Lending Club just posted this update on their blog today. It announces several new changes to their platform. Most of them are minor but there is one that may cause some consternation among investors. So what changes have been made?
Basically there are four changes that I will summarize here:
New listing times have been changed to 6am, 10am, 2pm and 6pm Pacific time every day. This is a shift of four hours later so that all times now occur during the day.
Four new credit attributes have been added to the Browse Notes download file: total installment credit limit, months since oldest bank installment account opened, number of revolving accounts and months since most recent bankcard delinquency. These new attributes are only available on the downloadable CSV file, not in their web interface.
FICO score ranges will now be five points instead of 18 or more. This is a nice improvement that will allow closer scrutiny of credit score for investors.
There will be a portion of available loans set aside for 12 hours for large investors.
The last change is the one that I will be focusing on in this post because the other changes are relatively simple and self-explanatory. I encourage you to read the post on Lending Club’s blog for all the details. For a glossary of all the fields in the Browse Notes files go here.
Some Loans Now Carved off For Large Investors
Before I launch into the details of this change here is some background. The large investors on Lending Club want to invest in entire loans. Up until now Lending Club has said no, you can invest in a maximum of 75% of a loan. But the demand for whole loans has been gaining momentum.
A few weeks ago Lending Club contacted me to get some feedback on this change. At the time I told them that retail investors wouldn’t like missing out on any loans. They understood that but they have to answer to both retail and institutional investors. So they came up with this plan. Interestingly, in our conversation the plan was for loans to be available to institutions for 24 hours but they have reduced that time period to 12 hours with this change.
This is how it works. Every time loans are added on to the platform 20% of them are held back for institutional investors. These loans are selected randomly from the pool of loans being added. After 12 hours the loans that were not taken by the institutional investors will be made available to everyone. On the CSV download there is now a new field called initial_list_status that will be set to “f” for fractional or “w” for whole. As I write this they are all fractional loans because this change was only implemented this morning. But soon we will see a mix of “f” and “w” loans.
So, here we are with this change. As a retail investor I am not thrilled about it. I want to be able to invest in every borrower that meets my criteria. But taken as a whole it seems like a reasonable compromise.
What do you think of these changes? I am always interested to hear your comments.
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.