Mail from Lending Club

I got this in my inbox today:

Dear Judith,

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


What this means is that uncommitted money I have in my account can't go to work there. I have to take it out to get it working, for an unspecified amount of time. What it means is no more referrals. And all this is out of the blue. I'm not impressed. But I've got his address. And so do you.

Portfolios: Prosper vs Lending Club

*edited 3/26/08
I recently joined Lending Club and added $500 to my account. I received an incentive deposit of $50 - I think because I joined through someone else's link. (You too can get an incentive when you join - click on the link to the right.)

Today I created a portfolio on Lending Club. I have six portfolios on Prosper. Here is a quick comparison of the two:

Lending Club:

There are actually two types of portfolios on Lending Club. The notes below apply to the automatic portfolio, known as LendingMatch. The other type is formed when you choose individual loans.

• $500 minimum for each portfolio
• Choice of "risk levels" from low to high but no other options
• $25 bids on each loan are automatically set - that is, the portfolio automatically bids $25 on each loan that fits the criteria. You can change the amount of each bid when you "review" the portfolio.
  

Prosper:

• No minimum for each portfolio
• Wide range of options in addition to risk levels. Can choose to exclude "auto funding", can set no. of delinquencies that are acceptable, can choose to include only those loans that friends of the borrower have bid on, for example.
• You choose the minimum bid ($50 or more).
  

What then?

On Prosper, it takes several minutes before a portfolio chooses loans that meet the criteria. On Lendingclub a list of loans is chosen immediately and you can select some from the list to delete if you like. (On Prosper you can't withdraw from a bid that is placed automatically by your portfolio.)

It takes less time, then, to set up a Lending Club portfolio and you get immediate results. On Prosper, though, you can add more criteria to tailor the loans you make. What works best for you obviously depends on your goals and preferences.

Lending Club

At Prosper Days I learned of a couple of other new "peer-to-peer" lending companies. One is loanio, which has not yet gone live. Another is Lending Club. I just joined Lending Club, in part as a diversification strategy and in part to find out what it's like.

Lending Club is similar to Prosper in its overall makeup: people lend to other people. Specifically, Lending Club makes loans and sells them to individual lenders, just like Prosper. There are, of course, differences. Lending Club only accepts borrowers with credit scores of 640 or higher, and may reject those if their credit balances are too high.

Acceptance as a lender is also similar to Prosper, except that instead of a checking account a lender can wire money to Lending Club. There aren't other options, like credit cards, yet.

Borrowers and lenders pay fees to Lending Club, based on the value of the loan. My quick glance tells me the percentages are higher than Prosper's.

Lending Club offers portfolios too, although some of the criteria differ from Prosper's.

I will offer more details in future posts.