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Lending Club "Goes Quiet" On Social Lending Temporarily
Written by Allen Stern - April 8, 2008
Social lending site Lending Club has posted a notice on their site and blog yesterday. The notice which I have copied below notes that new loans for the time being will come directly from Lending Club and not from other individuals as they have in the past. In summary, Lending Club works by individuals lending money in groups to other Lending Club members at interest rates determined by their credit score. Check the Lending Club blog for more details.
Could the company be working towards an IPO? My guess is not and that this is a standard process to protect Lending Club as they grow. The term "quiet period" is being used and we hear this period could last as long as three months. I have an email into Lending Club to try to get more details. In any event, we will keep you informed as the situation progresses.
Important Information
Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.
The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.
Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.
Check out our 3-part social lending series to learn how this new lending option works.
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L-O-L. Methinks that banking regulators were not happy with Lending Club's business model.
Probably not. Banks don't like loosing their customers.
I think they are positioning themselves to set up a secondary market to buy and sell loans. They've filed for a section D exemption with the SEC, which means they want to sell securities to the general public.
The open question is one I think you have correctly mentioned, thats whether the company intentionally filed or did so because they were obliged to do so legally. The answer to this question will likely come after, or if, the SEC approves their loan.
At this point they aren't saying much about the change over.
Given their extreme growth though, I would suspect that LendingClub's management is probably pretty smart and would ultimately like to beat prosper and zopa. The only way to do this is to move the business model a step forward. That would be to create a secondary market for buying and selling loans. -
Banks do this, but P2P lending currently does not. Why? It seems an obvious next step for a business looking to expand.
But, as mentioned earlier, we won't know until the SEC finishes its review.
Thanks,
James
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