Author Topic: Lending Club drastically reduces direct mailing 75%  (Read 4349 times)

P2PFact

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Lending Club drastically reduces direct mailing 75%
« on: June 07, 2016, 11:22:34 PM »
I think it's due to the fact they have the obligation to fund a certain percentage of preapproved direct mail offer. If no investor would fund it they have to use their balance sheet.

This is consistent with the interest rate raise move to reduce borrower demand.



http://www.ft.com/intl/cms/s/0/d46239e0-2c4a-11e6-a18d-a96ab29e3c95.html?siteedition=uk#axzz4AxDrCQAj
http://www.thecountrycaller.com/58843-lendingclub-corp-lc-75-drop-in-direct-mailing-but-why/


Fred93

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #1 on: June 08, 2016, 12:26:24 AM »
I think it's due to the fact they have the obligation to fund a certain percentage of preapproved direct mail offer. If no investor would fund it they have to use their balance sheet.

There's a much simpler explanation.  Demand is down.  Therefore they need less supply.  Therefore they turn down the costly efforts to product supply, including the direct mail channel.

RT45

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #2 on: June 08, 2016, 01:48:40 AM »
Actually, I believe it is regulatory.

I remember reading somewhere that direct mail solicitations require the lender honor the loan offer.

If LC runs out of capital, but has a regulatory requirement to fund loans on balance sheet from its direct mail offers, it could cause a huge cash crunch and run afoul because they are soliciting loans without the capital to back it up.

SLCPaladin

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #3 on: June 08, 2016, 11:33:13 AM »
Actually, I believe it is regulatory.

I remember reading somewhere that direct mail solicitations require the lender honor the loan offer.

If LC runs out of capital, but has a regulatory requirement to fund loans on balance sheet from its direct mail offers, it could cause a huge cash crunch and run afoul because they are soliciting loans without the capital to back it up.

Interesting. I did not know this. If this is correct, care to wager a guess as to how much cash LC has deployed to funds on the platform that were not snapped up by institutional or retail investors?

dompazz

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #4 on: June 08, 2016, 11:55:00 AM »
Interesting. I did not know this. If this is correct, care to wager a guess as to how much cash LC has deployed to funds on the platform that were not snapped up by institutional or retail investors?
We actually discussed this a month ago.  I came to the conclusion it's not a huge deal.

You could probably guestimate by looking at change in funded status of loans listed in the primary market.  That would give you a max value (assuming no one was buying loans) and then haircut it.

I suspect the "Restricted Cash" line item on the Balance Sheet contained the potential liability at quarter end.  That was not huge.

And with LC making a 4% origination fee, they could turn around and put notes on Folio at a 2% discount and walk away with a 1% return on that cash.

RT45

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #5 on: June 08, 2016, 12:21:47 PM »
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We actually discussed this a month ago.  I came to the conclusion it's not a huge deal.

I think a lot has changed since this though. When there is institutional money behind you, you're not at any risk for being stuck. It isn't so much that they couldn't originate, it is if they were to get caught sending pre-approvals without the capital to back it up - which also doesn't look good. Also, a 75% reduction in one of your primary ways to generate business is a big deal.

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And with LC making a 4% origination fee, they could turn around and put notes on Folio at a 2% discount and walk away with a 1% return on that cash.

This brings up an important question - can LendingClub list it's own notes on Folio as a seller?

nonattender

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #6 on: June 08, 2016, 12:38:32 PM »
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And with LC making a 4% origination fee, they could turn around and put notes on Folio at a 2% discount and walk away with a 1% return on that cash.

This brings up an important question - can LendingClub list it's own notes on Folio as a seller?

They have never commented; I have always wondered.  If one had a time machine, one could go back to the pre-IPO days, when people who lived in states where LC's primary notes were not cleared for sale could access FolioFN.  There was a brisk trade in new note issues.  I know that a lot of that was done by individuals.  But there was so much of it, from nearly day one, that one wonders.

Another interesting question might be:  Is there any transparency into the debt buyers for charged-off notes?  Is it RenaudCo LLC?

I'm not saying it is - this is total speculation - but it's another area where investors lack transparency and may be subject to abuse.

If they're willing to buy their own loans and own stock - maybe they also found an artful way to "disintermediate" the debt buyers?

Not to take away from your original question... I'd love to hear an answer to whether LC transacts (or ever has) on the secondary.
A little nonsense now and then is relished by the wisest men.

SLCPaladin

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #7 on: June 08, 2016, 12:59:42 PM »
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Another interesting question might be:  Is there any transparency into the debt buyers for charged-off notes?  Is it RenaudCo LLC?

Maybe it's John Oliver's "CARP" fund: https://www.youtube.com/watch?v=hxUAntt1z2c
« Last Edit: June 10, 2016, 01:10:37 PM by SLCPaladin »

RT45

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #8 on: June 09, 2016, 10:13:04 PM »
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Another interesting question might be:  Is there any transparency into the debt buyers for charged-off notes?

This is a very good question as well.


LonghornSF

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Re: Lending Club drastically reduces direct mailing 75%
« Reply #9 on: June 10, 2016, 01:05:18 AM »
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Therefore they turn down the costly efforts to product supply, including the direct mail channel.

Definitely not. Direct mail is one of the lowest cost channels to acquire consumer credit customers. That's why Chase, Capital One, Citi, etc. still bombard us with credit card offers. It works.