There are second acts in financial services, it seems — or at least interesting attempts at them. Renaud Laplanche, Lending Club’s former CEO, is back with a new internet lending startup called Credify Finance Corp.
Housed literally right down the street from Lending Club, Credify will now compete with the online lending marketplace Laplanche launched in 2006; the new firm is staffed by a cohort of former Lending Club executives and one former Treasury official.
Credify is still a very early-stage startup that hopes to begin making loans in 2017, according to internal sources quoted by the Wall Street Journal. But despite its early status, Credify comes into the market pre-wired for lots of attention — since its founder is both famous and infamous in online lending circles.
Famous because for almost a decade, Renaud Laplanche was the public face of online lending — its biggest booster and arguably its biggest success story — building Lending Club from the ground up into a force to be reckoned with in the market that was behind $29 billion in loans last year alone. And infamous because of dual revelations in May that Laplanche had overseen sale of loans to an investment bank that explicitly did not meet that bank’s standard purchase and that he made personal investments in a fund that was buying Lending Club loans without disclosing that information to his board — or anyone else.
Laplanche stood down as Lending Club’s CEO — as did many of the firm’s executives — without a fight in the wake of the revelations.
“I recognize that events occurred on my watch where we failed to meet our high standards. While there are disagreements as to the characterization of facts, I accept that the board acted in good faith and did what it believed was right for the company,” he noted in a statement released shortly after the big reveal.
Lending Club is additionally facing scrutiny from the Securities and Exchange Commission, the Federal Trade Commission and authorities from at least three U.S. states.
It’s been a tough year.
But apparently every downfall needs a comeback — and it looks like Credify will be Laplanche’s attempt. The firm was quietly incorporated in Delaware on May 31, less than a month after Mr. Laplanche left Lending Club, according to state records. That termination did not require him to sign a noncompete agreement with Lending Club.
So, he’s competing. The new firm set up shop over the summer in San Francisco’s financial district and is now in the process of registering to do business in more than a dozen states.
Credify is being funded with Mr. Laplanche’s money and that of outside investors, though who exactly those investors are remains a mystery at this time.
Will it work?
That is the big question as the world waits for a launch, though not one with a clear answer. Online lending in general — due to changing market conditions, increasing default rates and slowing investor demand — was already showing cracks in early 2016 before the Lending Club bomb detonated in May and drastically shook confidence in the industry across the board. In the wake of those revelations, further weakness in the market in general has strongly depressed online lending across the board.
But Renaud Laplanche does have a history of getting people excited about this idea — even at a time when no one had ever heard of marketplace lending. It remains to be seen if he can overcome being well known for something not-so-good as well as he overcame being a virtual unknown.