Change to Loan Issuing Process

[brycemason]

Perhaps then LC will reduce the fees they pay to WebBank by the interest earned, and then they will rebate our servicing fees by exactly the same amount. I could live with that, especially since I don't pay income taxes on waived servicing fees. Then everyone would win.

[DanB]

With:
- $1B annual underwriting
- 12% average interest rates
- 3.5 days average holding period

WebBank will get more than $1M annually.

No, as I stated previously, it's more like $4-$5 million for just the first year since it is $1 billion quarterly in underwriting.

[DanB]

Perhaps then LC will reduce the fees they pay to WebBank by the interest earned, and then they will rebate our servicing fees by exactly the same amount. I could live with that, especially since I don't pay income taxes on waived servicing fees. Then everyone would win.

Hey Bryce, are you just floating this ? I'm not sure if everyone winning is the goal around here.

[rawraw]

That is crazy.  Web Bank is risking no capital and shouldn't be collecting interest.

Don't forget that Web Bank is taking care of the Patriot Act, OFAC, etc. They aren't a shell they are doing things required.

[cardinalrose]

This seems like a defensive move to insulate Lending Club in case the current court ruling goes against eBay.

This is from eBay's most recent 10Q:

In May 2010, a lawsuit was filed against Bill Me Later, PayPal and eBay in California state court, alleging that in its relationship with the chartered financial institution, Bill Me Later is acting as the true lender to customers and violating various California laws, including the state’s usury law. That suit was later removed to the U.S. District Court for the Central District of California. In September 2011, WebBank requested to intervene in the action and was added as a party to the action. In October 2011, the court transferred the case to the U.S. District Court for the District of Utah. Following the transfer, the Utah Court allowed plaintiffs the opportunity to amend the complaint and plaintiffs filed an amended complaint in February 2012. We and WebBank filed a motion to dismiss all claims in the amended complaint in March 2012. A hearing on the motion was held by the court in September 2012 and the matter is still before the Court.

If the court rules against Bill Me Later and considers them the true lender then I think other similar customers of WebBank, like Lending Club, may also be considered true lender.  Obviously, this would require an entirely new regulatory regime for Lending Club, which would likely be very detrimental to its business. 

By allowing WebBank to "season and sell" the loans, even if it is just for a few days, I believe that it strengthens Lending Club's case that WebBank is the true lender. 

Smart move by Lending Club to clean up a loose end before their IPO.

[DanB]

That is crazy.  Web Bank is risking no capital and shouldn't be collecting interest.

Don't forget that Web Bank is taking care of the Patriot Act, OFAC, etc. They aren't a shell they are doing things required.

You say it as if the above are new & aren't the same things they've already been doing the past 7 years. Look I'm definitely among the last people who cares how another person or entity makes their living. I don't think the issue here is a discussion of the merits or the fairness of how Web Bank makes their money. This discussion (i believe) is one that is examining how this cost of doing business expense, for lack of a better term, has instead been casually been passed on to us,....................us investors who have been taking all the risk & subsidizing Lending Clubs' existence from day one. Passed on to us with nothing more than an email notification. How many more of their operating expenses are we going to be shouldering in the coming years?

[DanB]

This seems like a defensive move to insulate Lending Club in case the current court ruling goes against eBay.

This is from eBay's most recent 10Q:

In May 2010, a lawsuit was filed against Bill Me Later, PayPal and eBay in California state court, alleging that in its relationship with the chartered financial institution, Bill Me Later is acting as the true lender to customers and violating various California laws, including the state’s usury law. That suit was later removed to the U.S. District Court for the Central District of California. In September 2011, WebBank requested to intervene in the action and was added as a party to the action. In October 2011, the court transferred the case to the U.S. District Court for the District of Utah. Following the transfer, the Utah Court allowed plaintiffs the opportunity to amend the complaint and plaintiffs filed an amended complaint in February 2012. We and WebBank filed a motion to dismiss all claims in the amended complaint in March 2012. A hearing on the motion was held by the court in September 2012 and the matter is still before the Court.

If the court rules against Bill Me Later and considers them the true lender then I think other similar customers of WebBank, like Lending Club, may also be considered true lender.  Obviously, this would require an entirely new regulatory regime for Lending Club, which would likely be very detrimental to its business. 

By allowing WebBank to "season and sell" the loans, even if it is just for a few days, I believe that it strengthens Lending Club's case that WebBank is the true lender. 

Smart move by Lending Club to clean up a loose end before their IPO.

Except that it is self evidently the case that the relationships between Ebay, Web Bank & Bill Me Later are completely different than the relationships between us, LC & Web Bank.

[BruiserB]

Not to be too cynical, but this goes into effect next Thursday.  In the last half of July I made a significant deposit to my LC account and have a big backlog of notes that are funded but haven't issued yet. I expected to see a big rush of issuances today since LC seems to hold issuances at the end of months to get into the next month's business. (Managed Growth). 

Well today I did have higher issuances, but not as many as I would have thought.

I'll be curious to see if I have a big flood of issuances next Thursday. Not only would issuing on this date cause this new policy to be in effect, but since it is a Thursday, it would give WebBank 4 days of interest on all of the loans issued that day.  This is because the policy is 2 business days, which is Thursday to Friday and Friday to Monday.

Lending Club, I'll be watching you!

[alimoyni]

The delay between funding a note, getting it reviewed and actually collecting any money on it takes so long already!   The last month all my new investment dollars have gone into Folio and I am just picking up notes there as a way to build up my portfolio.

[BruiserB]

This won't further slow the process per se, but will make your first payment smaller than it would have been.  Unless of course they are holding back loan issuances until the new policy goes into effect.