New C/Net Interview with Renaud Laplanche

[edward]

http://news.cnet.com/8301-1023_3-57588175-93/with-rising-revenues-lending-club-ceo-plans-expansion-q-a/

Upcoming plans in Lending Club

[SBryantMS]

"More than three-quarters of your loans go to refinancing credit card debt. Are you just contributing to the United States debt problem by shuffling debts around, letting consumers borrow more money but not actually get out of the hole?

Most of our consumers aren't refinancing balance because they're maxed out. They're refinancing to get a lower interest rate. We pull credit reports three and six months after funding a loan to see if the balance has come down. In 80 percent of the cases, borrowers show a lower balance three and six months later than the time they took the loan. We're instrumental in helping the American consumer deleverage and get out of debt faster."

Emphasis mine: Thoughts?  Does 80% seem like a reasonable number? Sounds extremely high to me!

[core]

Seems high to me as well, but if they're in the process of getting together an IPO I doubt he would be making blatantly false public statements.

What I'd like to know is:  If they're pulling this 3+6 mo data, why do we not have access to it?  It's not a privacy issue since they're already providing all of that data before the loans get funded.  If we're the ones 100% on the hook for the money, then why are they the ones keeping all the data close to their vest?

[yojoakak]

Does 80% seem like a reasonable number? Sounds extremely high to me!

I wonder what percentage of those "balance declines" are people who take out a LC Loan and then immediately file for bankruptcy.

[Fred]

For me, the following caught my attention:

1. We will do income verification before issuing the loan.

2. The operating expense ratio is coming down every quarter, so yes, I would expect over time as we scale we can continue to lower interest rates to borrowers.

It would be interesting to see how each would affect the the overall experience from investors' perspective.

[mitgib]

Does 80% seem like a reasonable number? Sounds extremely high to me!

I wonder what percentage of those "balance declines" are people who take out a LC Loan and then immediately file for bankruptcy.

I am not very familiar with bankruptcy law, but isn't that pure fraud?  If challenged, would it be discharged?

[Peter]

Does 80% seem like a reasonable number? Sounds extremely high to me!

I wonder what percentage of those "balance declines" are people who take out a LC Loan and then immediately file for bankruptcy.

I am not very familiar with bankruptcy law, but isn't that pure fraud?  If challenged, would it be discharged?

Yes that is fraud and I know that LC have challenged people doing that in the past. If they are successful I believe the bankruptcy filing is discharged. But there still has to be money somewhere to pay back the loans and that is often problematic from a lenders perspective. The good news is that it happens on a tiny fraction of loans (less than 1% in my experience) but it always hurts when it happens.

[viking]

For me, the following caught my attention:

2. The operating expense ratio is coming down every quarter, so yes, I would expect over time as we scale we can continue to lower interest rates to borrowers.[/i]

Why would lower LC operating costs result in lower interest rates for the borrower?