When I first read the news when I woke up this morning I thought it must have been a joke. The CEO and Founder of Lending Club, Renaud Laplanche, has resigned. But this is not April 1 and it is certainly no joke. The person who has probably had more impact on the growth of this industry than anyone else is no longer CEO of the company he founded – it is effective immediately.
Wow. Just Wow.
There is a press release out this morning with many of the details. The board asked for Renaud’s resignation following the discovery of an improper sale of $22 million in loans to one investor. According to the press release the loans in question departed from the instructions given by this investor. The loans have since been repurchased by the company. But the impropriety did not stop there. From the release:
The review began with discovery of a change in the application dates for $3.0 million of the loans described above, which was promptly remediated. The board also hired an outside expert firm to review all other loans facilitated in the first quarter of 2016 and the firm did not find changes to data in these or other Q1 loans.
The review further discovered another matter unrelated to the sale of the loans, 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. This lack of disclosure had no impact on financial results for the first quarter.
So, it seems that not only were the loans sold to an investor against their instructions it looks like the dates were changed to possibly try and hide something. Then there was the further discovery of a conflict of interest. Given these things it is not surprising that the board asked for Renaud’s resignation.
While we don’t know Renaud’s motivations behind all this, and we probably won’t ever find out the full story, it is clear this is bad news not just for Lending Club, but for our entire industry. Really bad. Coming on the heels of the Prosper news from last week and the OnDeck earnings May 2016 will go down as the worst month ever for our industry. And we are barely a week into the month.
Lending Club released their earnings earlier today and it looks like they produced another solid performance with loan volume, revenue, and net profits all increasing nicely. But none of that is going to matter today. The news of Renaud’s resignation will overshadow everything else.
My Take on This News
People often ask me what is the worst thing that could happen to this industry. I would somewhat flippantly respond that it would be massive fraud by the CEO of Lending Club. While thankfully this is not what has happened here there has clearly been some level of impropriety at the highest level within Lending Club. I am not sure what motivated Renaud to take these actions.
This is going to have massive repercussions inside the company. Renaud was revered as CEO with an approval rate of 96% according to Glassdoor. Everyone I have spoken with at Lending Club from entry level employees on up only had good things to say about Renaud. He had put not just Lending Club but the entire online lending industry on the map.
In my personal dealings with Renaud I have always found him to be the consummate professional since I first met him back in 2011. He seemed to be a man on a mission – he was personally very driven to change the banking system and make Lending Club into one of the financial giants of tomorrow. This will clearly be a bitter personal blow for him.
Was this just a case of a CEO losing his head and misusing his power? What was the story behind this $22 million investor and why they were treated that way? How will Lending Club cope without the only leader they have ever had? Who will they recruit as the new CEO? Scott Sanborn, the long time #2 at Lending Club, is taking over for the time being but I expect they will bring in a new CEO with deep financial services experience at some point. But we may never know the answers to some of these other questions
I only just found about this news an hour ago but wanted to get an article published immediately. We will have more on this story as well as a full analysis of the Lending Club Q1 earnings shortly.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.