P2P Lending / NFT Lending Forum

Lending Club Discussion => Investors - LC => Topic started by: muflafler on November 05, 2014, 11:00:00 PM

Title: "Credit for Ineligible Loan"
Post by: muflafler on November 05, 2014, 11:00:00 PM
I had several transactions show up today, "Credit for Ineligible Loan."  Does anyone know what is going on when this happens?  The Account Activity page does not show the loan number or any other data, just this:


11/06/14   Transfer   Credit for ineligible loan   $24.44

I had 8 of these show up today, I've never seen it before.
Title: "Credit for Ineligible Loan"
Post by: brycemason on November 05, 2014, 11:00:00 PM
LC may have bought back loans that were either identify theft or never should have been on their platform in the first place. Given how many you had and how  rarely loans have been bought back due to identity theft, I vote for the latter.
Title: "Credit for Ineligible Loan"
Post by: core on November 05, 2014, 11:00:00 PM
If it was ID theft, then I would expect the full $25.00 to be credited, no?  The only way it would be for less is if there was a payment made on the loan.  Maybe I'm hanging out with the wrong kind of crooks, but the ID thieves I know don't usually start making payments on the victim's loan.  That kind of defeats the purpose.

OK, maybe some screwed up family member situation.  I can see that.
Title: "Credit for Ineligible Loan"
Post by: Ran on November 05, 2014, 11:00:00 PM
from: core on November 06, 2014, 09:51:11 AM
Title: "Credit for Ineligible Loan"
Post by: Kombinator on November 05, 2014, 11:00:00 PM
This is quite strange, possibly them cleaning their books to be queaky clean going into IPO, or buying back policy code  loans they accidentally released into general population...would be good to get a clear answer.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
from: Kombinator on November 06, 2014, 10:56:49 AM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
No question, looks like a monumental fuck up somewhere, just not clear where and how
Title: "Credit for Ineligible Loan"
Post by: samybob on November 05, 2014, 11:00:00 PM
I also have 6 of these, does anyone know for sure what they are? I didnt see any notes come off my account?

Date
Type
Description
Amount
11/06/14   Transfer   Credit for ineligible loan   $25.28
11/06/14   Transfer   Credit for ineligible loan   $25.15
11/06/14   Transfer   Credit for ineligible loan   $24.90
11/06/14   Transfer   Credit for ineligible loan   $25.15
11/06/14   Transfer   Credit for ineligible loan   $24.95
11/06/14   Transfer   Credit for ineligible loan   $24.94
Title: "Credit for Ineligible Loan"
Post by: avid investor on November 05, 2014, 11:00:00 PM
from: samybob on November 06, 2014, 11:22:52 AM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
Looks like they are just taking it out with accrued interest or at par, which explains the 25+/- numbers.

Really disturbing that there has been 0 communication on this issue from LC.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
Ok, just called LC on this.  They were "recent" notes that should not have been allowed on the platform.  They have been bought back by LC, without fee.  If the amount is less than the note amount, you have already received one or more payments.  If it is more, it is due to accrued interest.  Sounds like "no harm no foul", if what I have been told is correct.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
For what reason were these loans not allowed on the platform initially?
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
I didn't ask that, but I failed to add that I was told that the "problem was corrected".  Ergo, we should not be seeing more of these unless a new such problem occurs.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
yes, I invest in $25 increments. So then this is no big dela, they are either paying us more and if they are giving us less its because we got a payment already. I would to know which notes these are so I can look at them.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
from: avid investor on November 06, 2014, 11:46:15 AM
Title: "Credit for Ineligible Loan"
Post by: core on November 05, 2014, 11:00:00 PM
Quote"> from: avid investor on November 06, 2014, 11:43:03 AM
Title: "Credit for Ineligible Loan"
Post by: avid investor on November 05, 2014, 11:00:00 PM
Just trying to honor the LC 13th Amendment, core.   ;)
Title: "Credit for Ineligible Loan"
Post by: kbenson99 on November 05, 2014, 11:00:00 PM
An example note refunded to me is https://www.lendingclub.com/account/loanPerf.action?loan_id=22101306&order_id=36226607&note_id=57454347.  If you attempt to access the performance page or detail page, you will receive a "Sorry, you do not have access to this loan" or an "Invalid Note or Order specified" exception.  Given the exception, it is logical that these are loans (policy code, institutional, etc) that were not supposed to be released to retail investors.

I noticed the exception on Nov 2 and sent LC an email looking for an explanation.  The reply I received was that it was forwarded on to the "appropriate team for further review as it may be related to a system bug".  Haven't received a follow-up on the refund yet.
Title: "Credit for Ineligible Loan"
Post by: BruiserB on November 05, 2014, 11:00:00 PM
I have around 20 of these.


Sent from my iPhone using Tapatalk
Title: "Credit for Ineligible Loan"
Post by: Randawl on November 05, 2014, 11:00:00 PM
I have a bunch of these as well.  These are technically "refunds" related to some error on LC's part, but they put the credited money under adjustments/credits.  Doesn't "adjustments/credits" get reported as taxable income?  Odd that they didn't include the loan or note ID.  Also odd that part of the "refund" included accrued interest, but yet the sum total of remaining principal was also put into adjustments/credits.  Will those loans get charged-off?  Or are they simply going to "disappear"? This is odd on quite a few levels to say the least.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
Nobody has used the word incompetent yet in this thread.  I see from the counts posted that this is obviously not just a few notes here and there.  This is the Bozo the Clown Show.

What is troubling though is that LC apparently reserves the right to buy back notes at any time, for whatever reason they want to make up.  Right now it's not really an issue since rates cannot go lower, but it won't always be this way.  Also even if we give them the benefit of the doubt and say that this time they only bought back notes that were involved with this fiasco; what about next time?  When they can selectively start plucking notes out of accounts there is lots of room for shenanigans there.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
Email response I received about the loans I questioned on 11/2 is as follows:

"Due to a system error, some loans that were not eligible for investment by retail investors were made available through the Lending Club platform.   ........were ineligible loans affected by this system error.  We have resolved the issue, removed all Notes corresponding to ineligible loans from investors' account and credited investors in the amount of any outstanding principal and accrued interest for such Notes."

So, sounds like policy 2 loans, institutional, etc....
Title: "Credit for Ineligible Loan"
Post by: rawraw on November 05, 2014, 11:00:00 PM
Based on this forum's love of high interest rates, I'd have to gather it was subprime notes.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
from: rawraw on November 06, 2014, 01:57:28 PM
Title: "Credit for Ineligible Loan"
Post by: muflafler on November 05, 2014, 11:00:00 PM
I had 8 "Credit for Ineligible Loan" when I posed this morning, but now I am up to 22 in total.  It's about 2.2% of my total Notes that have been returned/refunded.
Title: "Credit for Ineligible Loan"
Post by: parker on November 05, 2014, 11:00:00 PM
I had 10 loans credited for ineligibility so far today out of ~650.

I was able to find one loan that was credited. It was subGrade A3. Interestingly almost all of the fields in the loan detail were blank. It was a NoteType = 1.

Parker
Title: "Credit for Ineligible Loan"
Post by: GS on November 05, 2014, 11:00:00 PM
It's hard to believe that an A3 would be subprime ...
Title: "Credit for Ineligible Loan"
Post by: Kombinator on November 05, 2014, 11:00:00 PM
The notes that were erroneously issued and have now been refunded were not really Cat 2, just made it through due to a glitch, they did not pass any of the underwriting models, older or updated, and as resulte LC reasonably had to remove them from circulation.  It was basically a bug that they fixed, not great but not terribly alarming either.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
email rcvd from lc

Due to a system error, some loans that were not eligible for investment by retail investors were made available through the Lending Club platform. We have resolved the issue and removed all notes corresponding from ineligible loans from investors' accounts and credited investors the amount of any outstanding principal and accrued interest for such notes.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
I had 10 as well (out of 1000 notes)
Title: "Credit for Ineligible Loan"
Post by: lascott on November 05, 2014, 11:00:00 PM
13 out of 1500+ ... but that number has risen everytime I looked today.
Title: "Credit for Ineligible Loan"
Post by: Randawl on November 05, 2014, 11:00:00 PM
So what is going to happen with the loans now?  Is LC going to package and sell them to someone else now or hold them on their books?

I wonder what this "system error" was and think of how incredibly easy it would be to claim "system error" for a multitude of questionable actions.

I also wonder how they would account for this in their SEC filings, because we just got paid interest (and principal) directly by LC instead of the borrower.
Title: "Credit for Ineligible Loan"
Post by: rawraw on November 05, 2014, 11:00:00 PM
It may have been discovered because of the due diligence with the IPO stuff
Title: "Credit for Ineligible Loan"
Post by: Lovinglifestyle on November 05, 2014, 11:00:00 PM
from: rawraw on November 06, 2014, 07:26:43 PM
Title: "Credit for Ineligible Loan"
Post by: core on November 05, 2014, 11:00:00 PM
from: Randawl on November 06, 2014, 07:24:44 PM
Title: "Credit for Ineligible Loan"
Post by: parker on November 05, 2014, 11:00:00 PM
Another scenario would be if an "ineligible" note was charged off. Did the investor get a credit for this note?
Title: "Credit for Ineligible Loan"
Post by: ksb1234 on November 05, 2014, 11:00:00 PM
Has anyone had a late, defaulted, or charged off note repurchased? Mine were all current.
Title: "Credit for Ineligible Loan"
Post by: Fred on November 05, 2014, 11:00:00 PM
from: Randawl on November 06, 2014, 07:24:44 PM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
from: Randawl on November 06, 2014, 07:24:44 PM
Title: "Credit for Ineligible Loan"
Post by: DanB on November 05, 2014, 11:00:00 PM
from: core on November 06, 2014, 08:57:35 PM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 05, 2014, 11:00:00 PM
Scenario 2 is far too complicated already as you presented it, and you're neglecting the possibility that it may have changed hands 10 more times after that.  They are not going to do anything like unwinding a whole chain of trades, I guarantee you.  Another company might.  LC can't/won't.  I do have some small experience in having trades unwound here.

Scenario 3 (and the most likely one IMHO):  You keep your $15.  The Folio trade stands.  Lending Club pays me the $25 full par value and takes the IGP note.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
from: ksb1234 on November 06, 2014, 10:24:12 PM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
When you go to the LoanDetail page, you'll get a "Sorry, you do not have access to this loan" message:

https://www.lendingclub.com/browse/loanDetail.action?loan_id=22471582

Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
from: Fred on November 07, 2014, 12:29:11 AM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
from: core on November 07, 2014, 12:44:24 AM
Title: "Credit for Ineligible Loan"
Post by: DanB on November 06, 2014, 11:00:00 PM
Quote"> from: core on November 06, 2014, 11:53:02 PM
Title: "Credit for Ineligible Loan"
Post by: core on November 06, 2014, 11:00:00 PM
from: DanB on November 07, 2014, 03:25:03 AM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
from: core on November 07, 2014, 03:47:17 AM
Title: "Credit for Ineligible Loan"
Post by: rawraw on November 06, 2014, 11:00:00 PM
Based on my redemptions, it comes out to a little less than 1% of my total notes I have invested right now.  And I'm a fairly low interest rate investor (weighted average is 14).
Title: "Credit for Ineligible Loan"
Post by: Randawl on November 06, 2014, 11:00:00 PM
from: DanB on November 07, 2014, 07:28:49 PM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 06, 2014, 11:00:00 PM
from: DanB on November 07, 2014, 07:28:49 PM
Title: "Credit for Ineligible Loan"
Post by: hoggy1 on November 07, 2014, 11:00:00 PM
from: core on November 07, 2014, 11:55:12 PM
Title: "Credit for Ineligible Loan"
Post by: SamV on November 08, 2014, 11:00:00 PM
I am fairly new to investing with LC and only have a small number notes so far as I test things out to see if I want to commit more money to this.  So it was easy for me to see that five of my already issued notes had disappeared when I logged in to their site on Friday.  I had five of these "Credit for ineligible loan" transactions on my account activity page and wasn't sure what that meant so I called them.

I got the same explanation as others in this thread but wanted to work through the numbers for myself because I don't have a lot of trust for this company yet and didn't just want to take their word for it with no details.  So I asked for details and the customer service person was able to give me the Loan ID's and Note ID's for the affected notes.  It was still a major chore to pull all the information together because the notes were no longer showing up in my account so I had to cross reference the ID's with orders on my account statements to find their dates and interest rates, and then payment details on the account activity page to find the payments I had received for them.

I just created an account on this forum just to let people know that you should call and ask if you want to know specifically which of your notes where affected by this.

I think I will be calling or emailing them again to let them know that I am not happy about the way they are handling this.  They should have contacted us to let us know what was happening and made it easier to find the details about which notes were involved.  I take it from the comments here that this is not a frequent occurrence?  I hope not.
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 08, 2014, 11:00:00 PM
from: SamV on November 09, 2014, 12:32:41 AM
Title: "Credit for Ineligible Loan"
Post by: Dennis on November 08, 2014, 11:00:00 PM
from: SamV on November 09, 2014, 12:32:41 AM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 09, 2014, 11:00:00 PM
from: core on November 07, 2014, 11:55:12 PM
Title: "Credit for Ineligible Loan"
Post by: TravelingPennies on November 10, 2014, 11:00:00 PM
Thanks Core and Dennis.  It is good to know that this specific thing hasn't happened before but that this type of thing is not unusual at this point.  I remain interested but cautious and will continue to monitor my account relatively closely.  And hope that LC is learning from its mistakes and gets more reliable and consistent as it goes forward.
Title: "Credit for Ineligible Loan"
Post by: Fred93 on November 10, 2014, 11:00:00 PM
from: Dennis on November 09, 2014, 03:30:58 PM
Title: "Credit for Ineligible Loan"
Post by: Prescott on November 10, 2014, 11:00:00 PM
I vote system error in their underwriting criteria - it could be something like a rounding error in their calculations that changed the interest rate on the note or allowed it to get past underwriting criteria when it shouldn't have.

Consider the calculation for how many months ago their last default was - how do you calculated months. If their model builders calculated it based on days / 30, vs the engineers calculating it as something slightly different, you have the situation where loans are just off by a bit. Now suppose your criteria is default < 6 months ago = no loan. You'll get people on the fringes depending on how you calculate months which might be off.

It could be fraud, but in my (somewhat limited experience) fraud is usually limited to joe stealing his neighbor or family members identity - which means finding a bunch of notes all at once wouldn't be common - it would trickle.

If a fraudulent note was late, and you sold it on the second market at a loss, I could see LC liability to the original seller.
Title: "Credit for Ineligible Loan"
Post by: muflafler on February 24, 2015, 11:00:00 PM
Hi,

Noticed on my 1099-B that all of these "ineligible" notes are on there.  Date of Acquisition is the date the note was funded,, while date of sale is listed as 11/06/2014 for all of them. 

Cost is $25 for all (my original investment amount in each note) and then Principal/Income received is just what I received in payments.  And the sale price works out so that I have zero gain or loss on all the notes, I.e., if I bought a $25 note, and then received an $0.80 monthly payment before the note got yanked back by LC, then the sale price is listed as $24.20 so that the total is $25.00 and I have no gain.  So for tax purposes LC is treating this as if you sold on the secondary market for no gain or loss.

Slightly annoying for me because I don't do the secondary market very much and haven't sold any notes on the secondary market, but now I have to enter this 1099-B info for a bunch of notes that LC screwed up on and where the total p&l is zero.  And I do not know how to import it into turbotax in an automated fashion.  Oh well...

Edit:

Actually, if total p&l is zero AND p&l on each individual line item is zero, do I really need to file the info from the 1099-b?  I guess the answer is yes, just because the IRS will receive this and the automated system will probably flag that the IRS received a 1099-B but I did not report a 1099-B in my filing.  And then my filing might get an additional review or something because of that.  Better safe than sorry when it comes to the IRS!