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Lending Club - Is P2P Lending Company Overhyped After IPO?

Lending money

From -

One key difference between banks and this new model, per Lending Club, is that Lending Club doesn't take on any credit risk. All of that risk is assumed by the investors who actually fund the loans -- that's everyday people like you or me. Think about that for a moment.

What happens when there's a rash of loan defaults? The credit cycle will eventually turn sour again; that's a fact of life. What happens to all those willing investors when loans fail to repay on time and there is no FDIC insurance protecting their cash? Credit risk may not be a direct risk to Lending Club, but it is clearly still a risk, even if an indirect one.

Editor’s Note: Jay Jenkin's article spoke on a few sobering facts during the height of euphoria about the success of the Lending Club IPO. We had to chuckle at the illustration he gave about how, according to some folks, "banks are to this company as Blockbuster Video is to Netflix". He goes on to ask some questions that need to be answered before they come to fruition. Here are our article highlights:

  • Lending Club claims that it's not a bank, it's a technology company.
  • The CFPB already has an ongoing investigation into potentially unlawful marketing, issuance, and servicing of loans for healthcare-related financing.
  • Lending Club reported a net loss of about $25 million for the nine months ending Sept. 30.

(Go to full article)

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