Author Topic: BRV Requests: Responses from Lending Club  (Read 19796 times)

investny

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Re: BRV Requests: Responses from Lending Club
« Reply #30 on: May 20, 2016, 01:12:20 AM »
just sent this email

Dear Scott Sanborn,

I think the biggest thing you can do to restore retail investor confidence is to create a Bankruptcy Remote Vehicle and also to have an independent auditor verify equal allocation of notes between whole and fractional marketplaces.

You can read more suggestions from retail investors on this LC forum

http://www.lendacademy.com/forum/index.php?topic=3842.0

fliphusker

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Re: BRV Requests: Responses from Lending Club
« Reply #31 on: May 20, 2016, 02:33:05 PM »
I asked about a BRV and asked for a non canned response. 

Thank you for your reply.


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,
Rick



LonghornSF

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Re: BRV Requests: Responses from Lending Club
« Reply #32 on: May 20, 2016, 05:11:30 PM »
I finally received an honest and straightforward response from LC about the BRV issue. Not that the answer is entirely comforting, but appreciate them being open about it.


Quote
Per our legal and prospectus, if we were to become subject to a bankruptcy or similar proceeding, the rights of the holders of the Notes could be uncertain, and payments on the Notes may be limited and suspended or stopped. The Notes are unsecured and holders of the Notes do not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans. The recovery, if any, of a holder on a Note may be substantially delayed and substantially less than the principal and interest due and to become due on the Note. Even funds held by us in accounts “in trust for” the holders of Notes may potentially be at risk.

What this means is that it is a possibility that proceeds from your notes will be paid to the creditor.


nonattender

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Re: BRV Requests: Responses from Lending Club
« Reply #33 on: May 20, 2016, 05:17:56 PM »
Honesty.  I like it!
A little nonsense now and then is relished by the wisest men.

Ran

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BRV Requests: Responses from Lending Club
« Reply #34 on: May 20, 2016, 05:29:07 PM »
I finally received an honest and straightforward response from LC about the BRV issue. Not that the answer is entirely comforting, but appreciate them being open about it.


Quote
Per our legal and prospectus, if we were to become subject to a bankruptcy or similar proceeding, the rights of the holders of the Notes could be uncertain, and payments on the Notes may be limited and suspended or stopped. The Notes are unsecured and holders of the Notes do not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans. The recovery, if any, of a holder on a Note may be substantially delayed and substantially less than the principal and interest due and to become due on the Note. Even funds held by us in accounts “in trust for” the holders of Notes may potentially be at risk.

What this means is that it is a possibility that proceeds from your notes will be paid to the creditor.
As long as management costs are a small portion of notes outstanding and LC does not issue secured or senior debt than notes, I can sleep well with it. Even in the bankruptcy, the note holders will be entitled to the majority of the asset since there is no other major debt holders under such a scenario

LonghornSF

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Re: BRV Requests: Responses from Lending Club
« Reply #35 on: May 20, 2016, 05:31:01 PM »
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As long as management costs are a small portion of notes outstanding and LC does not issue secured or senior debt than notes, I can sleep well with it. Even in the bankruptcy, the note holders will be entitled to the majority of the asset since there is no other major debt holders under such a scenario

Agree that this is currently true. However, this is an issue that LC needs to fix long term in case it ever wants to take on debt.

investny

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Re: BRV Requests: Responses from Lending Club
« Reply #36 on: May 20, 2016, 05:48:25 PM »
I finally received an honest and straightforward response from LC about the BRV issue. Not that the answer is entirely comforting, but appreciate them being open about it.


  Even funds held by us in accounts “in trust for” the holders of Notes may potentially be at risk.


Does that mean even cash in LC account is not protected in any way?

LonghornSF

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Re: BRV Requests: Responses from Lending Club
« Reply #37 on: May 20, 2016, 06:09:15 PM »
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Does that mean even cash in LC account is not protected in any way?

I believe so. That has always been my base assumption. I sweep excess cash out of my account on a regular basis though, so I'm less concerned about the cash part.

Fred93

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Re: BRV Requests: Responses from Lending Club
« Reply #38 on: May 20, 2016, 06:13:37 PM »
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  Even funds held by us in accounts “in trust for” the holders of Notes may potentially be at risk.

Does that mean even cash in LC account is not protected in any way?

My understanding is that cash in our accounts is held at Wells Fargo in an FDIC insured account.  That means it is very well protected.  It says that somewhere on the web site or in the prospectus.  I'm not sure where exactly any more.  Also, you notice that cash held in lender accounts doesn't show up on the balance sheet anywhere.

LonghornSF

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Re: BRV Requests: Responses from Lending Club
« Reply #39 on: May 20, 2016, 06:45:26 PM »
My understanding is that cash in our accounts is held at Wells Fargo in an FDIC insured account.  That means it is very well protected.  It says that somewhere on the web site or in the prospectus.  I'm not sure where exactly any more.  Also, you notice that cash held in lender accounts doesn't show up on the balance sheet anywhere.

Given what LC said in their response to me, I don't think that's clear at all. The bank account is FDIC protected, but who gets the proceeds from the account in the event of a bankruptcy is far from clear.

LC's website says this:

Quote
Your Lending Club account cash balance (consisting of all uninvested cash) is deposited in a special “in trust for” pooled deposit account held at Wells Fargo Bank, an FDIC insured banking institution.  Your uninvested cash is therefore covered by FDIC insurance on a “pass through” basis, subject to any applicable limits.

But in their response to me, LC specifically said that the status of cash held in accounts "may be at risk":

Quote
Even funds held by us in accounts “in trust for” the holders of Notes may potentially be at risk. 


What it comes down to is you're taking both the credit risk of lending to LC and lending to the original borrower. Again, I think the credit risk of LC is quite low even in its current predicament, but it's not zero.

nonattender

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Re: BRV Requests: Responses from Lending Club
« Reply #40 on: May 20, 2016, 06:50:48 PM »
I like the FDIC.  I see that and I think "safe".

But, yes, if it's a pooled account, maybe not?
A little nonsense now and then is relished by the wisest men.

LonghornSF

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Re: BRV Requests: Responses from Lending Club
« Reply #41 on: May 20, 2016, 07:11:14 PM »
Quote
  I like the FDIC.  I see that and I think "safe".

But, yes, if it's a pooled account, maybe not?

Again, the account is safe in the sense that if Wells Fargo fails the account holders still get their money. The real question is: who gets the proceeds in the event of a bankruptcy? If there are only $100mn in LC assets to go around but $300mn in liabilities, you might only get 30% of your original cash and notes balance.

I wouldn't get too worked up over it, but the problem needs to be addressed by LC eventually.

Fred93

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Re: BRV Requests: Responses from Lending Club
« Reply #42 on: May 20, 2016, 07:34:43 PM »
Again, the account is safe in the sense that if Wells Fargo fails the account holders still get their money. The real question is: who gets the proceeds in the event of a bankruptcy? If there are only $100mn in LC assets to go around but $300mn in liabilities, you might only get 30% of your original cash and notes balance.

I believe that the accounts are individual accounts in our individual names, and therefore provide FDIC protection against the failure of Wells Fargo.  Now of course I don't expect Wells Fargo to fail, so the FDIC part is a little over the top.  Your more current concern is the possibility of an LC bankruptcy.  I believe the accounts, being in our individual names, are protected in that situation.  I remember these questions being asked many years ago.  Sorry I don't have immediate pointers to written statements about this.

fliphusker

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Re: BRV Requests: Responses from Lending Club
« Reply #43 on: May 20, 2016, 08:01:34 PM »
I asked about a BRV and asked for a non canned response. 

Thank you for your reply.


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,
Rick
My new buddy Rick from LC called tonight but I was busy.  I refer to him as "buddy" as he referred to me by my nickname that is on my email, and not by Mr. "insert last name".  I understand him wanting to be all personal, but did not dig that, as signed email with my initials then last name like on all my documents. 
Sorry for tangent, but he is going to call me back Monday.  Sure wish he would call one of you more experienced guys, then me.  :P  So will get a list of questions going for him.  Guess it is time for me to learn more about BRV and others so I do not sound like a complete fool, only half a one.  :P

nonattender

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Re: BRV Requests: Responses from Lending Club
« Reply #44 on: May 20, 2016, 08:13:03 PM »
Sure wish he would call one of you more experienced guys, then me.  :P  So will get a list of questions going for him.  Guess it is time for me to learn more about BRV and others so I do not sound like a complete fool, only half a one.  :P

Nah, they need to talk to new money, too - that's you!  I'm sure they'll get a kick out of all of your casino metaphors, but, probably, if you're honest with yourself, you really don't think you're gambling to that extent.  Then again, maybe you do.  I suspect not, though.

If the expectation was to get screwed (instantly or over time), I don't think any of us would be here...  Have fun and let 'em have it...
A little nonsense now and then is relished by the wisest men.