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Lending Club Discussion => Investors - LC => Topic started by: jrl on September 23, 2019, 06:45:54 PM

Title: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on September 23, 2019, 06:45:54 PM
Just received this email:

Quote
Hi ****,

We wanted to let you know that new LendingClub Notes are temporarily unavailable in your state. We're working diligently to address this matter and apologize for the inconvenience.

This won't disrupt the servicing of your existing Notes, but it does mean that you won't be able to purchase new Notes for the time being or access the LendingClub mobile app as its primary purpose is to purchase new LendingClub Notes. Consequently, you may notice cash accumulating in your account from principal and interest payments.

During this time, you may still participate in the secondary market. Learn more here.

We appreciate your patience, and as a small token of our gratitude for your business, we'd like to offer you an Amazon gift card.*

Thank you,
The LendingClub Team

Really frustrated right now. Investing since May 2016.

Called and was told it was due to some operation they did on the back-end? Also, the gift card is only $25 and won't be sent out until November?! (Are they expecting this to last that long?)

Apparently it's amateur hour at LC right now.  ???
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: honvl on September 23, 2019, 07:21:30 PM
https://www.lendingclub.com/investing/investor-education/what-are-the-eligibility-requirements-to-invest-through-lendingclub

"At this time, investing through LendingClub is only available to individuals residing in the U.S. Due to current state restrictions, investors who reside in the states below have limited investment access to Notes:

Residents of Alaska, Arizona, Florida, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, and Texas can only purchase Notes through the secondary market. These are known as trade-only states.
Ohio residents arenít able to invest in Notes at this time."

The temporary in the e-mail is a euphemism for "a long time."
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on September 23, 2019, 07:57:10 PM
Quote
Due to current state restrictions, investors who reside in the states below have limited investment access to Notes:

Residents of Alaska, Arizona, Florida, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, and Texas can only purchase Notes through the secondary market. These are known as trade-only states.
Ohio residents arenít able to invest in Notes at this time."

The temporary in the e-mail is a euphemism for "a long time."

What did they change that now a half-dozen more states are unable to invest in new notes?
I kinda figured it would be long-term, that's what's frustrating.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Debt Free on September 23, 2019, 09:18:34 PM
Reel those lines in boys!  Time to find a new fishing hole.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on September 23, 2019, 09:30:18 PM
If anyone figures out what's really going on, I'm interested. Clearly it's something that happened at LC, not in the states, since several got restricted at the same moment. (I'm in Florida.)

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: bkcarolina on September 24, 2019, 02:51:53 AM
Time for a little a lot of transparency.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on September 24, 2019, 04:23:56 AM
If anyone figures out what's really going on, I'm interested. Clearly it's something that happened at LC, not in the states, since several got restricted at the same moment. (I'm in Florida.)

I don't know what happened, but I can tell you what I've heard in the past when things like this changed.  Some folks have told me about situations where the LC lawyers changed their mind about some interpretation of some regulation, so policy abruptly changed.  This theory seems to fit the facts.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on September 24, 2019, 08:35:15 AM
This theory seems to fit the facts.

Makes sense to me ... if anything does.  ;)

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Cam79 on September 24, 2019, 11:01:11 AM
It might not just be Lending Club, I tried signing up for Prosper and couldn't get past the first step, not available in my area(TX).  I checked their availability and Texas isn't listed, although I never tried signing up for them previously.

https://www.prosper.com/plp/legal/compliance/
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Cam79 on September 24, 2019, 11:23:00 AM
Both Lending Club and Prosper still have active licenses as regulated lenders in Texas.  I sent a message to OCCC consumer assistance but the worker is out of office until next week. I'll update if I hear back.

Edit:
Looks like the links don't work, you can find them by searching here.

https://alecs.occc.texas.gov/Generic/AdvanceSearch?fromSource=true#

Lending Club
#154127

Propser
#47698
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on September 24, 2019, 05:20:24 PM
A license is not the only thing one needs.  One needs to believe one is operating within the rules set by each state.  Each state has lots of borrower protection rules.  A change in interpretation of one of these rules by the corporate lawyers could easily trigger this.  Could be as subtle as a perceived risk that some regulator might later interpret something as not being in compliance with some rule.  Could be triggered by a change in a rule, or a particular court case which gave some color to some rule, or a new lawyer bringing a new point-of-view about interpreting a rule.  Very difficult to diagnose from a distance.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on September 24, 2019, 07:11:16 PM
Each state has lots of borrower protection rules.

This is clearly not about borrower protection, as loans are still being listed today with borrowers in the affected states. (According to LC available notes)

The rest of what you mention sounds about right. It could be something major, or it could be something minor, we just don't know enough yet.

My returns have been above average (top 10%) and i've been planning on investing more, even with the recent scarcity of good notes.

I'm just glad this didn't happen after I deposited/rolled over more to my Roth account. What a headache that would've been! Certainly not looking forward to winding down my Roth either.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Rob L on September 25, 2019, 09:07:15 AM
I'm surprised by this since I think it is only a matter of time before LC shuts down individual participation completely. According to their most recent quarterly report individual investors now represent only 5% of originations (lowest % ever):

https://ir.lendingclub.com/Cache/1001255340.PDF?O=PDF&T=&Y=&D=&FID=1001255340&iid=4213397 (https://ir.lendingclub.com/Cache/1001255340.PDF?O=PDF&T=&Y=&D=&FID=1001255340&iid=4213397)

Why they continue it at all is an interesting question. Maybe they still make a bit of money from it but it seems pretty likely it's dying and LC will eventually pull the plug. The only reason I can imagine is that if LC shut it down they'd have to write off all the assets they carry on their books for this part of their business (software, computers, leases with cloud services providers, etc.). Might be a pretty big hit on the balance sheet that could hurt their stock price but I haven't done the research to figure out how big.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on September 25, 2019, 03:51:50 PM
They did lay off the retail sales staff.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on September 25, 2019, 04:09:42 PM
individual investors now represent only 5% of originations

I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on September 25, 2019, 06:03:25 PM
According to their most recent quarterly report individual investors now represent only 5% of originations (lowest % ever):

Well, if they did better at selecting which notes to make fractional, they would have never lost so much retail interest.

Deciding that a 5% ROI that turns into 2.5% or less after tax and variance (even negative!) is good enough to attract reatil investors is certainly living in a fantasy world.

If I (and others judging by which notes get bought up first) can spend a few hours here and there backtesting to create good filters to minimize charge-offs and bring pre-tax returns over 10%, then LC certainly can too. They just choose not to, because some bean counter thinks that a 5% average "ANAR" (pre-tax, taxed as income) is attractive enough for retail investors, even after seeing retail drop off when returns dropped to a third of what they were before all the scandals.

https://www.lendingclub.com/info/demand-and-credit-profile.action

If I wasn't getting at least 5% after tax, I would'nt need to be prevented from investing to cash out my taxable, it would've already happened by now.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on September 25, 2019, 10:15:16 PM
individual investors now represent only 5% of originations

I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?

Edward

LC learned they could grow faster in these other markets.  LC has always had a very strong growth imperative.  Therefore, they emphasized the markets in which they saw growth.  Speaking of the growth imperative ... you see it in every quarterly investor conference call where they explain that they're losing money, but isn't it great that they grew.  From an investor perspective, I think the huge growth story died a long time ago, and LC might be better off emphasizing profitable operation rather than growth.  I don't think they are going to agree with me, so I don't try to engage them in argument.

Also, I believe they structure fees in such a way that the institutions pay them more than the retail customers do, per $ of loan.  I know that sounds strange, but that's how my math comes out. 

This led them to deemphasize the retail market, which led to a self-fulfilling prophesy.  They don't work at generating interest among retail investors.  ...so its no surprise that their view is that there isn't great demand in the retail market.

Renaud Laplanche, LC's original CEO often said that the retail market was important because retail investors are "sticky", ie likely to remain in place thru credit cycles.  In a financial downturn, some institutional customers, hedge funds (for example) can literally dry up overnight.  I believe Renaud's thoughts on this subject are long forgotten in today's LC management.  Is that because the environment has fundamentally changed, or are they simply thinking short term?

On the other hand, they've moved past hedge funds, and now the majority of their business is with banks.  I think banks are surely a lot stickier than hedge funds.  The ecosystem around banks is complicated, and I'm not an expert on it.  I don't understand why banks are so interested in investing in LC loans. ...but they clearly are.  Many banks no longer view LC as a competitor and are essentially outsourcing lending operations to LC.  There are exceptions of course: Marcus, etc. 

They view themselves as playing in a different arena now.  We're not in their arena any more.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: bkcarolina on September 26, 2019, 01:28:35 PM
individual investors now represent only 5% of originations

I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?

Edward

They lost interest in us long, long ago, once we'd served their purpose. Now they're just saying GTFO a little more explicitly.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Rob L on September 26, 2019, 09:03:05 PM
Another quick look at the Q2 presentation reports 200k+ self directed individuals that invested $155m. That's $775 per investor in Q2; or $258 per investor per month; or a little over 10 notes of $25 each per investor per month.  The self directed investor business isn't exactly booming :o
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: investny on October 10, 2019, 12:05:56 AM
Anyone got/heard any updates on this situation. Or should we just all forget about LC?
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on October 10, 2019, 12:15:13 AM
If LC opens it up again, I'll invest again. I'm not planning on it though. I'm withdrawing cash as it accumulates and spending my time thinking about other stuff. Lending Club? Sounds vaguely familiar. Was that a basketball team?

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on October 10, 2019, 12:39:42 AM
Another quick look at the Q2 presentation reports 200k+ self directed individuals that invested $155m. That's $775 per investor in Q2; or $258 per investor per month; or a little over 10 notes of $25 each per investor per month.  The self directed investor business isn't exactly booming :o

I didn't find info that in the Q2 presentation.  I believe you, but I tired out before I found it.  I went to the 2018 10K, where I found total loan origination 10.881B for all of 2018, and self-directed is 6% in the most recent quarter.  (was a little more in earlier quarters.)   Then 6% of 10.881B = 653M annual self-directed. which roughly matches your quarterly number.

Looking at my monthly statements, I see how much I bought each month during 2018.  (Its about the same every month, as I'm just recycling, so after I looked at a few months I realized all I had to do was take one and multiply by 12 to get an annual number.)  I won't tell you what fraction of the total is me, but I can say there obviously aren't very many of us left!
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Jctraugott on October 16, 2019, 09:30:16 PM
Iíve been with LC since early on, endured removal of lender ability to ask borrowers questions, powered through when auto investing became the only way to get the better notes before they were gone, watched as institutional investors were given access to the cream of the crop, maintained faith through the leadership scandals, struggled through recovery from the F and G note debacle (thanks to folioFn), complied with the onerous IRS rules, and all the while increased my stake in the platform over the years. 

Iíve reached a point of inflection with this latest event.  Whatís different?  Whatís different is that each of the previous struggles could be explained or justified; growing pains, market changes, underwriting lessons learned, pursuit of profitability, competition, and so forth.  There no no way however to justify  suspension of note creation is multiple states without an explanation to investors.  Trust is broken.  I thought that we (lenders) were part of the team but this event is a wake up call.  We are not on the team.  Iím not sure what we are to LC but Iím feeling used and taken advantage of. 

Perhaps as others have said, individual lenders no longer matter to them, or perhaps what happened is so embarrassing that they donít want anyone especially their coveted institutional investors to know, or perhaps they assume we will take what they dish out and stick with them.  Itís all speculation.  We donít really need to know though because Trust is broken.  It calls into question everything they say and do.  Notes have always been risky but it seemed acceptable risk with a good underwriter behind it.  Now, the level of risk is increased beyond acceptable limits in the absence of transparency and trust.

Iím not yet sure what I personally will do with this segment of my portfolio, but the relationship with LC is broken. 


Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: kib on October 23, 2019, 11:55:24 AM
@jctraugott, I absolutely agree with this.  I haven't been in from the beginning, but I've seen many of the things you mention and yes, this one is the straw that's breaking the camel's back.  I've gone from feeling like part of the team, to feeling ignored but functional, to this "talk to the hand" business.  The risk of non-liquidity was always clear, but there was no stated risk that I suddenly wouldn't be able to reasonably manage my money OR get it back.  This is like they locked the door to participation with all my money on the other side and they won't even acknowledge it.  "You want out?  Sure, just go to this secondary site and put your notes up at a 20% loss and we'll take the profit from that, thanks for the donation." 
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on November 02, 2019, 02:30:00 PM
This happened to me in Florida years ago (I don't remember the exact year). LC turned off FL and told me they just had to get their license renewed every few years and that they were waiting on the government to sign off on it. A few months later FL was back. I have to assume this is a similar situation.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on November 02, 2019, 02:41:43 PM
Iíve been with LC since early on, endured removal of lender ability to ask borrowers questions, powered through when auto investing became the only way to get the better notes before they were gone, watched as institutional investors were given access to the cream of the crop, maintained faith through the leadership scandals, struggled through recovery from the F and G note debacle (thanks to folioFn), complied with the onerous IRS rules, and all the while increased my stake in the platform over the years. 

Iíve reached a point of inflection with this latest event.  Whatís different?  Whatís different is that each of the previous struggles could be explained or justified; growing pains, market changes, underwriting lessons learned, pursuit of profitability, competition, and so forth.  There no no way however to justify  suspension of note creation is multiple states without an explanation to investors.  Trust is broken.  I thought that we (lenders) were part of the team but this event is a wake up call.  We are not on the team.  Iím not sure what we are to LC but Iím feeling used and taken advantage of. 

Perhaps as others have said, individual lenders no longer matter to them, or perhaps what happened is so embarrassing that they donít want anyone especially their coveted institutional investors to know, or perhaps they assume we will take what they dish out and stick with them.  Itís all speculation.  We donít really need to know though because Trust is broken.  It calls into question everything they say and do.  Notes have always been risky but it seemed acceptable risk with a good underwriter behind it.  Now, the level of risk is increased beyond acceptable limits in the absence of transparency and trust.

Iím not yet sure what I personally will do with this segment of my portfolio, but the relationship with LC is broken.

If you stuck with them through all of that this is very small in comparison. Wait until this is over and then decide if their silence was good or not. Maybe they don't want to announce that they were breaking the law? If that's the case doesn't seem smart to bring that to people's attention.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on November 26, 2019, 05:48:11 PM
This happened to me in Florida years ago (I don't remember the exact year). LC turned off FL and told me they just had to get their license renewed every few years and that they were waiting on the government to sign off on it. A few months later FL was back. I have to assume this is a similar situation.

I called lending club today to ask about FL and they told me it was that they had to get their license renewed by the state, which is what I suspected had happened and happened before. They told me they mentioned this on their Q3 call and that they sent everyone an email last week, although I didn't get that.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: investny on November 26, 2019, 05:50:29 PM
I'm in NY and did not get any emails from LC.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: investny on January 03, 2020, 02:21:52 AM
Almost  4 months and still no updates from LC!
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on January 03, 2020, 09:11:15 AM
Personally I'm not expecting any updates. As others have pointed out, LC has little incentive to work on keeping individual investors. If my state gets brought back into the fold, I'll reinvest, but until/unless that happens, I'l just take my payments and run.

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on January 08, 2020, 05:13:25 PM
Almost  4 months and still no updates from LC!

Just talked to them earlier today, they're expecting to be back up in NY "soon" (take that with a grain of salt!) and will email investors when it's done. Hopefully it's not more than a few months.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: welkestein on January 18, 2020, 10:33:59 AM
Thank you very much for the solution. It really helps.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: LiKenun on January 28, 2020, 04:30:21 AM
Almost  4 months and still no updates from LC!

Just talked to them earlier today, they're expecting to be back up in NY "soon" (take that with a grain of salt!) and will email investors when it's done. Hopefully it's not more than a few months.
If they pull through, Iím back on board.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on February 02, 2020, 11:19:38 PM
Almost  4 months and still no updates from LC!

Just talked to them earlier today, they're expecting to be back up in NY "soon" (take that with a grain of salt!) and will email investors when it's done. Hopefully it's not more than a few months.

They told me back in November it would be "soon", so I wouldn't get my hopes up
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on March 05, 2020, 02:15:06 PM
anyone heard an update to this? I still can't invest
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Edward Reid on March 05, 2020, 02:41:58 PM
anyone heard an update to this? I still can't invest

I'd go with your previous comment ... don't get your hopes up.  :o

Edward
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: Fred93 on March 05, 2020, 03:43:26 PM
Given the rate at which LC is reducing allocation to the retail market, I can't imagine that they would allocate $ toward lawyers to get one state back online for retail investors.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrl on March 06, 2020, 05:16:46 PM
Given the rate at which LC is reducing allocation to the retail market, I can't imagine that they would allocate $ toward lawyers to get one state back online for retail investors.

It was a few states, NY being one of the biggest.

https://www.lendingclub.com/investing/investor-education/what-are-the-eligibility-requirements-to-invest-through-lendingclub (https://www.lendingclub.com/investing/investor-education/what-are-the-eligibility-requirements-to-invest-through-lendingclub)

FWIW, the population of the states with no access to the LC primary market currently accounts for a third of the US population. This includes the 2nd, 3rd, 4th, 5th, 7th, 9th, 14th, 37th, 48th, and 49th most populated states. As far as I'm aware, Ohio (#7) and Pennsylvania (#5) never had access to the primary market.

https://en.wikipedia.org/wiki/List_of_states_and_territories_of_the_United_States_by_population

Presumably, that means that around a quarter of LC's customers were kicked off the primary market in the fall.

Again, not getting my hopes up, but NY is 4th most populated state, with nearly 6% of the US population. TX, NY, and FL together represent over 1/5 of the US population. That means over 20% less profit/revenue from the retail segment if this keeps up.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: jrr6415sun on April 01, 2020, 08:53:02 PM
well now i'm glad lending club blocked my state. Prevented me from reinvesting $20k in what would be really risky assets right now.
Title: Re: Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)
Post by: LiKenun on April 04, 2020, 11:35:39 PM
Seems like they unblocked 2 states. The blocked states are now: AK, FL, NC, NM, NY, PA, and OH (both primary and secondary market). NY is still on that list unfortunately, but it shows that some progress is being made.