Lending Club (LC), the world's largest online marketplace connecting borrowers and investors, today announced that it has further strengthened the issuing bank relationship to provide additional investor protection and maintain access to affordable credit in light of concerns created by the Madden vs. Midland decision rendered by the Second Circuit Court of Appeals in May last year.
Under the enhanced program structure, the issuing bank maintains an on-going economic interest in all loans made after they are sold, which is paid only when borrowers make payments on their loans. The majority of the bank's revenue is tied to the terms and performance of the loans. The bank also maintains an ongoing contractual relationship with borrowers, who may seek additional credit through the Lending Club program in the future.
"While the facts of the Madden case were very different from the way we operate and that case did not pose an immediate threat to our business, we believe this new structure will strengthen the foundation of our program to provide borrowers the ability to access affordable credit on a nationwide basis and to provide investors with greater certainty," said Lending Club Founder and CEO Renaud Laplanche.
The average interest rate on loans issued through the Lending Club marketplace is 12.60%, compared with a national average of over 17% for credit cards1. Borrowers who obtained a loan through the platform to pay off or refinance a credit card balance say they paid on average 7.6 percentage points less than they were paying on their outstanding debt or credit cards, reducing their rates by 35%2. Lending Club has helped over a million customers save hundreds of millions of dollars in the cost of their credit since inception in 2007.