LendingClub’s (LC) CEO Scott Sanborn on Q2 2016 Results
Average platform rate is 13%
“In total, rates rose by a weighted average 135 basis points since December bringing the weighted average platform rate on our standard program to just over 13%. This average rate remains a very attractive bond from secured consumer credit. On the credit side we reduced approval rates for certain targeted segments to eliminate roughly 9% of the higher risk personal loan population that have exhibited a propensity to accumulate debt and could have the most exposure to an economic slowdown.”
Reduced credit to individuals who have been building debt after the lending club loan
“On the credit reductions, I think a way to think about this population is, it’s really around – I would view this as a bit of a normalization of credit. As this recovery gets longer, credit has become more available. And these individuals, in particular have shown a propensity to be building debt kind of coming into the loan and then continuing to accumulate debt after the Lending Club loan as oppose to leveraging the loan to kind of pay-off their debt.
So is it permanent? I think this credit as a whole is pretty organic, and it’s something that is living and breathing. And I think these changes reflect the current environment, so I don’t think it’s permanent. Also, there are things that we can do to manage this population differently through things like Direct Pay, which we launched earlier this year and essentially as part of the application process pays down existing debt.
So I think if you couple that maybe with some monitoring tools, that would be the kind of thing that over time we could add. But given our more modest near-term volume ambitions and our desire to really boost the attractiveness of the asset, this was the right decision for now. And I think that’s evidenced by the investor demand that we’re seeing.”
Many investors paused activity following our May 9 announcement
“this quarter started off strong in April, then following the announcement we made on May 9th, many investors initially paused or reduced their investment activity. We were able to quickly respond to decrease – to the decrease in investor capital by cutting back on our marketing spend to more closely match borrower loan applications with investor supply.”