Lending Club Submits Response to Treasury RFI on Online Marketplace Lending

SAN FRANCISCO, Sept. 30, 2015 /PRNewswire/ -- Lending Club (NYSE: LC), the world's largest online marketplace connecting borrowers and investors, today submitted a response to the U.S. Treasury Department's Request for Information (RFI) on Expanding Access to Credit through Online Marketplace Lending.

"We appreciate the Treasury Department's continued interest in understanding how online marketplace lending can expand access to credit, and how the financial regulatory framework should evolve to support the industry's safe growth," said Lending Club founder and CEO Renaud Laplanche. "Our response reflects our company values and commitment to transparency, consumer friendliness, and responsible credit products, and takes advantage of this opportunity to offer input and ideas that can help the industry grow safely and responsibly."

Lending Club's response starts by explaining the benefits it delivers to both borrowers and investors. Lending Club uses technology to reduce costs and pass on the cost savings to borrowers in the form of lower interest rates and to investors in the form of better returns. More specifically, borrower benefits include:

• Significant cost savings: Over 70% of borrowers on our platform report using their loan to pay off an existing loan or credit card balance, and report that the interest rate on their Lending Club loan was an average of 7 percentage points lower than they were paying on their outstanding debt or credit cards.¹
• Responsible credit: Customers who use the Lending Club platform to refinance their credit card balance are replacing revolving, non-amortizing, variable rate debt with a fully amortizing, fixed rate installment loan. This product provides for a more responsible way to manage their credit, and helps improve the customer's credit score by reducing the amount of open-ended credit. In fact 77% of these customers experienced a FICO score increase within three months of obtaining their loan through Lending Club, with an average score increase of 21 points.²

Investor benefits include:

• Access to credit asset classes that individual investors didn't have access to before and institutional investors only had limited access to on a pool basis.
• Steady cash flow and net annual returns averaging between 6%-9%³ since inception.
• Full control and transparency as to loan quality and performance. Individual investors decide which loans to invest in based on their investment objectives, and have access to a tremendous amount of historical performance data to ground their investment decisions. 

At the invitation of the Treasury, Lending Club offered four recommendations for legislative or regulatory consideration that it believes would enhance or clarify the development and operation of online credit marketplaces to the benefit of consumers, small businesses, investors and the financial system more broadly:

1. Small business lending protections - We believe existing regulations adequately protect consumers borrowing through online credit marketplaces. However, we are concerned that small business owners may not benefit from the right level of protections and transparency. We believe there is an opportunity for the industry to adopt best practices in terms of transparency and responsible credit, and for the appropriate regulatory agencies to continue to monitor the industry's progress in that respect. (Q11).
2. Alignment of interest and disclosure requirements – Lending Club has a tremendous amount of "skin in the game" (starting with over 20% of our revenue from each loan being subject to loan performance over time) and an ongoing alignment of interests with investors. Therefore we believe that any mandated capital-based risk retention requirement for marketplaces would be misguided and detrimental to both borrowers and investors. To ensure investors have all the necessary information to make informed investment decisions and continue to exercise full control over the quality of loans being issued through marketplaces, we are proposing additional mandatory disclosure requirements. (Q10)
3. Tax incentives to increase access to credit in underserved segments - We propose that investors who provide capital in defined underserved areas and to low- to moderate-income small business borrowers be taxed at the capital gains tax rate, rather than the current marginal income tax rate, if the loan is held for over 12 months. Additionally, we propose, similar to the UK framework, that all investors be able to offset losses directly against interest income and gains and have returns on the first $5,000 of investments made tax-free. (Q9)
4. More efficient income verification – We urge that the IRS create an application programming interface (API) for its 4506t tax return transcript process. This would make it easier for consumers and small business owners to give lenders access to their tax information voluntarily. We believe this relatively simple improvement to the current 4506t process would make a meaningful difference in lenders' ability to offer lower cost, faster, easier, safer, and greater access to credit, across consumer and small business lending. (Q2 and Q9)

Lending Club's full response is available here: http://ir.lendingclub.com/interactive/lookandfeel/4213397/LendingClubResponseToTreasuryRFI.pdf

About Lending Club

Lending Club's mission is to transform the banking system to make credit more affordable and investing more rewarding. The company's technology platform enables it to deliver innovative solutions to borrowers and investors. Since launching in 2007, the Lending Club platform has facilitated over $11.2 billion in consumer loans and has more than doubled annual loan volume each year. We operate at a lower cost than traditional bank lending programs, so we're able to pass the savings on to borrowers in the form of lower rates and to investors in the form of solid returns. Lending Club has been prominently recognized as a leader for its growth and innovation, including being named one of Forbes' America's Most Promising Companies three years in a row, a CNBC Disruptor two years in a row, a 2012 World Economic Forum Technology Pioneer, and one of The World's 10 Most Innovative Companies in Finance by Fast Company. Lending Club is based in San Francisco, California. More information is available at https://www.lendingclub.com. Currently only residents of the following states may invest in Lending Club notes: AR, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY (accredited investors), LA, MA, ME, MN, MS, MT, NE, NH, NV, NY, OK, RI, SD TX, UT, VA, VT, WA, WI, WV, or WY. All loans made by WebBank, a Utah-chartered Industrial Bank, Member FDIC.

Some of the statements in this above are "forward-looking statements." The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. The Company may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. The Company does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Information in this press release is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Additional information about Lending Club is available in the prospectus for Lending Club's notes, which can be obtained on Lending Club's website at https://www.lendingclub.com/info/prospectus.action.

¹ Based on responses from 14,986 borrowers in a survey of 70,150 randomly selected borrowers conducted from July 1, 2014 – July 1, 2015, borrowers who received a loan to consolidate existing debt or pay off their credit card balance reported that the interest rate on outstanding debt or credit cards was 21.8% and average interest rate on loans via Lending Club is 14.8%.
² Average credit score change of all borrowers who took out a loan via Lending Club between January 1, 2013 and January 31, 2015 with a stated loan purpose of debt consolidation or pay off credit cards.
³ For Retail investors with at least 100 Notes and 100 different borrowers and no Note accounting for more than 2.5% of the portfolio assuming 24 to 30 months of average age of portfolio, as of September 15, 2015.

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SOURCE Lending Club

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