In a decision I consider nearly as bad as the “New Coke” experience, Lending Club has decided to limit the questions an investor can ask potential borrowers. The resulting policy only allows investors to ask a limited series of pre-approved questions.
For me, this is unacceptable.
The primary reason for the change in transparency was to protect the borrower’s identity. Via Lending Club’s blog…
Lending Club investors have the ability to ask questions of potential borrowers before committing investments into their loans. This ability has raised concerns in terms of protecting the privacy and identity of both borrowers and investors. These concerns led us to adjust our Q&A mechanism for the benefit of both borrowers and investors.
Starting tomorrow, investors will only be able to ask questions from a predefined set that was created based on the most frequently asked questions logs over the last 2 years and reviewed and edited by our compliance team. As an investor, feel free to submit additional questions that you would like to see added to list to email@example.com.
I agree 110% that a borrower’s identity needs to be protected. No problem. I’ll bend over backwards to comply.
What I vehemently disagree with is that Lending Club has positioned themselves so that my questions have to be pre-approved even though I’m investing my money. Moreover, I only get to select from a series of pre-approved frequently asked questions that were filtered through Lending Club’s compliance department.
Bottom line: if Lending Club doesn’t “approve” of my question, sucks to be me.
This isn’t a quarterly earnings analyst call with Goldman Sachs or General Motors, nor is it a politician’s press conference, where softball questions are predefined and the deck is stacked to make the party of interest look their best. It is a — it was a — place where a borrower could apply for a loan, investors could review the borrower’s personal finances, and ask any question they wanted (without compromising either party’s identity) to make a decision on the borrower’s creditworthiness as well as make a decision on the probability the borrower would repay the loan plus interest.
If that meant asking the borrower a few tough questions, calling BS on the the borrower’s cream puff answer(s), or he/she decided to tap dance around the question without answering it, we investors apparently no longer have a say in the matter. We just take what we’re given, and told to take it or leave it.
In my opinion, this greatly compromises an investor’s ability to outperform the benchmark index and raises the rate of default.
I had high hopes for Lending Club as they were the most progressive thing that happened in finance for many, many years. I’ve also been one of their most outspoken supporters over the last 2 years by posting my returns and assisting more new investors find their way than any other blogger I know by organizing a 100+ person investment club.
However, based on the new policy of reduced investor transparency, I will not be investing new funds, nor will I be reinvesting funds that are repaid.
I will also be closing down the Lending Club investment club of 100+ members, and the new P2P Lending Investor blog & forum is dead in the water. Apologies to those that found value in the club, but I don’t like anyone telling me what I can or can’t ask when it comes to my money and my investments.
In hopes of remaining neutral, I will not advise anyone to follow along with my decision, but instead of writing a dozen blog posts trying to persuade Lending Club to reverse their decision, it’s far more simple to vote with your money.