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Author Topic: The identiy fraud repayment promise

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The identiy fraud repayment promise
OP: March 18, 2017, 11:00:00 PM
Lending Club promises to buy back loans (notes) "where the loan was obtained as a result of identity theft or fraud".

From the LC investor agreement...
https://www.lendingclub.com/info/lender-agreement.action
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B
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The identiy fraud repayment promise
#1: March 19, 2017, 11:00:00 PM
I currently have over 70,000 active notes and easily have double that amount purchased since Lending Club opened their doors. I've never looked to see if I was ever reimbursed for an identity thef loan but I think I keep a pretty good eye on my account and would have noticed that. Excellent question and one as a group of investors would be worth getting an answer to.
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r
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The identiy fraud repayment promise
#2: March 19, 2017, 11:00:00 PM
The one time I saw it happen, there was no notification. Just a notation in the collection log of a previously defaulted note

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T
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The identiy fraud repayment promise
#4: March 19, 2017, 11:00:00 PM
Yes I received the principal. I don't remember what the language was. Now that your asking, I'm questioning if I imagined it! Lol

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T
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The identiy fraud repayment promise
#5: March 19, 2017, 11:00:00 PM
I'm wondering how these loans show up on the web site, on my statements, in the notes file, etc.

I'm thinkin' maybe they DON'T show up most of these places.  Maybe they are made invisible, like non-persons.  (Ie are dropped from my notes file.)

There would have to be a transaction, ie cash moving to my account, but the way the LC web site works these days, transactions are incredibly difficult to look for.  They are hidden in daily sums, and the pop up windows which expand the daily sums don't let you do anything useful. 

Seems like a transaction would have to appear on my statement, but unless I know the words they use to describe such a transaction on a statement, I won't know what to search for. 
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j
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The identiy fraud repayment promise
#6: March 19, 2017, 11:00:00 PM
I tried skimming my statements in the recovery type section and didn't see anything.  Be nice if it was a loan status.
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The identiy fraud repayment promise
#7: March 19, 2017, 11:00:00 PM
I also remember in the past we discussed such "identity fraud" loans on the forum. IIRC, Lending Club made investors whole when loans were discovered to be "fraud". Also at one time few years ago there was a big news (may be just forum discussion or disclosure by Lending Club) with few fraudulent Loan IDs being disclosed. Sorry, don't remember more specific details.
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T
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The identiy fraud repayment promise
#9: March 20, 2017, 11:00:00 PM
I got a response from LC.  I take this as an initial response, not necessarily the whole story...

They say that there is presently no notification.  They say they're working on a uniform process to communicate these events.  They say these loans show up as "full payment" on the loan status page.

These answers raise many more questions, for which I have no answers.

I have asked them to tell me all the loans for which this has occurred.  This may seem like a bold request, but I pointed out that notification was and is an explicit formal requirement of the lender agreement.  In other words, they were supposed to tell us, and they didn't tell us, so the very least they can do now is to tell us now, after the fact.  Doesn't make up for their omission, but it would at least show good faith.
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T
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The identiy fraud repayment promise
#10: March 20, 2017, 11:00:00 PM
2nd response from LC, clarifying ... They say such loans will definitely show up as prepayments.  The loans are not deleted. 
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T
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The identiy fraud repayment promise
#11: March 20, 2017, 11:00:00 PM
3rd response from LC, clarifying...  They say they are preparing a list showing which of MY loans (not everybody's loans) were repurchased due to identity theft.

I intend to share info when it arrives.

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The identiy fraud repayment promise
#12: March 21, 2017, 11:00:00 PM
How did you contact Lending Club? I wouldn't mind getting a list for my loans.
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The identiy fraud repayment promise
#13: March 21, 2017, 11:00:00 PM
Yes, who doesn't want to see these notes annotated to reflect their true state(s)?

LC attacking this on a case-by-case or user-by-user basis - especially when they have a clear, legal obligation to notify when such is the case - strikes me as someone thinking small and trying to save workload, when, in fact, they ought to just update their database to properly reflect all loans which have been bought back due to the ID theft guarantee.  This may also have some positive implication vis a vis the prepayment rates (which all investors monitor, closely - or should) and would likely reduce that number (and thereby some of the concerns which arise around the prepayment rate, if the ID-thefy reimbursements show up merely as "fully paid", in the data, shortly after origination) - not mentioning some other benefits which may accrue, regarding backtesting for investors and credibility for the platform.

There's no good reason not to do it for the entire dataset.  If they're going to do it, they may as well do it right.

Good catch, Fred.  I had the same thoughts when I watched Scott's keynote (which otherwise I liked) --- my mind instantly went to the opposite of what he said re: "we have a strong incentive to catch ID theft since we're on the hook" (paraphrased), to which my mind immediately translated "no, you have a perverse/reverse incentive not to monitor for ID theft, since otherwise you're on the hook".

Transparency solves for most of that.  Let's see it.  Thanks.
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