Lending Club Halts New Lender Registrations and Referral Program Pending Filing with SEC

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Lending Club today announced that it has “started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.” Thus, it appears that Lending Club wants to create a secondary market for its loans that would allow peer-to-peer lenders who need some or all of their cash back to sell their loan portfolio to other lenders. Prosper started a similar process back in October 2007 by filing an S-1 Registration Statement with the SEC. The odd thing here is that Lending Club has decided to halt its lender registration and referral programs during this process; Prosper has continued both while its S-1 is under review by the SEC. Lending Club will still make loans available to borrowers during this process, but Lending Club itself will fund those loans.

Here’s the full text of the email I received today:

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

Q&A:

Q1. What about money I have begun moving, but is still in transit to Lending Club?
A1.1. If you are in the process of verifying your bank account, you will be able to complete that verification but will not be able to add new funds
A1.2 If you have initiated a transfer, the funds will be displayed in your Lending Club account balance as soon as those funds are available.
A1.3 If you have uncommitted funds, you may request that Lending Club return those funds via the same method used to load the funds. For example,
If you have initiated an ACH to add funds, these funds will be transferred into your Lending Club account but you will not be able to lend these funds out. You can go into your Lending Club account once the ACH transfer has been completed and withdraw funds back into your linked bank account..
If you’ve wired funds into your Lending Club account and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to wire these funds back to you at no charge.
If you’ve sent funds by check, and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to send you a check by mail for the same amount at no charge.

Q2. What about referrals?
A2.1 The current referral program is terminated. If you have referred someone who has already signed up as a lender or a borrower, or if you have been referred by someone and have already signed up as a lender or a borrower, you will be receiving your referral payment within the next few days.

Sincerely,

Patrick Gannon
Senior Vice President
Lending Club
440 N Wolfe Road
Sunnyvale CA 94085
www.lendingclub.com

Lending Club’s move makes me wonder if there isn’t something more here than simply registering debt. I’ll be looking for its SEC filings and will report back what I find. Until then, if you’re looking to invest in P2P loans, Prosper is now your primary choice.

Published or Updated: February 13, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Four Pillars says:

    My analysis is this move is: lame!

    Mike

  2. DR says:

    Mike, by “this move” do you mean the registration of debt to create a secondary market or the decision to suspend the lending and referral programs? It seems to me that a secondary market is critical for the long-term success of P2P lending and borrowing. Why Lending Club suspended its lending and referral programs, however, is a complete mystery to me. My best guess is that it was a recommendation from a lawyer who was being overly cautious.

  3. Scott says:

    Maybe you can help me understand, but doesn’t selling the loan to an institution kinda smash the whole “community,” “peer to peer” thing?

  4. Four Pillars says:

    DR – I mean the move to suspend its lending program. I don’t believe this is a cautionary move but rather a sign that they are out of money or have way too many lenders.

    I agree the secondary trading market is an excellent idea.

    Mike.

  5. DebtKid says:

    @ Four Pillars – Lending Club is definitely not out of money. Why would they be funding the loans themselves if they were out of the 10 mil that they recently raised?

    Anyway, my thoughts:

    http://www.debtkid.com/my-take-on-lending-clubs-sec-registration

    • DR says:

      If LC were out of money, shutting down the lender registration program would be the last thing they would do.

  6. Tom says:

    Lending Club has opened up their referral program again with Commission Junction.

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