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Lending Club Introduces Self-Directed IRA to Enable Investments in P2P Lending

wiseclerk

P2P lending service Lending Club, today announced the availability of the first Self-Directed Individual Retirement Account to enable investments in peer lending. EntrustCAMA, part of the Entrust Group,  serves as the administrator for these accounts.

This new Self-Directed IRA investment choice gives individuals the ability to build a portfolio of Lending Club notes and hold that portfolio in a tax-free or tax-deferred account. To meet the Federal deadline for this tax season, applications must be completed online, printed and postmarked before April 15, 2009. The account application is available at https://www.lendingclub.com/sdIRA/registerIRA.action

Key benefits stated:

  1. Potential for high returns. Choose from a diversified group of hundreds of qualified borrowers.
  2. Tax advantages. Investments in a Self-Directed IRA can grow tax deferred until retirement age.
  3. Flexibility.
    Select the type of IRA which is right for you:
    Individuals: Traditional or Roth
    Small businesses: SIMPLE or SEP
    Fund the IRA directly with a check or an existing account (IRA or 401K) to transfer or rollover.
  4. A Diversified Retirement Portfolio. This Self-Directed IRA gives your portfolio access to Lending Club Notes, going beyond traditional stocks, bonds and mutual funds.

Fees:

  • No account opening fees
  • One flat 250 US$ annual account maintenance fee starting in 2010 when you open an account before April 15, 2009
  • No other fees
  • Low minimum starting contribution of 5,000 US$

Sources: press release, Lending Club website

Lending Club receives 12 million US$ VC funding

wiseclerk

Lending Club announced today that they have closed another funding round. Excerpt from the press release:

… closed a $12 million Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Rebecca Lynn, a Morgenthaler Principal, is joining Lending Club’s board of directors.

Lending Club also announced today that it has added Pamela Kramer as Chief Marketing Officer. Ms. Kramer is an established marketing veteran … . She was most recently Chief Marketing Officer of MarketTools, Inc and, before that, spent 9 years in leadership roles with E*TRADE Financial … .

Pertuity Direct starts affiliate program

wiseclerk 3 Comments

P2P Lending service Pertuity Direct has launched an affiliate program. The new referral marketing campaign of Pertuity Direct pays:

  • 35 US$ for each referred completed and approved borrower application for a loan
  • 50 US$ for each completed investor application
  • performance incentives for websites that generate at least 5 leads per month

The campaign runs at affiliate network CJ, where Lending Club does administrate it’s affiliate program, too. Lending Club pays 35 US$ commission for each loan application and 60 US$ per lender registration plus performance incentives.

See earlier posts about p2p lending services using affiliate marketing.

Lending Club invested 2.4 million US$ to fund loans

wiseclerk 3 Comments

As P2Plendingnews.com has researched Lending Club has invested 2.4 million US$ of its own money to fund loans since the relaunch in last October. The total volume of funded loans is approx. 10 million US$, that means that Lending Club funded about 24% of all loans itself.

The data is from weekly sales reports that Lending Club files with the SEC. The sales reports look like this and give details on each loan funded.

More details and numbers in the article (recommended reading) by P2Plendingnews.com.

While this may be contrary to the “pure” idea of peer to peer lending my take on this is:

  1. I see it as a positive development. By using own money to fund loans Lending Club demonstrates their belief in the business model and shares the same risk it expects lenders to take. By the way: There are ongoing discussions at MYC4 about changes that could lead to MyC4 and MYC4 providers to share more risk in funded loans.
  2. By co-funding loans Lending Club adds continuity. When supply of money by lenders is low, Lending Club co-funds more. That way the demand by borrowers can be served without interruptions.
  3. However since due to SEC filings very detailed information on the funded loans is publicly available, the explanation of Rob Garcia that the download data was removed due to privacy concerns (see previous post), seems stale.
  4. P2Plendingnews questions, if Lending Club can continue with co-funding for running out of funds. On the other hand, Lending Club earns interest from the funded loans and can sell the notes any time on the secondary market (that would explain why so many of the notes there are offered for sale immediately after the loan was funded).
  5. One further and important aspect: Only residents of 25 states can participate as lenders on Lending Club directly. However on the Note Trading platform residents of all but the states Kansas, Maryland, Ohio, Oregon, Texas and Vermontand the District of Columbia can buy notes.
    That means by co-funding loans and selling part of their investments on the Note Trading Platform Lending Club enables a larger target audience to use their service.

Please share your opinion by commenting here or in the Lending Club forum. Thank you.

Lending Club Observations

wiseclerk 6 Comments

Recently I noticed two changes on p2p lender’s Lending Club website.

On the statistics page the link to download the loan data was removed. Before it was possible to download the complete loan data since inception of the service. Furthermore the predefined setting for the parameter “Loans issued from” is set on March 1,2008 now. That means, if you look on the page and do not change that parameter manually you see how loans performed that were issued between March 1, 2008 and today. Older loans issued between June 1, 2007 and Feb 29, 2008 are not included in the displayed results.

When I noticed that, I was reminded of what Prosper did with it’s statistics. Prosper segmented it’s loans (e.g. prosper select index) and cited only results for better performing segments in press releases. Furthermore the predefined values on Prosper’s statistic page, were set in a way that lowered the late payments and default ratios compared to an average over all Prosper loans.

But Lending Club had successfully positioned itself with transparency a core value in the past, so I asked Lending Club to comment on the reasons for the changes.

Rob Garcia, Director Product Strategy told P2P-Banking.com:

This is a temporary situation. We chose to take down the files due to privacy concerns raised by our customers. We are working to address these concerns in a way that continues to provide full transparency to platform data, while protecting the privacy of our customers….

On the setting of the parameter he stated:

The default setting for the statistics page is a year. So since we are now in March, the “From” date is defaulted to March 2008. This is to show the most relevant annualized indicators for the last year. Users can then change the “From” and “To” dates to explore the indicators for a specific time frame they may be interested in, including from inception (June 1, 2007). We did this based on numerous email inquiries from lenders asking for annual default rates instead of a general default rate since inception (so that they can compare annual defaults to annual interest rates to get actual net returns). We’re looking at tools to make that calculation easier…

Yesterday Lazy Man wrote about his observations on how Lending Club reports risk. The posted screenshots show that interpretation of the risk figures is not obvious under certain circumstances.