Lending Club bankruptcy remote vehicle

[Lovinglifestyle]

I viewed twice because I was thinking about the question before answering.  Don't views to read responses count too?

[DanB]

This servicing  agreement is about decreasing the chances (not eliminating) the likelihood of a substantial walkaway on the part of borrowers simply because they feel they don't need to pay anymore, without negative consequences.

BRV does not eliminate the risk either; borrowers might still walk away.

Yes Fred, I know that it doesn't. The BRV has nothing to do with risk that  borrowers decide to walk away. That is what the continued servicing deal is about. It is not a a question of aving one or the other. The BRVs intent has to do with segregating any interest that is paid & principal paid back so that it in the event of a bk it comes back to us (the people who lent it out). Perhaps in my haste I'm not explaining it as well as I could. No offense but you being a long time investor, I'd have thought that you'd have previously taken the time to familiarize yourself with all this.

[Victor]

@ Fred & John:

You are both absolutely correct regarding the lower status of shareholders vis a vis unsecured lenders in a bankruptcy proceeding.  My bad! It comes from talking before thinking.

[Rob L]

I am one of the lonely 6 "extremely concerned" so far.
However, I'm not "extremely concerned" but I already have limited my investment in LC because of "platform risk" so that's the only box that fit.
I consider myself "prudent" on this matter rather than "extremely concerned".
The risk is probably pretty small, but so was "breaking the buck" in the money markets.
My cash equivalents were not in the money market at the time of the meltdown, but in the ETF "SHV", which I considered much saver.
There may be those of you that will look at SHV and say I was fooling myself; and that might be true. Not sure I want to know.
However, I did my best to plan for an unimaginable event that did occur.
Does anyone really think it's less likely that an LC catastrophe will occur than the "break the buck" event?
Does anyone think the Fed and all monetary authorities of the world will come to LC's rescue, as was the case when the whole world looked over the precipice?
So, with my real money, rather than my play money, you might call me uber-conservative , or flat out paranoid.
"Only the paranoid survive" (Andy Grove).

[AnilG]

You are not alone. I am also in the extremely concerned category when it comes to BRV for LC. This segment has been wild-wild west and reminds me of combination of dot-com bubble in 1999 and housing bubble of 2007. Overall, I am very concerned with platform risks.

Premature IPO attempts by p2p platforms is also concerning. I am taking that as indication of founders, VCs and early employees want to cash out and exit while the market is hot. They may be seeing the growth reaching a plateau and increased competition. I believe we will see a lot of shake out when interest rate start to rise. Potentially stepped up government regulations of p2p platforms once investors lose money.

I am one of the lonely 6 "extremely concerned" so far.
However, I'm not "extremely concerned" but I already have limited my investment in LC because of "platform risk" so that's the only box that fit.
I consider myself "prudent" on this matter rather than "extremely concerned".
The risk is probably pretty small, but so was "breaking the buck" in the money markets.
My cash equivalents were not in the money market at the time of the meltdown, but in the ETF "SHV", which I considered much saver.
There may be those of you that will look at SHV and say I was fooling myself; and that might be true. Not sure I want to know.
However, I did my best to plan for an unimaginable event that did occur.
Does anyone really think it's less likely that an LC catastrophe will occur than the "break the buck" event?
Does anyone think the Fed and all monetary authorities of the world will come to LC's rescue, as was the case when the whole world looked over the precipice?
So, with my real money, rather than my play money, you might call me uber-conservative , or flat out paranoid.
"Only the paranoid survive" (Andy Grove).

[DanB]

Again,  I agree with you Anil though I wouldn't say I was extremely concerned with platform risk.  I push for the BRV because it's simply what we've got to protect our interests. If something else comes up tomorrow that protects us, I'll push for that too.

 Company narratives & spin aside, I see the retail investors influence on the fate of p2p to continue diminishing down the road especially if interest rates go up, which they have too at some point. Retail investors will walk in that scenario & we all know from experience what'll happen during the next economic downturn. Simply put, retail investors will see their mid one digit returns go to almost zero & then they'll wind down their accounts. 

I'm sure that LC & Prosper spin the IPO advantage on how that'll draw a massive number of new retail lenders who haven't been able to lend etc...........,but I see that as mostly wishful thinking.  In their heart of hearts I'd bet serious money that both SF companies are quite disappointed  that they've been unable to penetrate the retail lender market to a much much  greater extent than they have to date. I just don't see an IPO changing all that in some dramatic fashion. 

Hell, 3 weeks ago the average person on the street didn't know what Alibaba was.............& today after their gazillion dollar IPO most still don't know &/or care. At this point Lending Club should consider it a massive accomplishment if a post IPO awareness bump consists of nothing more than people no longer confusing them with Lending Tree!

[Jon]

I understand the concerns. 

I voted for the option of least concern because I feel powerless to improve the situation. 

If I can't take an action to address my concerns, I let it go; just invest an amount commensurate with my perception of the risk.

Is my assumption that I'm unable to improve the situation flawed?

-Jon

[rawraw]

I understand the concerns. 

I voted for the option of least concern because I feel powerless to improve the situation. 

If I can't take an action to address my concerns, I let it go; just invest an amount commensurate with my perception of the risk.

Is my assumption that I'm unable to improve the situation flawed?

-Jon

If you are limiting your investment commensurate with risk, then you are concerned.  It may just be your level of investment yet hasn't reached a threshold of extremely concerned.  If you weren't concerned, you wouldn't consider it a risk when choosing to allocate investments

[SeanG]

So did this discussion lead to any concrete steps to get retail investors the same level of bankruptcy protection as institutional investors?

I am assuming some list members have contacted LC directly and have gotten a wishy washy "we'll look into it" type of response. Es verdad?

The time to push for retail investors to have BRV protection is now (pre-IPO when LC is very vulnerable to any negative press).

I just purchased the domain name for LendingClubBankrupt.com. I want to use this website to educate all new potential retail investors how they are not given the same type of bankruptcy protection as institutional investors. It cost me about $25 (one default) so there, I took one for the team.

I hope we can organize ourselves instead of just whining about being mistreated. But it's not FAIR!!!! (wringing of hands / gnashing of teeth)

Yeah we know it's not fair that's why we need to organize and push back. LC will brush off individual complaints but will stand up and take notice if we stand up and speak with one voice. Especially if that voice is raised loudly just as they are trying to convince the rest of the world what a great company they are.

Timing is everything.

Sean

[lascott]

http://www.lendacademy.com/lending-club-files-to-go-public/

[toiletpaper55]

So did this discussion lead to any concrete steps to get retail investors the same level of bankruptcy protection as institutional investors?

I am assuming some list members have contacted LC directly and have gotten a wishy washy "we'll look into it" type of response. Es verdad?

The time to push for retail investors to have BRV protection is now (pre-IPO when LC is very vulnerable to any negative press).

I just purchased the domain name for LendingClubBankrupt.com. I want to use this website to educate all new potential retail investors how they are not given the same type of bankruptcy protection as institutional investors. It cost me about $25 (one default) so there, I took one for the team.

I hope we can organize ourselves instead of just whining about being mistreated. But it's not FAIR!!!! (wringing of hands / gnashing of teeth)

Yeah we know it's not fair that's why we need to organize and push back. LC will brush off individual complaints but will stand up and take notice if we stand up and speak with one voice. Especially if that voice is raised loudly just as they are trying to convince the rest of the world what a great company they are.

Timing is everything.

Sean

guess there's no relief for the little guys..

[Jon]

guess there's no relief for the little guys..

The way I read Peter's statement above is that they are foregoing the BRV to assure a greater pool of retail investors and to capture more lending business from "traditional" lenders. 

If I am interpreting that a correctly, I'd probably make the same business decision. 

It's not about relief for the little guy, it's about capturing as much of the total available market as possible.  I'd rather LC be available in all 50 States than just 26.

Yes, it increases our risk, but it also increases our opportunity for reward.

Can someone confirm that I understood properly, or that I've lost the plot?

-Jon

[toiletpaper55]

guess there's no relief for the little guys..

The way I read Peter's statement above is that they are foregoing the BRV to assure a greater pool of retail investors and to capture more lending business from "traditional" lenders. 

If I am interpreting that a correctly, I'd probably make the same business decision. 

It's not about relief for the little guy, it's about capturing as much of the total available market as possible.  I'd rather LC be available in all 50 States than just 26.

Yes, it increases our risk, but it also increases our opportunity for reward.

Can someone confirm that I understood properly, or that I've lost the plot?

-Jon

perhaps i am understanding this incorrectly. how does creating a bankruptcy remote vehicle jeopardize their blue sky exemption? from reading above, i thought such an exemption is dependent on being public. unless the creation of a brv jeopardizes their ipo, the two are unrelated.

prosper has a 'prosper funding' vehicle and probably intends to go public shortly after lc...i would speculate that lc is so focused on pushing out volume to boost their origination metrics (obv heavily reliant on institutional $) that they don't care to put in the work (which is understandably a lot if individual prospectuses are required). nonetheless, it's pretty indicative of their current priorities...

increased access by retail investors, under its current legal structure, does nothing to mitigate risk to current or any prospective (retail) investors...that very fundamental risk remains...i mean, otherwise, why wouldn't institutions be game to buy notes technically back by the platform's credit...

so not entirely sure what you mean about the "opportunity for reward"... sure, there may be more borrowers but if anything, citing "marketing reasons" for lowering borrower acquisition cost from IPO publicity is bullshit. what happens when everyone has access and it blows up? the retail investors get screwed the most (and many more of 'em). haven't we learned anything about tail risk in finance, haha

anyways, like you said, i'd probably also "make the same business decision" but we're in different positions..

full disclosure: invested in lc loans but letting my portfolio runoff

[DanB]

guess there's no relief for the little guys..

The way I read Peter's statement above is that they are foregoing the BRV to assure a greater pool of retail investors and to capture more lending business from "traditional" lenders. 

If I am interpreting that a correctly, I'd probably make the same business decision. 

It's not about relief for the little guy, it's about capturing as much of the total available market as possible. I'd rather LC be available in all 50 States than just 26.

Yes, it increases our risk, but it also increases our opportunity for reward.

Can someone confirm that I understood properly, or that I've lost the plot?

-Jon

 Are you an owner of LC? No, then why would you rather? Even if what Peter is saying is factual, (& not just an unsubstantiated opinion) what difference would it make to you whether investors from say Ohio or Texas are included or excluded?

I would love to hear how exactly you think "that it also increases our opportunity for reward."

I don't know about lost the plot but I think you've been influenced way too much by the "spin" of individuals who have vested interests in the success of this company. Influenced to believe that the interests of us lenders & of this company are much more aligned than they are in reality.

[core]

Isn't it possible a BRV would jeopardize the fat cats' stakes in Lending Club?  I can almost guarantee the companies that sank millions into Lending Club didn't do so under an agreement that made their piece of the pie junior to outstanding notes.  In effect, they used our notes to guarantee that cigar smoking yacht party-goers would not lose money.  A BRV would take that away, because the buffer of several $billion would disappear.