care about secured or unsecured loans (unless they intend to default).  They are just looking for the best deal much like investors look for the best returns.
What are you talking about?  Have you ever made a loan to someone?  Movements don't make headlines (i.e. 30 year mortgage?)?   It's obvious it won't be productive to continue this. . .

Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on August 27, 2013, 12:12:26 PM
Given the default rates, if they lowered interest rates by much to stimulate borrowing, I wouldn't invest.  There is barely enough risk adjusted return as it is.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 08, 2013, 08:13:55 PM
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Lovinglifestyle on September 08, 2013, 08:45:44 PM
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.

Love it!  Sounds perfect to me.  The sooner the better, please. 
Title: Fairer Solutions to Excess Investor Demand
Post by: stowers on September 08, 2013, 10:41:09 PM
Yes, sounds perfect.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Randawl on September 08, 2013, 11:15:56 PM
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.

 :P

From page 1 of this thread, post #4:

Solution: Dollar amount restriction per loan fraction (Investment limit per loan, per SSN).
Investors are limited to loan fractions of X amount of dollars, allowing for hundreds of investors to participate in a particular loan.

This would stem the tide, but only for a short period of time.  If the fraction restriction was set to $100, even on a $35,000 loan it could still be theoretically fully funded by just 350 investors.  This may seem like a good idea now, but it won't be long before thousands and tens of thousands of investors want the same note.  This is a Band-Aid solution and investors will find themselves with the same hyper-competitiveness as this asset class continues to grow.


It would be great if they did this, but it is only temporary and must include the other suggestions eventually.  Shifting more of the loans to the whole pool may make a difference, but only temporarily.  If done, I see this cycle repeating itself and "in the end" the question that begs to be asked is how much is enough?  50%, 75%, 99%?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 08, 2013, 11:21:47 PM
Randawl,

I'm not sure that future growth of the retail investor base is a big concern, because as the investor base grows LC will also be growing the borrower base. They can pull other tricks to try to balance that out. The major problem is that a couple big bots are chomping up all the fractions, leaving slow humans in the dust. I think a better use of the existing whole loan program solves this issue. LC will have to prevent multiple accounts (of the same institution) from buying tons of $100 increments, though.

Bryce
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on September 09, 2013, 10:39:35 AM
I remain opposed to the Whole Loan Program while in support of the maximum investment limit of $100.

Its elimination will have a significant impact on the loan inventory for all investors and its elimination should have no impact on the institutions.  What's the difference to them having $10M invested in 100,000 loans versus that same $10M in 25,000 loans?  Just a little more time!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 09, 2013, 10:50:42 AM
RLV99,

The whole loan program is entirely necessary for institutions who need to own the entire loan. When an entity buys an entire loan, LC can stamp it and actually transfer ownership to the entity. This is the ultimate in bankruptcy protection and a precursor to a lot of institutions' participation. Their participation is necessary to maintain the scale that LC needs to be profitable. So, I contend that the whole loan program is here to stay and any solutions suggested without it are dead in the water.

Even if LC scaled the whole loan percentage to something like 60%, most retail investors would be able to invest their capital at $25/loan fairly quickly, as long as they didn't miss an upload. If it keeps the huge fractions away, there will be a lot more availability of all types of loans for many more people.


Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on September 09, 2013, 10:56:30 AM
Guys, I am in San Francisco and meeting with Renaud Laplanche and Scott Sanborn this morning. I will put this question to them and see how they respond.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: yojoakak on September 09, 2013, 11:04:08 AM
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.


The only way I could see you getting them interested is if you moved your filters to LendingClub, and agreed to auto-invest in any loan that matched the filter as soon as it came out. Sort of like a mini-LC Advisors.

However, this would require LendingClub to add a new feature to their website. And I think we all know that that is never going to happen.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Lovinglifestyle on September 09, 2013, 11:40:11 AM
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.


The only way I could see you getting them interested is if you moved your filters to LendingClub, and agreed to auto-invest in any loan that matched the filter as soon as it came out. Sort of like a mini-LC Advisors.

However, this would require LendingClub to add a new feature to their website. And I think we all know that that is never going to happen.

I don't understand why slowing down the funding pace would be a deal breaker considering that the review time is extensive.  Not many would notice half a day longer spent in review.  A borrower wouldn't drop out over a few hours delay, although the interest time clock on a 24 hour period could run out if the issuing time were not manipulated on the back end.  Would you mind elaborating on the harm involved?  Or explaining what I'm wrong about and why? 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 09, 2013, 01:07:28 PM
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.

I agree. It's good that my proposed solution doesn't change the pace of funding on average. It just somewhat shifts the distribution of which get funded super fast. The money coming onto the platform doesn't change.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: yojoakak on September 09, 2013, 01:33:31 PM
I don't understand why slowing down the funding pace would be a deal breaker considering that the review time is extensive.
That's true. They could leave the loan open for investment until they complete the review then randomly select which investors would get notes. I have to admit I don't pay much attention to new issues though anymore. What's the average length of time a loan spends "Under Review" these days?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on September 09, 2013, 02:18:30 PM
This is a supply-demand issue -- not an operation issue (e.g., whole-loan vs. fractional, max note amount per note) -- and we need a supply-demand solution.  LC can tweak here and there, but if the fundamental issues are not addressed, the tweaks will only be band-aids.

One obvious solution is to lower the interest rates -- this will reduce investors demand and simultaneously increase borrowers supply.

Other options:
- reduce origination fees
- increase service fees
- more borrower advertisement
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Randawl on September 09, 2013, 08:01:38 PM
Randawl,

I'm not sure that future growth of the retail investor base is a big concern, because as the investor base grows LC will also be growing the borrower base. They can pull other tricks to try to balance that out. The major problem is that a couple big bots are chomping up all the fractions, leaving slow humans in the dust. I think a better use of the existing whole loan program solves this issue. LC will have to prevent multiple accounts (of the same institution) from buying tons of $100 increments, though.

Bryce

"I'm not sure that future growth of the retail investor base is a big concern, because as the investor base grows LC will also be growing the borrower base."

This is not entirely true.  Sure, the "problem" (as we retail investors like to call it) is mostly due to institutional involvement in the fractional pool, but the investor and borrower bases are not growing in parallel.  As time progresses, we will continue to see an increasing number investors for a certain selection of loans that is not increasing at nearly as high of a rate.

"I think a better use of the existing whole loan program solves this issue."

It may ameliorate things for a time.  I am in favor of a small adjustment to the percentages if they implement my other suggestions, but it has got to stop somewhere. 

"LC will have to prevent multiple accounts (of the same institution) from buying tons of $100 increments, though."

Limit it by SSN as I've discussed and a similar ID system for institutions in order to restrict the fractional pool to retail investors, if only for a brief time.   Even then, let them buy as much of a loan as they want, from any pool, just allow retail investors a certain time frame to express interest then open it up for institutions.  Similar to the way whole loans are dumped into the fractional pool after a time.  Call it the institutional pool (with whole loans initially) and the retail pool (with fractional loans initially) where after a certain time frame loans that are not fully funded are allowed full access by any investor type.

With all that said, I still think it goes back to what I've been saying all along:

The Solution: Combine Investment Limit per Loan Fraction (for a set time period), a Round Robin (or similar distribution system after a certain amount of time of investor interest), and Stricter Whole & Fractional Pools by Investor Type.  This allows for a fully scalable solution even if LC were to grow to unforeseen levels.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Randawl on September 09, 2013, 08:05:15 PM
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.


The only way I could see you getting them interested is if you moved your filters to LendingClub, and agreed to auto-invest in any loan that matched the filter as soon as it came out. Sort of like a mini-LC Advisors.

However, this would require LendingClub to add a new feature to their website. And I think we all know that that is never going to happen.

"Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly."

If this were true, the whole loan pool would not exist.  Every day, loans go entirely unfunded for twelve hours by institutions that skip them and let them get dumped into the fractional pool.  The approval and verification process lasts a few to several days at best.  Allowing funding to occur during this period instead of a few seconds would result in no adverse change for the company.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 09, 2013, 08:46:35 PM
This is a supply-demand issue -- not an operation issue (e.g., whole-loan vs. fractional, max note amount per note) -- and we need a supply-demand solution.

Hi Fred,

In general you're right, of course, but to the extent that LC has made a commitment to human interface, there is a separate operations issue of human users not being able to get availability of like quality loans. They have to solve both sides of this thing.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on September 10, 2013, 09:29:32 AM
Just a heads up on the issue that was discussed yesterday of reducing the fractional pool to say $100 max. The trouble right now is that there are agreements in place with many large investors that allow them access to the fractional pool at a certain percentage maximum up to 75%. To make a change to a $100 max per loan Lending Club would have to renegotiate these agreements and that is something they do not want to do. They have other ideas for helping retail investors and will start implementing some this month.

BTW, Renaud said he has been reading this thread and taking note of all the ideas. So, even though he doesn't participate here you can be sure your ideas are at least being taken into consideration by the CEO at Lending Club.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: cfb on September 10, 2013, 09:57:59 AM
One obvious solution is to lower the interest rates -- this will reduce investors demand and simultaneously increase borrowers supply.


Lowering the interest rates enough to stimulate demand would lower my interest in lending.  I'd have to slide down one grade from d-g to e-g, and then I'd have few notes to choose from and I'd have to take less return for higher risk.  Not going to work for me.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 10, 2013, 10:24:04 AM
Awesome, Peter. I encourage Renaud to consider renegotiating those deals with the institutions. He can offer them a much larger sized whole loan program. I wouldn't think any institution would balk at having to buy the remaining 25% of a loan. It only takes 2-3 million dollars to achieve reasonable diversification with whole loans. Retail investors don't need many loans carved off for the fractional loan program, we just need automation to invest in them every single release time. If we catch them all, we'll get invested just as fast.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on September 10, 2013, 10:48:45 AM
There are many tools coming for investors, one of which will be automation.

But Bryce, they are not going to go back and renegotiate these deals with large investors. Keep in mind these large investors are even less happy than us. They are demanding more access to loans as well. LC is not going to go back to them with any program that reduces access to loans going forward.

One point to say about interest rates. They emphatic on this issue. They are not lowering interest rates. Why? Because they don't need to. Borrower demand is not the issue. They could have 10,000 loans on the platform tomorrow if they chose to, but that would break all their systems and so they will not do that. Let me repeat this: borrower demand is not the issue. There are billions of dollars in unmet demand for borrowers.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rlv99 on September 10, 2013, 11:13:57 AM
Peter

Lowering of interest rates would send me back to greener fields.  I almost left in May-June when LC lowered some interest rates.

However, on the other issues, you are sounding more and more like an LC advocate.  You do not represent the retail investor!
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Chuck on September 10, 2013, 11:28:55 AM
Peter's comments make sense to me.  I assume that the larger investors negotiate a lower admin fee (many basis points below the 1% they charge us) from LC as well.  If LC were to try to make life harder for the larger investors, they would likely increase LC's admin overhead, have a hard time getting out of existing contracts, and generally upset the apple cart of an attractive flow of investment.   I assume whole loans create the lowest cost for LC from an admin/compliance/payment perspective.

I'm a big fan of LC's disruptive business model - even with the growing pains of supply/demand issue.  I keep my glass "half full" by thinking of this as a big online game or competition - it's actually pretty funny around the house:  every four hours I'm logging in for the next big note drop - my kids think it's hilarious to watch Dad head to the computer on a schedule.

I also find it fascinating to see notes disappear in $5k and $10k chunks during the note drops every four hours - there are some deep pockets out there snapping up large amounts of notes.  If someone has the resources to do that, more power to them.

Some of my friends pay money to play online games (think of games like WoW or Tapped Out)... with LC, I get the same kind of gaming excitement looking for notes, I get to earn interest and get all the fun of trying to catch the high yield notes - all with pretty darn low volatility and predictable risk.

-Chuck
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: edward on September 10, 2013, 11:49:05 AM
"However, on the other issues, you are sounding more and more like an LC advocate.  You do not represent the retail investor!"

Respectfully, I'm not sure Peter's role here is to necessarily advocate for one side versus the other, as an attorney does. I think it's great that Peter makes this forum available for us, and with his knowledge and background, and that of all the posters here, we all have the opportunity to learn a great deal, and vent our frustrations.

Peter holds a very special place here other than that of founder of this forum--he gets to talk with the very top at Lending Club, Prosper and others, and we get to know that our (retail) voice is being heard. But Peter also must maintain his confidences, otherwise he would not be privy to the level of information that he is. I'm glad to have him around and I just want to say thanks to Peter for all his hard work--most of which we never see or know about.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Lovinglifestyle on September 10, 2013, 12:37:25 PM
I agree with you, and I very much appreciate the information Peter shared with us today on this thread.  Hearing more than one perspective is always illuminating.  Were it not for Peter's forum, we'd not know our voices were being heard as much as they are.

Thank you, Edward, for expressing what you did so well.  You speak for many of us.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: yojoakak on September 10, 2013, 12:49:11 PM
...Borrower demand is not the issue. They could have 10,000 loans on the platform tomorrow if they chose to, but that would break all their systems and so they will not do that...

For a long time it seemed like the only jobs they advertised for were sales. I guess now they're trying to play catch up with the technology.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: LC Adv on September 10, 2013, 01:21:46 PM

One point to say about interest rates. They emphatic on this issue. They are not lowering interest rates. Why? Because they don't need to. Borrower demand is not the issue. They could have 10,000 loans on the platform tomorrow if they chose to, but that would break all their systems and so they will not do that. Let me repeat this: borrower demand is not the issue. There are billions of dollars in unmet demand for borrowers.

I am noticing more technical "glitches"daily , including this afternoons feeding frenzy (1 PM eastern time) in which i was logged off by LC and after signing back in my order basket was still full. Additionally I have a open ticket for a reporting problem that is ongoing for 2 weeks. LC's system has to function perfectly or the entire jig is up. After all this is real money they are dealing with, not bitcoins
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on September 10, 2013, 05:07:28 PM
Borrower demand is not the issue. They could have 10,000 loans on the platform tomorrow if they chose to, but that would break all their systems and so they will not do that. Let me repeat this: borrower demand is not the issue. There are billions of dollars in unmet demand for borrowers.

I'm not quite sure what to read into this.  If 10k loans would "break all their systems" that implies there is a software limitation.  Or "systems" can mean people as well.  Both can be solved in not all that much time.

The more interesting issue is this:  If there are more borrowers knocking at the door than LC can handle, that means a large percentage of them who otherwise meet baseline criteria are being turned away.  I can only speculate as to what kind of formula they use to decide who gets turned away but it's a pretty safe bet that they're not turning away the cream of the crop.  This would seem to mean that whenever these borrowers do start to be accepted (after the LC systems issues are resolved) then the default rate may very well increase.  Possibly significantly.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Peter on September 10, 2013, 05:41:57 PM
I'm not quite sure what to read into this.  If 10k loans would "break all their systems" that implies there is a software limitation.  Or "systems" can mean people as well.  Both can be solved in not all that much time.

The more interesting issue is this:  If there are more borrowers knocking at the door than LC can handle, that means a large percentage of them who otherwise meet baseline criteria are being turned away.  I can only speculate as to what kind of formula they use to decide who gets turned away but it's a pretty safe bet that they're not turning away the cream of the crop.  This would seem to mean that whenever these borrowers do start to be accepted (after the LC systems issues are resolved) then the default rate may very well increase.  Possibly significantly.

Systems in this case means people and technology. What Renaud was saying yesterday was that there is a huge borrower pool. But he never said these people are knocking at the door at LC. Borrowers come to the platform through marketing - snail mail and online campaigns. Spend more money on marketing means more borrowers. LC are trying to grow as fast as they can while creating a sustainable business and not causing internal problems.

Every borrower on the platform has some kind of human interaction with LC and for this reason they cannot add 10,000 borrowers immediately. And judging from some of the glitches we are seeing today maybe their IT would not be able to handle it either.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: rawraw on September 10, 2013, 06:29:51 PM
Peter, I'm glad you are adding some sanity to the thread.  This forum has been such a panicky place recently I've started to enjoy reading the threads less and less.  I sure hope that doesn't hide the reasonable suggestions that are being made from people like Renauld when they read the forum.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on September 11, 2013, 12:58:07 AM
BTW, Renaud said he has been reading this thread and taking note of all the ideas. So, even though he doesn't participate here you can be sure your ideas are at least being taken into consideration by the CEO at Lending Club.

Everybody, please say Hi to Renaud. :)

If LC issues boil down to just "capacity issues", then this is really one of the best problems a start-up (err ...  pre-IPO) company could have --  too much demand is better than no demand.
 
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: LC Adv on September 11, 2013, 09:38:56 AM
I am glad to report that as of this morning all my technical issues have been fixed, there is a full supply of notes available, the website is functioning beautifully and once again I am fully invested.  Congrats to the IT boys on their superb effort, and my LC Rep for helping. LC has some of the best reps I have ever had the privilege of dealing with.

Now that I have time to think I will resume placing low-ball bids for Puerto Rico Bonds which are being thrown out like a baby with the bathwater.

As for the LC IPO, I think that all LC Investors should be given a chance to purchase " Friends and Family" shares, or to participate in some sort of Dutch Auction Pre-IPO.  Anyone else agree?
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: core on September 11, 2013, 09:51:32 AM
As for the LC IPO, I think that all LC Investors should be given a chance to purchase " Friends and Family" shares, or to participate in some sort of Dutch Auction Pre-IPO.  Anyone else agree?

Heck yeah!  Even though I would question the financial wisdom of doing so, I'd be all over that just for the fun of it.  Excellent idea.  I think you should be allowed to purchase one round lot for each day that you tried to invest in notes but couldn't due to short supply.

With my luck, my shares will show up as being "in review" for 3-4 weeks and then eventually the cash will be returned to my brokerage account.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on September 11, 2013, 05:58:33 PM
As for the LC IPO, I think that all LC Investors should be given a chance to purchase " Friends and Family" shares, or to participate in some sort of Dutch Auction Pre-IPO.  Anyone else agree?

Ha ..., ha ..., this would be nice.  8)

However, I am not sure that the management or underwriters would like to see the value of their shares reduced by "Friends and Family" dilution or the Dutch Action.  In general, IPO valuation is priced so that the shares will rise about 15% on the first day.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: DanB on September 11, 2013, 06:21:56 PM
As for the LC IPO, I think that all LC Investors should be given a chance to purchase " Friends and Family" shares, or to participate in some sort of Dutch Auction Pre-IPO.  Anyone else agree?

Heck yeah!  Even though I would question the financial wisdom of doing so, I'd be all over that just for the fun of it.  Excellent idea.  I think you should be allowed to purchase one round lot for each day that you tried to invest in notes but couldn't due to short supply.

With my luck, my shares will show up as being "in review" for 3-4 weeks and then eventually the cash will be returned to my brokerage account.

Haven't you heard? They've already made the decision to set aside a special class of stock just for you. It'll become available for you to purchase once the regular shares have risen by 70% or more.............& you can only trade on it once every 90 days.  :)
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: nonattender on September 14, 2013, 05:53:18 PM
The biggest obstacle to a "solution" for this issue is the SEC.  They, if memory serves (and it usually does), demanded that Prosper
dismantle their "standing order" feature and instead replace it with a "shopping cart"-like system which required investors to login,
manually approve each "basket", and then "invest".   Prosper then had to work around that, w/AQI, which has features similar, but
not identical, to the old "standing order" feature - you set your targets and then when a loan is listed AQI will (via an excel macro!)
invest funds into the loan (rather than the old way, which would fill "standing orders" with the new loans - and worked in reverse.)

I don't know if the SEC is still so dominant - or if Prosper still works this way on the backend - but they had it set up right long ago,
when, blammo, here comes the SEC to make Prosper conform to the way that LC had structured its offering.  (No spec as to why...)

Anyway - all inside baseball and regulatory gamesmanship aside - until a mechanism exists to real-time fill loans, with pre-signalled
capital commitments (which, it appears, only exists, at the moment, for LCA), neither platform can implement any longterm solution -
at the platform level...  which is all anyone really wants - a "standing order" system which can save us time and put us all "in line"...

*shrug*
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Rob L on September 14, 2013, 06:25:46 PM
They, if memory serves (and it usually does), demanded that Prosper dismantle their "standing order" feature and instead replace it with a "shopping cart"-like system
Thanks for the history lesson. Very informative for a n00b like me. Helped me connect a few dots.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: nonattender on September 14, 2013, 06:38:42 PM
Yes...I'm  filled with P2P history...

On that note, important to remember that Prosper had just switched to a fixed price model, like LC, where they were pricing their own notes, so, likely that SEC did not like that setup because it led to some "principal/agent" issues, whereas Prosper was setting prices and, at the same time, filling standing orders (perhaps the SEC viewed this as too tempting - "they could just chg their underwriting to hit all those pre-existing capital commitments"?), so, chose the pivot point of "pricing/investing" to draw a line in sand for both P & LC.

Prior to this, when Prosper had the auction pricing mechanism in place to solve "excess investor demand", there was no problem - but once they dropped auctions and were pricing the securities AND placing orders on behalf of customers (even though the orders were "set" by customers), maybe the SEC saw a potential conflict and that's why...........

This is why I say, unpopularly, that a price discovery/rate-competition, via auction (realtime competition btwn standing orders) would likely return at some point - as it's the only mechanism, w/SEC's pivot point, which would allow for non-conflicted realtime order filling, under current regulatory regime (which is pretty insufficient, anyway, as SEC doesn't do squat for any issues on the borrower side)...

Ahwell.  Swimming time.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: brycemason on September 14, 2013, 07:46:21 PM
Yes...I'm  filled with P2P history...
...Ahwell.  Swimming time.

+rep! Nice history and explanation of some constraints they may feel like they're under.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: Fred on September 14, 2013, 08:42:06 PM
For your reading enjoyment:

SEC Cease-and-Desist Order on Prosper -- http://www.sec.gov/litigation/admin/2008/33-8984.pdf

The issue was more about the treatment of the notes being issued & sold.  They were not treated as securities by Prosper, while SEC on the other hand thought that they were securities.  Securities need be registered with SEC before they could be bought or sold.

Summary:
Prosper operates an online lending platform connecting borrowers with lenders. The loan notes issued by Prosper pursuant to this platform are securities and Prosper, from approximately January 2006 through October 14, 2008, violated Sections 5(a) and (c) of the Securities Act, which prohibit the offer or sale of securities without an effective registration statement or a valid exemption from registration.
Title: Re: Fairer Solutions to Excess Investor Demand
Post by: nonattender on September 14, 2013, 08:55:02 PM
That's merely the document by which SEC exerted authority over "P2P lending" ("loans" into "notes")...

What I'm talking about is the near constant oversight and direction that SEC has exercised, since then.
P2P is the most highly regulated industry I've ever come across - and it all happened AFTER that C&D...

SEC's director of division of corporate finance at the time was... LendingClub's former in-house counsel.
She officially recused herself from all P2P related issues at some point - so, I don't know, but whatever.

Anyway, what you reference was not the "issue" which I was talking about, which is still an on-going...