When former Facebook app LendingClub announced last year that it would use its peer-to-peer lending model to move into the auto loan and mortgage space, everyone thought "What could go wrong?"
With a corporate ethos deigned to combat the evils of a pre-2008 economy, LendingClub was turning the industry on its head by making loans a human exercise. No more would greed, dishonesty or risk be at the center of the act of lending, even if LendingClub would need to create a lot more business after its 2014 IPO.
What, indeed, could go wrong?
The CEO of the leading company in the burgeoning “peer-to-peer” lending industry resigned Monday following a board investigation into what it called improper practices in the lending process.
So what? This moralist punk of Fintech disruption forgot to dot a few i's or cross the right t's on some old man paperwork? It's a revolution people, you can't slap his wrist too hard for trying to make things better...
LendingClub said the board review found the company sold an investor $22 million in loans to consumers with low credit scores whose characteristics violated the investor’s “express instructions.” The board, advised by outside lawyers and experts, found that some people at the company knew the sale didn’t meet the investor’s criteria and that the application date on $3 million of those loans had been altered to make them comply.
Damn, son! That's some Mozilo sh!t right there.
It wasn’t immediately clear what role Mr. Laplanche played in the loan sales. LendingClub said “certain personnel” were aware the sales, which occurred in March and April, didn’t meet the investor’s criteria, and three other senior managers were terminated or resigned over the incident. The company later repurchased the loans at par and resold them to another investor.
Well, there are other "certain personnel" at LendingClub who are likely having pretty nasty flashbacks right now as they watch old habits dying hard and the company's stock price drop about 25% this morning.
You know what we're talking about, LendingClub director John Mack.
But hey, this is an isolated incident that can be chalked up to growing pains, and Laplanche fell on his sword to make sure that people understand it. It's not like Fintech babies born of the crash would ever be as reckless as the evil ancestors they seek to disrupt.
LendingClub said its review uncovered another unrelated matter, involving a failure to inform the board’s risk committee of personal interests held in a third-party fund while the company was contemplating an investment in the same fund.
Welcome to the big kid table, LendingClub.