This comes during a time when relationships and funding issues between online lenders are facing tougher times, particularly in light of the Lending Club issues. Lending Club is Prosper’s largest rival in the industry but has faced controversy after now ex-CEO Renaud Laplanche was pushed out by its board. But in the case of Prosper, the sources indicated that it has hit pause on its LendingTree and Credit Karma relationships as the company attempts to halt new deals with investors to buy its loans. Both LendingTree and Credit Karma are sites that consumers use to find personal loans and financing help, which also aid in providing pricing between lenders.
Companies like Lending Club and Prosper have traditionally used the loan referral sites to bring more loan volume to their own business, but in light of the recent scrutiny, there has been a bit of a chill in the industry. This comes at a time when these lenders are finding it tougher to get investors to buy their loans. Both Lending Club and Prosper expect to fall for another quarter.
These companies’ business models are unique because they, unlike banks, don’t have consumer deposits or large balance sheets to keep their loans funded, so they rely on investors to keep them running.
“We use a variety of online and offline marketing channels, and we are able to quickly and efficiently adjust those channels to best match borrower and investor demand,” Prosper CEO Aaron Vermut said in a statement to WSJ. “This ensures we maintain equilibrium, which is the number one priority when running a marketplace business.”
Sources cited in the article indicated that Prosper stopped buying leads from Credit Karma last month and did so with LendingTree earlier this year. Lending Club has taken similar action. Regardless, this doesn’t mean that LendingTree’s or Credit Karma’s business will actually be hurt since they have other sources to pull from.
“Our business moves in tandem with the collective demand of all of our lenders instead of any individual ones,” Doug Lebda, LendingTree’s CEO, told WSJ.