Lending Club and Citi will work together to facilitate up to $150 million in loans to low- and moderate-income borrowers in underserved communities, the alt-lender and bank jointly announced on Tuesday (April 14).
Under the deal, Citi will provide capital to fund the loans, which will be made under the terms of the Community Reinvestment Act (CRA) through its Citi Community Capital group. Lending Club will find the potential borrowers through its online platform and vet their creditworthiness using its rating system, which takes into account factors beyond conventional credit scores, which might be low for CRA-eligible borrowers. And investment firm Varadero Capital will purchase the loans through Lending Club’s platform, through a credit facility provided by Citibank.
While that’s a complicated arrangement, it means Citi will get credit for making CRA loans without having to find and vet borrowers, Lending Club will get new customers with certainty that there will be a funder for their loans, and Varadero will have relatively safe investments, according to Bloomberg’s analysis.
“Many banks across the country are looking for opportunities to enhance their community lending efforts for low- and moderate-income families,” Lending Club CEO Renaud Laplanche said in a prepared statement. “We’re excited to expand the use of the Lending Club platform to make this process easier for Citi and other banks, and help lower the cost of credit for borrowers.”
Lending Club went public last December and reached a $10 billion market cap, but its stock price has sagged by about 30 percent since then. It has also begun to offer small-business loans in the past year.
And it’s not above a little bit of showmanship to attract attention. At the announcement of the Citi partnership during the LendIT conference in New York City, Laplanche also surprised the crowd by unveiling a bright orange cube, 7 inches on a side, that reportedly will offer voice recognition, a digital display, touch-screen keypad, scanner and Wi-Fi connection, The Street reported. “We call it The Cube,” Laplanche said.
A Lending Club spokesperson later elaborated for PYMNTS (but only slightly): “The Cube is an imaginative concept developed by Lending Club. The idea is that The Cube, a voice recognition, automatic credit dispenser, will be placed in brick-and-mortar retailers and banks sometime in the future.”