Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)

[jrl]

Just received this email:

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. 

[honvl]

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 aren’t able to invest in Notes at this time."

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

[jrl]

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 aren’t 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.

[Debt Free]

Reel those lines in boys!  Time to find a new fishing hole.

[Edward Reid]

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

[bkcarolina]

Time for a little a lot of transparency.

[Fred93]

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.

[Edward Reid]

This theory seems to fit the facts.

Makes sense to me ... if anything does. 

Edward

[Cam79]

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/

[Cam79]

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

[Fred93]

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.

[jrl]

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.

[Rob L]

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

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.

[Fred93]

They did lay off the retail sales staff.

[Edward Reid]

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