Author Topic: FTC Files Complaint Against LC, Accuses of Deceptive Practices  (Read 8174 times)

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #30 on: April 30, 2018, 06:56:38 PM »
Another reason would be years of data on this type of unsecured loans that lending club has. No other company in the world has this much data on this segment. That's why being the market leader gives you an advantage too. The more data you have, the better underwriting you have.

If LC has "hidden" (or obvious) value this could be it. In a world increasingly driven by big data, somebody out there may think they have the mother lode. LC may or may not have done a good job of underwriting using the data but somebody may think they could do very well with it. Could possibly be used for purposes other than unsecured lending; who knows? I haven't a clue how to place a value on it though.

One more thing, all it takes to know how much interest banks have in acquiring fin-tech companies in lending space, you can listen to some interviews with Ron Suber (industry legend/founder of prosper)

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #31 on: April 30, 2018, 10:43:39 PM »
To give a counter argument about owning lending club stock:
Lending club is in a two sided market, the borrower side and the investor side. For them to effectively compete long term with likes of Marcus, they have to make at least one side or both sides cheaper. So either cheaper customer acquisition cost or cheaper cost of capital. Marcus has a cheaper capital cost because it doesn't have a middle man deducting origination fees. It also has the power to undercut lending club by reducing their margins. Lending club doesn't have that power because they are dependent on their investors giving them money.  I don't see Marcus squeezing them in the short term because the more players in the market, the bigger the consumer awareness is and better for all players. However, they could decide to go near 0 margin (amazon business model for a long time) and drive competitors out. This could be even worse if they buy a company like creditKarma and also reduce their cost on the consumer acquisition side as well. Lending club's CEO isn't a visionary. That's why I think the best path for them is to be acquired by a bank or by a company like Intuit (mint) to be able to compete long term.
It's unfortunate Renaud got ousted over something so minor. He was actually a visionary. There is a possibility that lending club ends up buying Upgrade and Renaud  returning as CEO but chances of that is pretty slim.
« Last Edit: April 30, 2018, 10:51:28 PM by MoMoney »

Rob L

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #32 on: May 01, 2018, 10:17:40 AM »
May we live in interesting times.
The stock is presently at $2.64, only $0.02 above the all time low hit earlier today.
Very much looking forward to the 2018Q1 report coming out about a week from now.
 
BTW: Maybe I'm the last to know, but what are Club certificates?

Tomp

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #33 on: May 01, 2018, 10:49:46 AM »
Another reason would be years of data on this type of unsecured loans that lending club has. No other company in the world has this much data on this segment. That's why being the market leader gives you an advantage too. The more data you have, the better underwriting you have.

If LC has "hidden" (or obvious) value this could be it. In a world increasingly driven by big data, somebody out there may think they have the mother lode. LC may or may not have done a good job of underwriting using the data but somebody may think they could do very well with it. Could possibly be used for purposes other than unsecured lending; who knows? I haven't a clue how to place a value on it though.

One more thing, all it takes to know how much interest banks have in acquiring fin-tech companies in lending space, you can listen to some interviews with Ron Suber (industry legend/founder of prosper)

Ron Suber>Charles Ponzi   

Ran

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #34 on: May 01, 2018, 12:32:37 PM »
Well said!
To give a counter argument about owning lending club stock:
Lending club is in a two sided market, the borrower side and the investor side. For them to effectively compete long term with likes of Marcus, they have to make at least one side or both sides cheaper. So either cheaper customer acquisition cost or cheaper cost of capital. Marcus has a cheaper capital cost because it doesn't have a middle man deducting origination fees. It also has the power to undercut lending club by reducing their margins. Lending club doesn't have that power because they are dependent on their investors giving them money.  I don't see Marcus squeezing them in the short term because the more players in the market, the bigger the consumer awareness is and better for all players. However, they could decide to go near 0 margin (amazon business model for a long time) and drive competitors out. This could be even worse if they buy a company like creditKarma and also reduce their cost on the consumer acquisition side as well. Lending club's CEO isn't a visionary. That's why I think the best path for them is to be acquired by a bank or by a company like Intuit (mint) to be able to compete long term.
It's unfortunate Renaud got ousted over something so minor. He was actually a visionary. There is a possibility that lending club ends up buying Upgrade and Renaud  returning as CEO but chances of that is pretty slim.



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MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #35 on: May 01, 2018, 03:36:06 PM »
Another reason would be years of data on this type of unsecured loans that lending club has. No other company in the world has this much data on this segment. That's why being the market leader gives you an advantage too. The more data you have, the better underwriting you have.

If LC has "hidden" (or obvious) value this could be it. In a world increasingly driven by big data, somebody out there may think they have the mother lode. LC may or may not have done a good job of underwriting using the data but somebody may think they could do very well with it. Could possibly be used for purposes other than unsecured lending; who knows? I haven't a clue how to place a value on it though.

One more thing, all it takes to know how much interest banks have in acquiring fin-tech companies in lending space, you can listen to some interviews with Ron Suber (industry legend/founder of prosper)

Ron Suber>Charles Ponzi

And what is that based on?

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #36 on: May 01, 2018, 04:09:21 PM »
May we live in interesting times.
The stock is presently at $2.64, only $0.02 above the all time low hit earlier today.
Very much looking forward to the 2018Q1 report coming out about a week from now.
 
BTW: Maybe I'm the last to know, but what are Club certificates?
Club Certificates:
https://www.lendacademy.com/lendingclub-introduces-new-certificate-investment-vehicle/

Rob L

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #37 on: May 01, 2018, 06:00:00 PM »
May we live in interesting times.
The stock is presently at $2.64, only $0.02 above the all time low hit earlier today.
Very much looking forward to the 2018Q1 report coming out about a week from now.
 
BTW: Maybe I'm the last to know, but what are Club certificates?
Club Certificates:
https://www.lendacademy.com/lendingclub-introduces-new-certificate-investment-vehicle/

Thanks for filling me in. Something to look at when the next quarterly comes out.

Edward Reid

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #38 on: May 02, 2018, 06:10:59 PM »
10,000 people asking divided by 2,000,000 loans = 0.5% which seems like a small number.  ... chances are that the actual number was something like 10,001.

I'd say the actual number was probably 20,000 based on "tens" (plural). Same argument though.

Half a percent asking ... yeah, seems extremely small. To me, that indicates that LC was doing a very good job of pointing out the fee, given how hard it is to get some people to read.

I hadn't heard about this development. Went on LC today to reinvest proceeds and noticed a lot of loans with 21-27 days left. Hardly ever saw those before (after filtering). Looks like lenders are spooked? Or is there some other reason? On the one hand, I had a lot of loans meeting my criteria to pick from. On the other hand, if it takes a couple of weeks to fund them, or if they don't get funded, that's time (=money) lost. And I'm not in a position to fund the entire loans.

Edward

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #39 on: May 02, 2018, 09:02:23 PM »
10,000 people asking divided by 2,000,000 loans = 0.5% which seems like a small number.  ... chances are that the actual number was something like 10,001.

I'd say the actual number was probably 20,000 based on "tens" (plural). Same argument though.

Half a percent asking ... yeah, seems extremely small. To me, that indicates that LC was doing a very good job of pointing out the fee, given how hard it is to get some people to read.

I hadn't heard about this development. Went on LC today to reinvest proceeds and noticed a lot of loans with 21-27 days left. Hardly ever saw those before (after filtering). Looks like lenders are spooked? Or is there some other reason? On the one hand, I had a lot of loans meeting my criteria to pick from. On the other hand, if it takes a couple of weeks to fund them, or if they don't get funded, that's time (=money) lost. And I'm not in a position to fund the entire loans.

Edward

Why would the lenders care about this? It wouldn't affect them either way. If anything it would affect borrower demand as they would be the ones paying the "hidden fees".
What you are seeing could just be seasonability. Q1 is supposed to be a slow quarter for them so it's possible that the demand has gone up. Also, looking at the referral traffic to lending club, I see a 17% increase from creditKarma in march and a 9% drop for Marcus so it's possible they are just having more competitive rates. In addition, in the last conference call, Scott said they had large increase in applications yoy so it could be that there is just more demand for their loans as there is increasing consumer awareness about this type of product.
« Last Edit: May 02, 2018, 09:05:01 PM by MoMoney »

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #40 on: May 02, 2018, 09:03:44 PM »
May we live in interesting times.
The stock is presently at $2.64, only $0.02 above the all time low hit earlier today.
Very much looking forward to the 2018Q1 report coming out about a week from now.
 
BTW: Maybe I'm the last to know, but what are Club certificates?
Club Certificates:
https://www.lendacademy.com/lendingclub-introduces-new-certificate-investment-vehicle/

Thanks for filling me in. Something to look at when the next quarterly comes out.

This could surprise us. Here is what they said in the last conference call about them:
"we have a strong pipeline of demand for the club certificates product and believe it will be an important part of our evolving funding mix"

Edward Reid

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #41 on: May 02, 2018, 09:26:57 PM »
Why would the lenders care about this?

Dunno. Didn't slow me down. Yet I've heard rather bright people confuse investing in LC's stock with investing in LC loans. I somewhat doubt seasonality, as this is a more serious swing than I've seen before. More likely one of the other factors you note.

Edward

MoMoney

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #42 on: May 02, 2018, 09:45:22 PM »
Why would the lenders care about this?

Dunno. Didn't slow me down. Yet I've heard rather bright people confuse investing in LC's stock with investing in LC loans. I somewhat doubt seasonality, as this is a more serious swing than I've seen before. More likely one of the other factors you note.

Edward

Looking at https://www.lendingclub.com/browse/browse.action and filtering by Time left, out of 685 pages of loans, only half a page is loans between 21-28 days left. The other 684.5 pages are loans 29 days left. Am I not looking at the right thing?

Retail note investors are very small portion of lending club investor mix. I hope banks and fund managers know the difference between lending club stock and their notes :)

storm

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #43 on: May 02, 2018, 10:05:44 PM »
Why would the lenders care about this?

Didn't slow me down. Yet I've heard rather bright people confuse investing in LC's stock with investing in LC loans. I somewhat doubt seasonality, as this is a more serious swing than I've seen before. More likely one of the other factors you note.

Edward

Unlike other investments, LC's success or failure is intertwined with the loans.  Our bankruptcy laws are untested when it comes to this type of investment, and LC never has implemented a BRV for marketplace investors.  If a major brokerage went under, you still own the stock, and your cash is insured.  If LC went under, we know the loans would still be serviced, but would investors get their money back?  If a more traditional financial institution bought out LC, I imagine they will shut down the marketplace and focus on institutional investors and securitization since supporting many small investors is costly and not the primary source of revenue.

Edward Reid

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Re: FTC Files Complaint Against LC, Accuses of Deceptive Practices
« Reply #44 on: May 02, 2018, 10:10:22 PM »
Looking at https://www.lendingclub.com/browse/browse.action and filtering by Time left, out of 685 pages of loans, only half a page is loans between 21-28 days left. The other 684.5 pages are loans 29 days left. Am I not looking at the right thing?

That's loans, not pages (currently 646 loans).

If you have a "time left" filter, then you are looking at a different UI from me. I can filter by "listing expires in", but my only choices are 3 or 7 days.

However, I look at the first 60 loans in the list, and only 4 are 29 days left. the other 56 are 20-28 days. 41 are under 25 days. That's for all loans, not just the ones in the filter I use.

Quote
Retail note investors are very small portion of lending club investor mix. I hope banks and fund managers know the difference between lending club stock and their notes :)

Sure, but I'm only talking about retail.

Edward