Lending Club's Terrible, Horrible, No Good, Very Bad Year Continues With Borrower Credit Concerns
LendingClub Corp (NYSE: LC) has been plagued with what seems like a never-ending stream of bad news reports.
Back in May, LendingClub's CEO Renaud Laplanche was ousted following an interview review by the board of directors that may have found wrongdoing in the sale of $22 million of new prime loans to a single investor.
Unfortunately for LendingClub's investors, the stream of bad news didn't end with the resignation of Laplanche.
LendingClub's investors suffered another setback after the Wall Street Journal reported Monday evening that the company's woes are likely to continue. The publication reported the company's charge-off rates have risen as much as 38 percent since 2013.
By comparison, the percentage of loans that banks have written off on their credit-card books in 2015 was 3.16 percent — the lowest levels since 1980.
The charge-off rate reflects loans on which a lender is unlikely to collect cash from the debtor has risen at a time when consumer credit was improving broadly. As such, LendingClub's business model of evaluating borrowers based on a series of algorithms are now being called into question.
In fact, LendingClub only verified the income for its borrowers in 26.8 percent of the time in the first quarter of 2016. This marks a decrease from the peak of 49 percent in 2013.
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