p2p lending
For Lending Club Borrowers, Interest Now Accrues During Grace Periods
February 26, 2017On February 24th, Lending Club eliminated a courtesy that had long been afforded to borrowers, interest waivers during grace periods. Specifically, borrowers who missed a monthly payment were given 15 extra days to make the payment with no extra interest assessed or late fees. Going forward, interest will indeed accrue during grace periods.
“we are eliminating the grace period interest waiver in order to better align borrower payment incentives as we seek to deliver solid returns to our investors,” Lending Club said in an email.
Since this will not affect a borrower’s monthly payment, all additional accrued interest will be extended to another month beyond the maturity date.
‘Peers’ Continue Retreat from Lending Club
February 18, 2017
The peer aspect of peer-to-peer lending continued to erode last year, according to Lending Club’s year-end earnings presentation. Self-managed individuals, those still making their own investment decisions, only made up $263 million of their 4th quarter’s origination volume, reaching the lowest level in two years. That’s nearly 38% lower from the peak of $419 million in Q1 of 2016.
Overall monthly originations haven’t really moved, hovering at around $2 billion per quarter over the last 3 quarters, down from the peak of 2016’s Q1 when they hit $2.75 billion. There’s money coming from somewhere though, of course. A chart in the presentation revealed that 74% of Lending Club’s Q4 originations came from banks and managed accounts. The managed accounts category is comprised primarily of asset managers who invest mainly in marketplace lending.
A glance at Lending Club’s self-managed individual originations as a percentage of total originations per quarter is below:
| Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 |
| 27% | 27% | 23% | 25% | 19% | 19% | 15% | 15% | 13% | 15% | 17% | 14% | 13% |
Retail investors were largely skimmed over during the Q4 earnings call, with CEO Scott Sanborn and CFO Tom Casey choosing to focus their attention on bank participation. “As you know, banks returning to the platform has been a priority for us and acts as an endorsement of our strength and compliance and controls,” Casey said.
Using the Seeking Alpha transcript as a guide, the word bank was said on the call 32 times while retail investor was only mentioned once.
To that end, Lending Club’s announcement highlighted its bank funding achievement.
Meanwhile, the word retail doesn’t exist anywhere in the announcement unless you count the necessary Safe Harbor Statement.
RIP the retail investor.
Nude Photos Used as Collateral for Loans, Leak
December 2, 2016Perhaps the only thing worse than sending a nude photo of yourself to a lender as collateral is learning that the photo had been leaked on to the internet. In China, some online lenders hold on to nude photos of their borrowers (typically women) to use as leverage to pay up. If they don’t, the photos may be distributed to the borrower’s friends and family members to shame them. While this practice is certainly not common, about 10 gigabytes worth of such photos from loan platform Jiedaibao were leaked on to the internet recently, according to People’s Daily
Jiedaibao says that loans with such terms are private peer-to-peer loans that they can’t regulate. “We have called the police and collected evidence to protect the company’s reputation. Those who leaked the nude pictures will be punished according to law,” they said in a public response.
Chinese regulators have been working hard to address the growth of p2p lending after investors have lost billions through fraud. P2P lender Ezubao for example, turned out to be a $7.6 billion ponzi scheme. Meanwhile, Moodys reported that by the end of last year, a whopping 800 p2p loan platforms in China had already failed or were facing liquidity issues. In response, banking regulators want all p2p lenders to register with the government.
Bitcoin-based P2P Lending Platform BitLendingClub Shuts Down
December 2, 2016BitLendingClub (not to be confused with Lending Club) has shut down their bitcoin-based p2p lending platform, citing regulatory pressure. A message posted on their website says, “over the last year or so, the regulatory pressures has been increasing to the point that it is no longer feasible to maintain the operation of the platform. We are regretfully announcing that we will have to begin terminating the services effective immediately.”
BitLendingClub received a $200,000 seed investment from European VC fund LAUNCHub just two years ago. The company changed its name to LoanBase in September 2015 but then changed it back only a few months ago.
This was no small experiment either. Kiril Gantchev, BitLendingClub’s CEO, claims on his LinkedIn profile that the company made more than 10,000 loans worth more than $8 million dollars, originating from 90 countries. The company’s website claims an average APR of 192% and a default rate of nearly 12%.
In March however, the company stopped lending to people in several countries including Iran, Ireland and Nigeria due to elevated fraudulent activity.
It’s unclear what “regulatory pressures” caused them to shut down but the company appears to have been operating from San Francisco despite originally incorporating in Bulgaria. A search for a California lending license connected to them yielded no results. After the US, the country with the 2nd most borrowers on the platform was Venezuela followed by Brazil, the UK and India.
“Investors should understand the risks involved when making bitcoin loans,” their website warned. “The main risks are default and failure to collect.” they added.
Chinese Regulators to Cap P2P Investments
August 24, 2016Thanks to the Ezubao ponzi scheme that opened up a can of worms and sent a slew of Chinese P2P lenders packing, the government is considering placing caps on the P2P lending sector to protect investors.
As part of the crackdown on Chinese P2P lenders, the central bank began collecting data on the process of assessing risk and deploying capital for loans made online after authorities arrested executives from two other Shanghai-based wealth management firms in May.
As per the new proposed cap, an individual investor can only provide loans upto RMB200,000 (US $30,000) on one lending platform, and cannot lend more than RMB1 million (US $150,000) in total.
Chinese media reported that over 515 P2P platforms have shut down in the first half of the year, with fraud being a pervasive reason. Despite problems, China continues to have the largest p2p lending sector in the world.
Funder or “Funda”? Either Way, The Korean Government is Worried
July 25, 2016
In South Korea, the government isn’t sure if Funda is a direct funder. Funda, ironically spelled like the New York pronunciation of the word, is one of several companies offering high yields to investors across their peer-to-peer lending marketplace. The average rate of return is 10.94%, according to Funda’s home page.
But according to Bloomberg, the government isn’t positive if investor money being poured into the industry is really being used to fund loans. Not that any company is accused of wrongdoing at this time, rather the Financial Services Commission is attempting to get out in front to prevent problems from occurring in the first place.
In China, for example, the government’s willingness to remain hands-off and let p2p lending blossom, resulted in catrastrophic levels of fraud and mismanagement. By May, ratings agency Moody’s reported that 800 Chinese platforms had already failed or were facing liquidity issues. Even worse, more than $10 billion of investor money was ensnared in Ponzi schemes. An astounding 900,000 individual investors lost money in the Ezubao fraud alone.
The Korean market is still relatively new. According to the The Korea Economic Daily, there were only 20 p2p lenders in the country as of the end of March. South Korea is home to more than 50 million people, about 15% the size of the US.
China Ponzi Scheme: Central Bank Collects Data on Risks, Funds Deployed
May 23, 2016
The concern around online lending is global.
As a part of the crackdown on Chinese P2P lenders, the central bank is collecting data on the process of assessing risk and deploying capital for loans made online. The rapid expansion of new players and the subsequent fraud cases that followed, forced the government to take control.
Last week, (May 16th), Chinese authorities arrested Xu Qin, owner of Shanghai-based wealth management firm, Wealthroll Asset Management Co. who confessed that his company still owed 5.2 billion yuan ($797 million) to 12,800 investors. And before that, in April the police arrested 21 executives of Shanghai-based Zhongjin Capital Management, that promised retail investors double-digit returns for short-term projects.
The can of worms was opened with the shakeup of Ezubao, the Chinese P2P lending site which duped 900,000 investors out of $7.6 billion in February this year. Following which, the Chinese police were ordered to shut down illegal online lending sites and take swift action against suspects.
The Ministry of Public Security also launched an online platform in a quest to garner more information from the public and warned of P2P lender defaults in June, when payments will be due.
China Ponzi Scheme: Police Crack Down on Shanghai Lender, Wealthroll
May 16, 2016
The crackdown of newfangled finance firms that emerged from the ashes of the Ezubao ponzi scheme opened up a can of worms.
And the latest head to roll is of Xu Qin, owner of Shanghai-based wealth management firm, Wealthroll Asset Management Co. who confessed to the authorities that his company still owed 5.2 billion yuan ($797 million) to 12,800 investors. Qin and 34 other executives from the firm were arrested on May 13th.
Qin who started the firm in 2011 with an initial investment of 5 million yuan from friends and family allegedly misused investor money on homes, luxury cars and on buying high-end office spaces for the firm in Shanghai.
This emerges in the wake of the shakedown of Ezubao, the Chinese P2P lending site which duped 900,000 investors of $7.6 billion in February this year. Following which, the Chinese police were ordered to shut down illegal online lending sites and take swift action against suspects.
The Ministry of Public Security also launched an online platform in a quest to garner more information from the public and warned of P2P lender defaults in June, when payments will be due.
The country’s banking regulator, China Banking Regulatory Commission (CBRC) and insurance regulator had also alerted the risks associated with investing in these schemes and barred these lenders from raising funds and signaled that close to 1,000 such businesses accounting for 30 percent of the industry could go belly up.
The Ezubao scam that surfaced on February 3rd revealed that 266 executives of Chinese P2P companies had fled and gone into hiding in the last six months. Ratings agency Moody’s has said that 800 platforms have already failed or were recently facing liquidity issues.
