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Topics - MoMoney

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General Lending Club Discussion / FTC Lawsuit update
« on: September 14, 2018, 05:28:09 AM »
Some positive news regarding the lendingclub lawsuit. They had a hearing for motion to dismiss the lawsuit. They were not granted motion to dismiss; however motions to dismiss are rarely granted so that wasn't a suprise. The judge noted that lending club had already stopped making the no hidden fees advertisement. She encouraged the parties to settle and avoid wasting court resources.  She said, "If they agree not to do it anymore in an enforceable way, then why are we here? That is not a good use of court resources. To me, it's not rational, and it doesn't make sense. I can't conceive of why the case shouldn’t be resolved.”
The judge seemed to lean toward finding for LendingClub on the FTC’s claims seeking injunctive relief, saying “the allegations are thin here.”  Rather than offering money as payment for a wrong in a civil action, injunctive relief is a court order for the defendant to stop a specified act or behavior.

There were some negative comments that the judge made as well which were the basis to deny the motion to dismiss. She argued that lending club customers are "less sophisticated consumers than someone getting a jumbo mortgage" and that they might just scroll through the contract without reading it fully.

In summary, this case will probably go to settlement with no or little monetary settlement. The judge has already said the the "allegations are thin".

I actually hope lending club eliminates the origination fees from the borrower side all together and shift the fees to investors more like Marcus. That would encourage better borrower behavior, and would also attract more financial savvy borrowers and improve charge offs. It would also fit within lending club's new focus on consumer financial health, and would show that they are serious about that. If they do that within the settlement, that could also give a "win" to both sides as it would look really good for FTC that lending club will no longer charge origination fees from consumers moving forward altogether. In addition, lending club mentioned in the last earning call that moving forward, their bottle neck is on the investor side not the borrower side. However, since Laplanche's departure lending club has been slower and a lot more conservative especially on the tech side. They have talked about new products coming for quarters yet little to show for it. Even features such as direct payoffs and car loans are in their infancy after quarters of touting them. In the last earnings call they said that direct payoffs is still not implemented for the majority of borrowers when they have seen very positive results as a result of it. Elon musk changes the break distance with an on air software update. How long does it take to implement a direct payoff features for gods sake. I'm still waiting for new credit monitoring service they had hinted a few quarters ago. We'll have to see if the new CTO is any more competent.

I still maintain that lending club is worth at least $8 based on a very conservative DCF and am heavily long the stock.

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