Lending Club CEO resigns after review into loan sales
09 May 2016 | 5481 views | 0
Shares in Lending Club plunged in pre-market trading on news that chief executive and chairman Renaud Laplanche has quit after an internal review of loan sales to an investor.
Laplanche, the online lending marketplace's founder, resigned after a review found that sales of $22 million in near-prime loans to a single institutional investor were "in contravention of the investor's express instructions as to a non-credit and non-pricing element".
President Scott Sanborn will take on the role of acting CEO, supported by director Hans Morris, who has assumed the newly created position of executive chairman.
Says Morris: "While the financial impact of this $22 million in loan sales was minor, a violation of the Company's business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues."
The internal review also found another issue "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".
Meanwhile, the firm has posted first quarter operating revenues of $151.3 million, an increase of 87% year-over-year. Net income was $4.1 million, or one cent a share, compared with a loss of $6.4 million, or two cents, the year before.
The company has decided that it is "prudent" not to provide guidance at the moment as it bids to resolve the weaknesses found in its internal controls.
Lending Club faces other problems too; the online marketplace sector has been facing a tough time in recent months thanks to a tightening of the capital markets. Last week it emerged that Prosper is slashing its workforce by 28%, while OnDeck Capital recently reported disappointing financial results.