Social Finance (SoFi), the FinTech lending company, said late last week that customers are missing their loan payments at a rate that wasn’t expected.
According to a report in The Wall Street Journal, the private company said it failed to meet its own internal projections for the fourth quarter, in part because of the markdown of personal loans, which it said had “lower-than-expected credit performance.” The report cited a letter to shareholders that was reviewed by WSJ.
SoFi also blamed increased hiring costs and rising expenses – largely due to management changes – for the earnings miss. The letter didn’t specify why customers were missing their loan payments, but did say it expects more of the same in 2018. The letter also informed shareholders that SoFi is improving upon its model for determining creditworthiness and is upgrading fraud prevention tools, investing money in improving collections and automating loan processing.
The report noted that incoming CEO Anthony Noto will likely focus on the loan process when he comes on board in March. Noto is leaving social media company Twitter to lead SoFi.
WSJ reported that SoFi made $3.3 billion in loans during the fourth quarter, up 30 percent year-over-year but down a bit from the third quarter. The company cited the wildfires in California and the Equifax data breach for the decline. Its adjusted profit was $126 million for all of last year and revenue was $547 million, noted the report.
The increase in missed loan payments comes as SoFi is moving forward after a scandal involving its former CEO hurt its chances of becoming a bank. The company was hit with two lawsuits in which the plaintiffs alleged sexual harassment and unfair work practices. That prompted Mike Cagney’s August announcement that he would be stepping down as CEO by the end of 2017. But with more reports surfacing that Cagney engaged in even more inappropriate conduct, SoFi announced in September that he would leave immediately.