Author Topic: BRV Requests: Responses from Lending Club  (Read 19822 times)

twigster

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BRV Requests: Responses from Lending Club
« on: May 19, 2016, 12:48:59 AM »
I have seen many requesting a BRV type arrangement with LC, here is the response I received back from LC.  I do not think I was aware of PFSC previous to this response. 

Quote
We have taken steps to provide continuity to protect investors and borrowers if Lending Club were to go out of business, including arrangements for backup servicing. If our platform were to fail or we became insolvent, we would work to transfer our Loan servicing obligations to our third-party back-up servicer.

For example, we have executed a backup and successor servicing agreement with Portfolio Financial Servicing Company (“PFSC”). Under this agreement, PFSC stands ready to service borrower loans.

If our agreement with PFSC were to be terminated, we would seek to replace PFSC with another backup servicer. Read more about the specific risks of investing with Lending Club at: https://www.lendingclub.com/public/risk-of-investing.action.

Best Regards,

storm

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Re: BRV Requests: Responses from Lending Club
« Reply #1 on: May 19, 2016, 01:02:42 AM »
PFSC will continue to collect payments from borrowers; however, as it stands now, a bankruptcy judge will have to decide if, when, and how much of the payments are distributed to investors.

I don't have a degree in business or law, but, in theory, if the issued loans were transferred to the BRV subsidiary, servicing and distribution could continue through bankruptcy with little to no interference by the bankruptcy proceedings as long as the BRV is solvent.
« Last Edit: May 19, 2016, 01:16:31 AM by storm »

rawraw

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Re: BRV Requests: Responses from Lending Club
« Reply #2 on: May 19, 2016, 05:08:43 AM »
PFSC will continue to collect payments from borrowers; however, as it stands now, a bankruptcy judge will have to decide if, when, and how much of the payments are distributed to investors.

I don't have a degree in business or law, but, in theory, if the issued loans were transferred to the BRV subsidiary, servicing and distribution could continue through bankruptcy with little to no interference by the bankruptcy proceedings as long as the BRV is solvent.
I replied back to their email the above. They went silent afterwards.  I don't want them to think this reply soothes retail investors, so I let them know :)

McLu

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Re: BRV Requests: Responses from Lending Club
« Reply #3 on: May 19, 2016, 08:33:32 AM »
I have seen many requesting a BRV type arrangement with LC, here is the response I received back from LC.  I do not think I was aware of PFSC previous to this response. 

Quote
We have taken steps to provide continuity to protect investors and borrowers if Lending Club were to go out of business, including arrangements for backup servicing. If our platform were to fail or we became insolvent, we would work to transfer our Loan servicing obligations to our third-party back-up servicer.

For example, we have executed a backup and successor servicing agreement with Portfolio Financial Servicing Company (“PFSC”). Under this agreement, PFSC stands ready to service borrower loans.

If our agreement with PFSC were to be terminated, we would seek to replace PFSC with another backup servicer. Read more about the specific risks of investing with Lending Club at: https://www.lendingclub.com/public/risk-of-investing.action.

Best Regards,

This isn't enough to reassure retail investors. Putting positive spin on what they already have in place won't turn the tide. Somewhere in that $500,000,000 in cash should be a budget for ensuring that retail investors have 100% ownership of their notes and that backup servicing would be smooth with no change in servicing fees in the event of LC bankruptcy. Until then....good luck getting anything but play money from retail investors going forward.

Three steps:
1 - Move servicing department to bankruptcy remote entity (call it "LC-BRV", no need to get creative). Each quarter, fund LC-BRV with enough cash to service all outstanding loans plus a buffer. - Cost = 150% of servicing costs through maturity
2 - Make existing backup servicing a backup to LC-BRV. Cost = $0
3 - Hire external legal team to verify that proposed structure gives 100% ownership of notes to the retail investors that bought them. Cost = $25k - $100k

Creating an sustainable alternative asset class that helps get folks out of credit card debt and avoid payday lenders.....priceless!

« Last Edit: May 19, 2016, 09:18:37 AM by McLu »

BruiserB

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BRV Requests: Responses from Lending Club
« Reply #4 on: May 19, 2016, 01:50:26 PM »
I had asked this on another thread but didn't get any responses.... Why would LendingClub be reluctant to provide a BRV to retail investors?  What is the downside to them of doing so?  Regulatory issues? Balance sheet issues?  There has to be some reason....


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.Ryan.

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Re: BRV Requests: Responses from Lending Club
« Reply #5 on: May 19, 2016, 01:53:43 PM »
I had asked this on another thread but didn't get any responses.... Why would LendingClub be reluctant to provide a BRV to retail investors?  What is the downside to them of doing so?  Regulatory issues? Balance sheet issues?  There has to be some reason....

It will shave off from their profit margin

putch

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Re: BRV Requests: Responses from Lending Club
« Reply #6 on: May 19, 2016, 02:47:46 PM »
I work in the financial services lead generation space. Two of my co-workers know Scott Sandborn personally (one had breakfast with him at a trade show this year). They both spoke very highly of his business acumen, ethics and as a person.  I believe the company is in very good hands (now) and seriously will consider putting together positive strategic moves, like a BRV, not only to give a sense of security to the retail investor as a group, but as a very smart PR move against the bad press. All retail investors need reach out to the email they provided and push them to get this done.

sommers

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Re: BRV Requests: Responses from Lending Club
« Reply #7 on: May 19, 2016, 03:20:02 PM »
I work in the financial services lead generation space. Two of my co-workers know Scott Sandborn personally (one had breakfast with him at a trade show this year). They both spoke very highly of his business acumen, ethics and as a person.  I believe the company is in very good hands (now) and seriously will consider putting together positive strategic moves, like a BRV, not only to give a sense of security to the retail investor as a group, but as a very smart PR move against the bad press. All retail investors need reach out to the email they provided and push them to get this done.
What email?  I haven't gotten an email.  I've got $90K of these freaking notes. 

putch

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Re: BRV Requests: Responses from Lending Club
« Reply #8 on: May 19, 2016, 07:10:33 PM »
investing@lendingclub.com

I'm in way deeper than you and I'm sure there are others retail investors with 7 figures in LC. Have confidence in the platform and team and don't buy into whatever the media says. Ship will be righted.



P2PFact

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Re: BRV Requests: Responses from Lending Club
« Reply #9 on: May 19, 2016, 08:00:45 PM »
I don't think LC care much about individual emails especially given they have so much to work right now.

But if the press like Bloomberg or WSJ reported this retail under Non BRV while institutional under BRV issue. Likely there will be response from LC on this. I don't think this issue is that widely reported. Likely most people just assume retail notes are protected under bankruptcy just like your stock portfolio held at brokerage. 

putch

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Re: BRV Requests: Responses from Lending Club
« Reply #10 on: May 19, 2016, 08:08:39 PM »
Good point P2P - and I think your right about the assumption that most investors think they are covered.

Do you think this press coverage helps/hurts the initiative to drive an expedited retail BRV?

BruiserB

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Re: BRV Requests: Responses from Lending Club
« Reply #11 on: May 19, 2016, 08:32:42 PM »
I had asked this on another thread but didn't get any responses.... Why would LendingClub be reluctant to provide a BRV to retail investors?  What is the downside to them of doing so?  Regulatory issues? Balance sheet issues?  There has to be some reason....

It will shave off from their profit margin

How?  They would still collect the same origination and servicing fees for the loans.

bobeubanks

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Re: BRV Requests: Responses from Lending Club
« Reply #12 on: May 19, 2016, 08:38:38 PM »

P2PFact

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Re: BRV Requests: Responses from Lending Club
« Reply #13 on: May 19, 2016, 09:33:00 PM »
How? 

Nothing is free.
Given the scale of retail notes, the cost of creating BRV is minimal. Every secularization deal in the street is under BRV. Some of them not even 100mm deal. And it's even worse if they are not doing it for the sake of saving money.

Anyway if anyone can reach good reporter to write about this and create big publicity, certainly will create a lot of pressure on LC. Peter may know someone. But don't think he wants to take on this hot potato.

Regardless how you put it, if Prosper can do it, LC should be able to do it.


lcelduderino

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Re: BRV Requests: Responses from Lending Club
« Reply #14 on: May 19, 2016, 10:26:02 PM »
C'mon guys, it's obvious why LC doesn't want a retail BRV: It would push their VCs down the capital structure below retail noteholders. Right now, VCs get paid first. Why in the world would LC want to change that?