Alternative Finances

Lending Club's Loan Issue Saga Continues

LendingClub loans

The waves hitting the online lending pool seem to be coming nonstop. Lending Club talked down its numbers on loans being sold to investors, with the additional disclosure, as noted by The Wall Street Journal, that the company has been buying at least some of the loans itself.

WSJ reported that the weekly report tied to loan sales “has been in focus” in a effort by observers and stakeholders to see just how deep the impact has been in the wake of the forced resignation of its previous CEO, Renaud Laplanche, tied to discoveries about falsified loan data and loan sales to investors that did not conform to those investors’ stated lending criteria.

The company said that it had been the beneficiary of a “large upward spike” in loans that are sold to investors in the form of public notes and that the spike occurred at the end of last month. The Wall Street community latched onto that claim as a nod that business might be returning to some modicum of stability in the wake of the head executive’s resignation.

But the firm walked back that information a bit this past week, when, in a Wednesday (June 8) regulatory filing, Lending Club revised its loan data lower, with a stated jump to $65 million being revised to $21 million, in turn a decline from the previous $22 million tally seen in the week before. As disclosed in an analyst note on Thursday morning, this actually points to a mistake in the company’s own estimates. The mistake thus raises questions about Lending Club’s ability to accurately track its business and about whether internal control issues may still be afoot.

The filing itself says that, in its tabulations, the firm “inadvertently included member loans sold as whole loans” and that at least some of those member loans "omitted the amount funded by Lending Club.” One source told WSJ that the errors were the result of a new system that is involved in "tagging" loans. For the first time, the company disclosed that it had been holding onto at least part of those loans originated, to the tune of $7.2 million.

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