Lending Club, the popular peer-to-peer lending site sent out an email this week to members basically saying that they are ceasing to accept any new loans indefinitely. In the email they mention they are filing with the SEC to be able to create a secondary market for their loans, but there isn’t any mention of why they can’t keep accepting new money.
I find this is extremely suspicious behaviour. What kind of company stops selling their product while a new one is being developed?
Over at TechCrunch, there is speculation that Lending Club needs to get a broker-dealer license from the SEC to legitimize its operations. If true then it’s very possible that Lending Club will be back in business, but it doesn’t say much for the company if they didn’t get this license before they started.
Obviously I didn’t anticipate that Lending Club would run into financial trouble but in a post I did recently, I raised a concern about their marketing costs:
Another issue I have is that Prosper and Lending Club seem to be spending a lot of money to get clients – advertising, free money giveaways. Where does this money come from?
I think that Lending Club is finished. While it’s possible they can come back from the dead, I suspect they will just sell their portfolio of loans to another company and that will be it.
[edit – looks like I was wrong! Lending Club is alive and well]