LendingClub envisions a ‘marketplace bank,’ seeks charter

LendingClub / Photo credit: Wikimedia Commons

Peer-to-peer lending platform LendingClub is exploring the possibility of obtaining a national bank charter as it adjusts its strategy following a $10.6 million loss in the second quarter.

“To be clear, our vision would be to maintain our marketplace model and support it with a marketplace bank,” CEO Scott Sanborn said in a call with investors on Tuesday. “The marketplace bank could enhance our lifetime relationship with members through a broader range of products and services and enable us to serve our investor bank partners more efficiently.” 

The bank charter would “likely” drive growth and margin potential “over the medium term at a new source of low-cost funding” and provide LendingClub with “greater resilience and regulatory certainty,” Sanborn noted. He pointed out that obtaining a national bank charter is a “significant undertaking” and said the company will provide updates as things evolve.

LendingClub also is finding new ways to expand its current customer base. To advance this goal, it rolled out its Select Plus platform earlier this week, opening opportunities for investors “to approve borrowers across the credit spectrum who fall outside the current criteria,” Sanborn said on the call. Currently, the company requires a minimum credit score of 600 for borrowers, a minimum credit history of three years and a debt-to-income ratio that’s less than 40% for single applicants and 35% for joint applicants. Loan amounts typically are between $1,000 and $40,000.

“It is not people that have been given a yes and accepted a loan offer,” Sanborn added. “These would be people that [we] wouldn’t otherwise have gotten to know based on the criteria that we currently apply, so this is truly incremental.”

LendingClub’s long-term goals are to add partners, continue to optimize Select Plus over the next six months and build up its long-term strategy, including tech investments. It partnered with Opportunity Fund and Funding Circle in April to “increase access to affordable credit for small businesses.” The company sees 14 million applicants per year and currently has 3 million members.

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