Lending Club Response To Treasury RF I

Marketplace Lending RFI
Document ID: 80 FR 42866
71 Stevenson Street | San Francisco, CA 94105
September 30, 2015

Laura Temel
Attention: Marketplace Lending RFI
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW, Room 1325
Washington, DC 20220
Dear Ms. Temel,
On behalf of Lending Club Corporation (Lending Club), thank you for the opportunity to
contribute to the Department of the Treasurys Request for Information concerning Marketplace
Lending. We also appreciate your hosting the Treasury Marketplace Lending Forum held on
August 5, which we attended and found very valuable.
Lending Club (NYSE:LC) is the worlds largest online marketplace connecting borrowers and
investors. Our mission is to transform the banking system to make credit more affordable and
investing more rewarding. Our platform has facilitated over $11 billion in loans to more than one
million individual and small business borrowers since launching in 2007, and is continuing its
rapid and deliberate growth, fueled by the value we deliver to borrowers and investors and by
their high level of satisfaction with our products.
As important and sophisticated as our technology is, we start from a set of values that prioritize
acting in the customers best interests. For borrowers, our platform offers responsible credit
products with standard program loans offering a fixed rate, fixed term, and no hidden fees. Our
platforms products are generally offered at a lower interest rate than prevailing alternatives, and
we disclose all terms upfront in a manner that is easy for borrowers to understand and plan for.
For investors, we provide full transparency by posting on our website the performance of every
loan offered publicly since inception, as well as equal access and a level playing field with the
same tools, data, and access for all investors, small and large.
Lending Clubs Response to Marketplace Lending RFI, September 2015
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We use technology to automate processes and reduce costs, and pass on these cost reductions
to borrowers in the form of lower interest rates and to investors in the form of better returns.
Technology-led cost reductions include many process improvements, the ability to operate
without a branch network, and the automation of tasks that remain highly manual at most
traditional banks. Our ability to collect and analyze data, process and service loans in a highly
automated fashion, and simplify processes for our customers has fueled our growth and the
growth of marketplace lending over the last eight years.
As a two-sided technology-enabled marketplace, we deliver unique benefits to both borrowers
and investors. We believe that we also deliver strong benefits to the U.S. financial system as a
whole by bringing more transparency, removing friction, reducing systemic risk by requiring a
match between assets and liabilities, and offering traditional banks, including many local
community banks, the opportunity to participate on our platform and benefit from the same cost
reductions from which our other borrowers and investors benefit.
Borrower Benefits
We believe our platforms low cost operating model enables it to make credit more affordable
and available for consumers and small business owners and helps community banks reach
more of their borrowers:
For consumers:
o Significant cost savings: Over 70% of borrowers on our platform report using
their loan to pay off an existing loan or credit card balance and report that the
interest rate on their Lending Club loan was an average of 7 percentage points
lower than they were paying on their outstanding debt or credit cards.1
o Responsible credit: Customers who use Lending Club to refinance their credit
card balance are replacing revolving, non-amortizing, variable rate debt with a
fully amortizing, fixed rate installment loan. This product provides for a more
responsible way to manage their credit, and helps improve the customers credit
score by reducing the amount of open-ended credit. In fact, 77% of these
customers experienced a FICO score increase within three months of obtaining
their loan through Lending Club, with an average score increase of 21 points.2
o Predictable payments: Our platforms personal loan customers benefit from a
fixed interest rate and fixed monthly payments that help them better budget their
monthly payments and plan ahead, and protects them against the risk of rising
interest rates.
For small business owners:
Based on responses from 14,986 borrowers in a survey of 70,150 randomly selected borrowers conducted from
July 1, 2014 July 1, 2015, borrowers who received a loan to consolidate existing debt or pay off their credit card
balance reported that the interest rate on outstanding debt or credit cards was 21.8% and average interest rate on
loans via Lending Club is 14.8%.
2
Average credit score change of all borrowers who took out a loan via Lending Club between January 1, 2013 and
January 31, 2015 with a stated loan purpose of debt consolidation or pay off credit cards.
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Access to capital: Many small business owners cannot get the credit they need
to finance their business expansion and create jobs. In particular commercial
loans under $250,000 are underserved by traditional lenders, largely due to the
high fixed costs of underwriting these loans through traditional methods. Bank
loans from $100k to $250k have fallen 22% since 2007, during a period when
bank loans of $1 million or greater increased by 56%.3 Our platforms automated
processes allow us to provide smaller commercial loans that are less available
more economically than traditional banks can.
Transparency: Lending Clubs platform offers a more transparent process to
small business owners looking for credit. We clearly disclose the interest rate
being charged to the borrower and all fees. We also offer a simpler application
process, faster credit decision, and faster funding than most traditional banks.
Affordability: The same low operating cost model that powers our consumer
lending marketplace also enables a lower cost of funding for small businesses.
Small business owners looking for small loans often resort to merchant cash
advances that have implied annual interest rates of as much as 100%. Lending
Clubs platform can help small businesses access capital at longer terms and
larger amounts with lower rates than typical credit cards or alternative business
loans or cash advances.
Responsible products: Our platforms use of 1-5 year terms and no
prepayment penalties keeps borrowers from over-levering or getting into cycles
of unnecessary repeat borrowing.
Small Business Borrowers Bill of Rights: Lending Club joined with leading
Community Development Financial Institutions (CDFIs), think tanks, nonprofit
small business advocates, and other responsible small business lenders,
brokers, and marketplaces in the Responsible Business Lending Coalition and
unveiled the Small Business Borrowers Bill of Rights on August 5, 2015
(http://www.responsiblebusinesslending.org/). It is the first-ever consensus set of
principles and practices for responsible small business lending. Lending Club has
signed on to these principles and has committed to operate its business within
them.
For community banks:

o Lower cost of operations: Over the last 30 years, community banks have lost
significant market share to larger banks because of their inability to compete with
the scale of large financial institutions. By partnering with Lending Club,
community banks can offer loans to their customers using the Lending Club
platforms lower cost of operations to more effectively compete with these larger
financial institutions and their products. To strengthen these relationships, we
recently announced a partnership with BancAlliance, a national consortium of
over 200 community banks, to support this segment.
o Saying yes to more customers: Community banks can offer more approvals
to more of their customers by partnering with Lending Club and accessing our
breadth of investor risk appetites. Additionally, community banks can define their
FDIC March 31, 2015 Call Report Data, C&I Loans and Nonfarm Nonresidential loans
Page 3 of 51
investment criteria and invest in loans that meet their specific criteria allowing
these banks to expand their offerings to their borrowers while diversifying their
own exposure. Providing their customers with access to loans also helps
community banks to retain and attract customers.
Regulatory Framework
Our borrowers benefit from the same regulatory protection as any bank customer as all loans
issued through our platform are issued by federally regulated banks. Working in partnership with
issuing banks has tremendous value to Lending Club and borrowers as it holds us to the highest
compliance and regulatory standard. As a result, borrowers benefit from all consumer protection
regulations including equal access to credit, fair lending, truth in lending disclosure
requirements, fair credit reporting, and fair debt collection. Our compliance with these rules and
regulations is monitored by daily oversight and review as well as quarterly and annual audits by
the issuing bank, monthly and annual audits by our internal audit and compliance teams, and an
annual audit by an independent auditor. This oversight is further supplemented by the diverse
investor base (federal and state chartered banks, insurance companies, pension funds, etc.)
that operate through Lending Clubs platform and bring with them not only their internal audit
review and oversight process but also the review and oversight of their regulators, such as the
FTC, FDIC, and OCC (For example see: OCC bulletin 2013-29 Third Party Relationships),
which come together to create a robust compliance program that benefits all users of the
platform.
Investor Benefits
Our marketplace has attracted both individual and institutional investors who participate through
a variety of programs that generally present the same overall benefits:
Access to credit asset classes that individual investors did not have access to
before and institutional investors only had limited access to on a pool basis.
Steady cash flow and net annual returns averaging between 6%-9%4 since
inception.
Full control over investment decisions: individual investors can build their own
portfolio of standard program loans or Notes based on their investment objectives
and risk appetite. Investors can use 32 different filters to build their portfolio
(including FICO score, debt-to-income ratio, job tenure, home ownership, etc.) and
review credit loss forecasts for the specific portfolio they selected before making their
investment decision;
Maximum transparency: investors can review statistics on credit performance by
grade and by credit attribute for every single loan that was made publicly available to
invest in since inception in 2007, as well as summary statistics by vintage of
origination.
For Retail investors with at least 100 Notes and 100 different borrowers and no Note accounting for more than 2.5%
of the portfolio assuming 24 to 30 months of average age of portfolio as of September 15, 2015.
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Our investment programs available to investors are regulated by the SEC under the Securities
Act of 1933 and the Exchange Act of 1934 and the rules and regulations thereunder.
Terminology
The term marketplace or credit marketplace is best used to refer to two-sided marketplaces
that facilitate lending between borrowers and investors, and do not take balance sheet risk by
investing in the loans they facilitate. We believe that companies that use their balance sheets to
make loans are not marketplace lenders, and may be better described simply as balance sheet
lenders. Throughout this response, we use marketplace to refer only to two-sided
marketplaces that do not predominately self-fund loans. The term platform may describe a
marketplace or other technology made accessible to third parties.
Recommendations to Enhance Marketplace and Other Online Lending
We have included in our response to the RFI a number of recommendations for legislative or
regulatory consideration that Lending Club believes would enhance or clarify the development
and operation of online credit marketplaces to the benefit of consumers, small businesses, and
the financial system more broadly. For ease of reference, we have listed these below, along
with the particular questions where the recommendation is discussed in this submission.
1. Small business lending protections We believe existing regulations adequately
protect consumers borrowing through online credit marketplaces. However, we are
concerned that small business owners may not benefit from the right level of protections
and transparency. We believe there is an opportunity for the industry to fully adopt the
practices and principles enumerated in the Small Business Borrowers' Bill of Rights, and
for the appropriate regulatory agencies to continue to monitor the industrys progress in
that respect. (Q11)
2. Alignment of interest and disclosure requirements Lending Club has a tremendous
amount of skin in the game (starting with over 20% of our revenue from each loan
being subject to loan performance over time) and an ongoing alignment of interests with
investors. Therefore, we believe that any mandated capital-based risk retention
requirement for marketplaces would be misguided and detrimental to both borrowers
and investors. To ensure investors have all the necessary information to make informed
investment decisions and continue to exercise full control over the quality of loans being
issued through marketplaces, we are proposing additional mandatory disclosure
requirements. (Q10)
3. Tax incentives to increase access to credit in underserved segments We propose
that investors who provide capital in defined underserved areas and to low- to moderateincome small business borrowers be taxed at the capital gains tax rate, rather than the
current marginal income tax rate, if the loan is held for over 12 months. Additionally, we
propose, similar to the UK framework, that all investors be able to offset losses directly
against interest income and gains and have returns on the first $5,000 of investments
made tax-free. (Q9)
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4. More efficient income verification We urge that the IRS create an application
programming interface (API) for its 4506t tax return transcript process. This would make
it easier for consumers and small business owners to give lenders access to their tax
information voluntarily. We believe this relatively simple improvement to the current
4506t process would make a meaningful difference in lenders ability to offer lower cost,
faster, easier, safer, and greater access to credit, across consumer and small business
lending. (Q2 and Q9)
Please find below answers to the specific questions asked in the RFI and thank you again for
the opportunity to offer input.
Renaud Laplanche
Founder and CEO
Lending Club
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1.
There are many different models for online marketplace lending including platform lenders
(also referred to as peer-to-peer), balance sheet lenders, and bank-affiliated lenders. In
what ways should policymakers be thinking about market segmentation; and in what ways
do different models raise different policy or regulatory concerns?
There are many ways to segment the market, and each segmentation has its own positive and
negative aspects. We believe the three lines of partition below, which differ from the Treasurys
proposed scheme and definitions, draw key distinctions and more accurately describe the
regulatory framework and control environment in which online lenders operate.
A. Balance sheet lenders vs. marketplace lenders
Many online lenders finance loans with their own equity and/or borrowed capital before reselling
these loans to investors either privately or through the securitization markets. We refer to these
lenders as non-bank balance sheet lenders and not as marketplace lenders, as they do not
facilitate a marketplace (as defined above). While this method has its merits, it is different in
nature from the business model of true marketplaces such as those operated by Lending Club
or Prosper. The marketplace operator lists loan applications that meet certain underwriting
standards, established by a banking partner in some cases. These approved applications are
shown to investors along with risk ratings, and investors decide which loans to invest in.
The structure of a marketplace with an issuing bank brings with it regulatory scrutiny at the
federal level (SEC, OCC, FDIC, CFPB, FTC) and state level through applicable state agencies
and the issuing bank itself, as well as daily acceptance testing by thousands of users. In
addition, each category of institutional investor brings a layer of additional due diligence,
scrutiny, and controls. These investors include banks, investment advisors, hedge funds,
endowments, and pension funds, which bring the following additional levels of oversight:
a. Large institutional investors perform significant investment, credit, and legal due
diligence before making an investment. They also generally employ investment and
credit professionals to monitor the marketplaces credit performance and servicing
quality as well as portfolio performance.
b. As a vendor or third party partner to banks, we are subject to strict vendor management
compliance requirements. Bank investors on the platform like Union Bank bring an
additional layer of audit and control requirements, particularly in areas such as Bank
Secrecy Act and Anti-Money Laundering, in order to satisfy their own compliance and
regulatory requirements.
c. Investment advisory firms offer an additional and different type of oversight to satisfy the
fiduciary duty they have to their clients. The satisfaction of that duty includes an initial
due diligence often involving an accounting and process audit as well as a traditional
investment and legal review, and ongoing monitoring of performance.
B. Marketplaces that offer private vs. public investments
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Some marketplaces are financed mostly or exclusively through private placements, while other
marketplaces like Lending Club offer investments only through a public offering, which began in
October 2008. In 2011, Lending Clubs wholly-owned subsidiary LC Advisors (an SEC
registered investment advisor) began making available private offerings to accredited investors
and qualified purchasers only in investment funds. At the same time, a separate business entity,
LC Trust I, was created to provide certain, qualified investors the ability to purchase trust
certificates in a vehicle that holds loans facilitated by the Lending Club platform.
We believe that a public offering of securities offers transparency to investors and the public at
large in terms of the risk factors associated with the investment, performance of the Notes and
underlying loans, and the issuers financial standing and financial performance. A public offering
of securities entails periodic disclosure and reporting requirements (on Forms 8-K, 10-Q, and
10-K), audited financials, accounting controls (SOX), and strong corporate governance. As a
publicly traded company, Lending Club is now also subject to additional public scrutiny and has
expanded its obligations under the 33 and 34 Acts and taken on the requirements of the NYSE.
Private investors through LC Advisors receive the same level of data and transparency as
Lending Clubs public investors and are not advantaged or disadvantaged in any material way.
The purpose of the private offerings was to increase the efficiency of investing larger sums of
capital as opposed to investing in $25 increments via the public offering.
In addition to the disclosure requirements required with a continuous public offering, Lending
Club and other leading marketplaces have elected to provide additional loan-level credit
attributes and performance data publicly on their websites for the publicly available Notes (and
underlying loans) so anyone can monitor underwriting and servicing quality, without making any
investment through or even signing up for the platform.
In contrast to this loan level transparency, certain other platforms and lenders finance loans with
their own equity or borrowed capital and then subsequently issue securities publicly through the
securitization market to create additional capacity on their balance sheet. While this structure
brings some level of transparency into the underwriting and servicing performance, this
transparency is limited to the performance of loans at a pool level, rather than an individual loan
level, which can mask individual loan performance.
C. Marketplaces that issue loans under states licenses vs. marketplaces that partner
with issuing banks
The two most common regulatory frameworks for issuing loans are the use of state lender
licenses and partnerships with issuing banks. Both of these models are well established and
have been relied upon for many years by many lenders. Under the latter framework, used by
Lending Club and others, Lending Club acts as a third-party vendor under the direct oversight
and control of the issuing bank that originates and issues loans to borrowers. Later the bank
then sells these loans to the marketplace operator, who may, in the case of Lending Club or its
affiliate, issue securities to investors to raise the capital needed to acquire the loan from the
bank or may subsequently sell the loan to an investor who is looking to hold the assets, such as
a community bank. These securities are special, limited obligations of the issuer that require the
issuer to make payments to investors if the borrower makes a payment to the marketplace,
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thereby matching the asset (the borrower promissory note) with the liability (the obligation of the
issuer to pay the investor). We believe that this perfect matching, combined with the spreading
of any such risk over thousands of investors, greatly reduces systemic market level risk related
to defaults. This matching materially differs from banks, which typically make loans at 10x the
value of equity held on their balance sheet.
As noted above, a marketplace that partners with an issuing bank is subject to an additional
level of regulatory oversight as it performs a number of tasks on behalf of the bank: applying the
banks credit policy, underwriting loans on behalf of the bank, conducting identity and credit
verifications - all at the banks daily direction, oversight, and control. In essence, the
marketplace is acting almost as part of the issuing bank and that program is subject to
supervision by the issuing banks prudential regulator and held to the standard of regulatory
compliance and consumer protections of the bank itself.
We believe that extremely robust and highly efficient compliance management and consumer
protections result from the model of: (i) acting as a two-sided marketplace with a wide variety of
investor types, each of which brings with it an additional level of diligence, oversight, and
scrutiny, (ii) conducting a public offering of securities that provides additional controls,
transparency, and disclosure and publicly disclosing loan-level data on our website beyond the
requirements of our securities offering, and (iii) partnering with a federally regulated issuing
bank to directly oversee and audit the loan program (along with its prudential regulators).
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2.
According to a survey by the National Small Business Association, 85 percent of small

businesses purchase supplies online, 83 percent manage bank accounts online, 82 percent
maintain their own website, 72 percent pay bills online, and 41 percent use tablets for their
businesses. Small businesses are also increasingly using online bookkeeping and
operations management tools. As such, there is now an unprecedented amount of online
data available on the activities of these small businesses. What role are electronic data
sources playing in enabling marketplace lending? For instance, how do they affect
traditionally manual processes or evaluation of identity, fraud, and credit risk for lenders?
Are there new opportunities or risks arising from these data-based processes relative to
those used in traditional lending?
As electronic credit data has increased in availability, particularly on small businesses, it has
been critical to the development of Lending Clubs marketplace and that of other innovative
firms that utilize data-driven underwriting models to provide nearly instant credit offers with an
experience that is substantially better and more efficient than traditional small business bank
lending. Newer types of electronic data sources are useful when traditional small business credit
data is less predictive, but they introduce privacy and fair lending issues issues that many
lenders within and outside of marketplace programs are now addressing. Electronic data access
creates the opportunity to increase the convenience of and access to affordable and responsible
financing for borrowers underserved by traditional lending systems, and makes borrowing a
faster and simpler process for everyone while reducing the potential risk of fraud. Specific
benefits include:
5
6
More convenient access to credit A traditional business loan requires an overly

burdensome amount of documentation that can take hours to prepare.5 The recent
Federal Reserve Bank of New York surveys have found that the average credit-seeking
small business owner spends about 24 hours just getting ready to initially apply for
credit6. In contrast, with online applications and the use of electronic credit data,
applications can be submitted faster and completed at the convenience of the borrower
as electronic credit data sources quickly provide technology platforms with the required
information, replacing the reams of information used by traditional lending decisions.
This speed and convenience allows small business owners to focus on running their
businesses and also makes it easier to comparison shop, driving down the cost of credit.
Faster access to credit By using electronic data, the platform leverages automated
credit decisioning that removes problematic discretionary credit decisions while allowing
a quicker decision that enables loan proceeds to be delivered to small businesses faster
than traditional lenders, typically five business days or less.
Reduced identity fraud Without a face-to-face relationship, online lenders use
various electronic data sources to prevent fraud and to protect both borrowers and
investors. By using electronic data and highly trained fraud reduction professionals,
Lending Club has developed excellent fraud detection capabilities across small business
https://www.sba.gov/content/business-loan-checklist
http://www.newyorkfed.org/smallbusiness/SBCS-2014-Report.pdf
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and consumer lending, enabling our marketplace to lower pricing and prevent harmful
identity theft. In the first nine months of 2014, the net identify fraud loss of the top credit
card issuers in the ID Analytics network was 10-15bps of portfolio outstanding. For LC
during the same time period, identity fraud losses were less than 1bp of loan principal
issued.
Broader access to credit By leveraging electronic data and in partnership with
community banks and CDFIs, Lending Clubs marketplace is broadening access to small
business financing. For example: Lending Club's partnership with Opportunity Fund
(described in Q5) combines the benefits of a technology-based platform and CDFI
approaches to small business lending. This type of partnership builds CDFI capacity and
increases access to thousands of potential borrowers that the CDFI might otherwise be
unable to reach.
As electronic data types expand and electronic data generally is made more accessible, it must
be used thoughtfully with continued testing and oversight to prove it is effective and stable, and
limit the risks inherent in blindly using and trusting new data. As a result, credit models based on
electronic data should be applied for less critical purposes initially, such as improving fraud
verification procedures. As electronic data is used for less critical procedures, users can test the
quality of the data to make sure that it performs as expected from a credit perspective. Once
electronic data is used for determining credit risk, users must also continually invest, test, and
refresh these models as electronic data can quickly change and its efficacy diminish. For
example, the Department of Justice noted that a model used by a major ratings agency to rate
mortgage backed securities failed to take into account new data as the mortgage products and
economic environment changed.7 As this example illustrates, while electronic data can make
credit more affordable and accessible, its use comes with a requirement of continual,
responsible, and diligent review and oversight.
7 http://www.justice.gov/iso/opa/resources/849201325104924250796.PDF
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3.
How are online marketplace lenders designing their business models and products for
different borrower segments, such as: Small business and consumer borrowers;
Subprime borrowers; Borrowers who are unscoreable or have no or thin files; Depending
on borrower needs (e.g., new small businesses, mature small businesses, consumers
seeking to consolidate existing debt, consumers seeking to take out new credit) and other
segmentations?
Like other marketplaces, Lending Clubs approach is to use a single technology platform that
can serve many markets. Lending Clubs marketplace started in prime consumer credit, then
expanded to custom consumer credit programs for both super- and near-prime borrowers,
specialized consumer lending (Springstone acquisition), and small business lending; we are
also continually assessing other markets. While each lending product has specific requirements
that are unique, the business model and platform used is consistent.
Marketplaces are building their platforms to leverage technology in order to: (i) reduce operating
costs, (ii) improve user experience, (iii) increase access to and affordability of credit, and (iv)
provide investor access to a new and attractive asset class. The application of these benefits
may differ by market. For example, in mortgage origination and issuance, user experience and
funding timelines are likely to be the main drivers of improvements to the process.
The technological sophistication of Lending Clubs marketplace enables it to leverage a broad
investor base with varying risk-return requirements. These varying risk-return requirements then
enable Lending Clubs marketplace to efficiently serve a variety of borrower segments matched
to these risk-return levels. These include some market segments currently underserved by
traditional bank lending, such as:
Credit card payoff personal loans: where traditional banks may not lend because of
concerns about cannibalizing their profitable credit card businesses
Small business loans under $300,000: where banks are hindered by legacy systems and do
not have the robust and scalable technology to efficiently and profitably underwrite and
process these loans (and alternative business finance companies are not as affordable or
transparent in their terms as most credit marketplaces).
Additionally, Lending Clubs diverse acquisition channels enable it to cost-efficiently acquire

borrowers in different segments. Partnerships are a major acquisition channel for small
business loans, while direct marketing channels are primarily used to acquire personal loan
borrowers.
Marketplaces have built technology platforms designed to be flexible around the needs of
different products and borrowers and to manage a diverse set of investors with a variety of risk
tolerances. As a result, marketplaces have efficiently delivered affordable credit to underserved
markets including small businesses and low- to moderate-income borrowers while offering
investors access to a new and attractive asset class.
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4.
Is marketplace lending expanding access to credit to historically underserved market

segments?
Marketplaces are providing increased access to credit to historically underserved market

segments, particularly to small business owners and low- to moderate-income individuals. We
believe that this trend is likely to increase as the industry develops because marketplaces have
structural advantages in serving underserved market segments, including lower cost of
operations, diverse capital sources with a breadth of risk-return tolerances, and technology and
data expertise.
Drivers of expanded access: Structural advantages
Marketplaces can bring structural advantages to serving underserved borrowers, by use of their
lower cost structure, expanded capital sources, no legacy systems, and core competencies in
data innovation. Lending Club, as an example, has an operating ratio estimated to be 2%, when
holding monthly originations constant, in contrast to the 5-7% operating ratios of traditional bank
lenders.8 This lower operating cost ratio enables the Lending Club platform to facilitate loans to
borrowers that a traditional bank may deem to be unprofitable, such as smaller sized loans that
underserved borrowers more often require. The minimum loan through the Lending Club
platform is $1,000 for consumer loans (in most states), and $15,000 for business loans.
Additionally, a diversity of capital sources enables marketplaces to serve borrowers that a
traditional bank lender may not. The risk tolerance of Lending Club investors varies significantly,
and therefore the platform is able to facilitate loans to a broader risk/return profile in contrast to
the more narrowly focused risk appetite of a balance sheet lender, including traditional banks.
The technology and data expertise of many marketplaces is a third important advantage.
Marketplaces have typically built their own technology and are not inhibited by a traditional
banks complex, legacy systems. This purpose built technology base, when coupled with a core
competency in data innovation, allows Lending Club and other marketplaces to efficiently serve
creditworthy borrowers with lower credit scores by discovering alternative indicators of
creditworthiness and effectively utilizing them in an automated underwriting process.
By leveraging these advantages of lower cost structure, expanded capital sources, and
technology and data expertise, marketplaces can serve more customers than traditional
lenders, and we believe marketplaces will increasingly serve the historically underserved over
time.
In practice
As a result of these structural advantages, marketplace lending delivers a significant amount of
affordable credit across the country to low- to moderate-income families and individuals. Over
8
Operating ratio is expressed as expenses as a percentage of outstanding loan balance. To adjust for rapid growth,
Lending Clubs estimated operating ratio is estimated on a run rate basis, assuming no growth in monthly rate of
origination volumes.
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the last 12 months, Lending Clubs platform, for example, has facilitated more than $200 million
in loans to low- and moderate-income individuals9 across the United States. Lending Club
believes it will continue to expand its platforms reach to this underserved population, through
partnerships like the innovative partnership announced this year with Citi and Varadero Capital,
which is designed to deliver $150 million of affordable credit to underserved, low- to moderateincome borrowers.
These platforms also facilitate loans to other underserved constituencies such as smaller
businesses. The underserved nature of these smaller businesses is evidenced in the Federal
Reserve's Joint Small Business Credit Survey, which shows microbusinesses (those with
revenue of less than $250,000) only succeed in obtaining credit 25% of the time10 while large
firms with annual revenues of $10 million or more succeed in accessing credit 70% of the time.
Moreover, this survey also notes 86% of microbusinesses are seeking credit for an amount of
$250,000 or less. Lending balances for smaller loans ($100,000 to $250,000) are down 22%
since 2007, while booked commercial loans of greater than $1 million have increased 56% in
the same period.11 To meet this emerging need, our platform is focused on serving the segment
seeking loan sizes less than $300,000 with an average loan size of $55,000. Our partnership
with Opportunity Fund, one of the largest Community Development Financial Institutions
(CDFIs), is structured to provide credit access to small businesses in underserved parts of
California in order to leverage our platform and deepen its access to and broaden the benefit for
this underserved population.
Successfully serving underserved populations, however, requires more than simply making
credit accessible to them. To truly serve these populations effectively, the credit product must
be designed to provide for the timely and successful repayment of the loan and allow the
borrower to end the cycle of debt that many currently available products encourage. The
Lending Club platform focuses on providing access to loans whose terms are fair, transparent,
and responsible for all borrowers with features for standard program loans such as a fixed term,
fixed monthly payments, and no prepayment penalty, in amounts that do not unduly burden the
borrower, which overall reflect responsible borrowing principles. Our position on these principles
is further reflected in the Small Business Borrowers' Bill of Rights (BBOR) that was created by
a coalition of lenders, brokers, nonprofits, and industry participants. (See Question 11 for further
detail on the BBOR). We believe that our marketplaces structural advantages, continued focus
on fair and transparent terms, and innovative partnerships will aid in broadening access to
responsible credit for these historically underserved populations.
Borrowers who have reported adjusted household income is less than 80% of the median income of their zip code
and live in majority or greater low to moderate income (LMI) census tracts as of June 30, 2015.
10
Federal Reserve Banks of New York, Atlanta, Cleveland, and Philadelphia, Joint Small Business Credit Survey
Report, 2014. http://www.newyorkfed.org/smallbusiness/joint-small-business-credit-survey-2014.html
11
FDIC March 31, 2015 Call Report Data, C&I Loans + Nonfarm Nonresidential loans
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5.
Describe the customer acquisition process for online marketplace lenders. What kinds of
marketing channels are used to reach new customers? What kinds of partnerships do
online marketplace lenders have with traditional financial institutions, community
development financial institutions (CDFIs), or other types of businesses to reach new
customers?
Lending Club uses a diverse array of direct and partnership marketing channels to attract
borrowers to our platform, including:
Online Partnerships: We work with companies that sell products or services that are
suitable for financing or that help potential borrowers manage their finances, manage
their credit, or find the best lending options.
Search Engine Optimization: We seek to ensure that our marketplace is optimized to
achieve meaningful organic traffic from search engines.
Search Engine Marketing: We also use paid placement on major online search
engines.
Social Media and Press: We leverage social media outlets and the press to help drive
brand awareness.
Offline Partnerships: We work with companies that sell products offline that often
require affordable financing, such as swimming pools, home improvements, and
furniture.
Mail-to-Web: We have developed a highly targeted direct marketing program that
selects from a given population of consumers and small business owners who would
benefit from our products.
Radio and Television Advertising: We utilize radio and television advertising to
enhance the impact of our other marketing channels.
Other Partnerships
Traditional Financial Institutions: We work with a large number of traditional financial

institutions that invest directly on the platform and / or partner with us to facilitate
personal loans to their customers. Banks are a natural partner for marketplaces as their
strong relationships with their customers and low cost of capital, combined with the
efficient and cost-effective technology offered by marketplaces, creates a best of both
worlds advantage for banks and their customers. These partnerships enable banks to
provide their existing customer base with access to credit products other than traditional
credit cards, which are an efficient payment solution but a poor long-term financing
option. These partnerships also enable banks to invest in these new loans that the bank
would not otherwise be able to procure, underwrite, and fund as efficiently, resulting in a
stronger borrower relationship and a more diverse bank balance sheet. Examples of
Lending Clubs banking partnerships include:
o BancAlliance: In February 2015 Lending Club announced a partnership with
BancAlliance, a national consortium of 200 community banks in 39 states, to offer
access to co-branded personal loans to their customers through the Lending Club
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platform, as well as purchase certain of these consumer loans and others for their
portfolios
o Union Bank: In May 2014 Lending Club announced a strategic alliance with Union
Bank, a $100B+ asset bank, to have Union Bank purchase assets through the
Lending Club platform, with the potential to create unique credit products together for
Union Bank and many other banks customers.
Non-profits: We have partnered with several non-profits such as the U.S. Womens
Chamber of Commerce and SCORE to expand access to credit to their networks.
CDFIs: We are developing relationships with CDFIs to broaden access to financing for
underserved borrowers, including:
o Opportunity Fund: Lending Club has partnered with Opportunity Fund, a leading
CDFI business lender, and the largest nonprofit lender to small businesses in
California, to provide a compelling combination of approaches to small business
lending to leverage the strengths of each model. Lending Club can help the
Opportunity Fund improve their efficiency and scale by providing them with the
Lending Club platforms automated credit model, fast, simple application process,
and access to thousands of potential borrowers that a CDFI such as Opportunity
Fund may otherwise be unable to reach. Through this new partnership, businesses
that would not satisfy the credit criteria of the issuing bank for Lending Clubs
platform may now be offered a loan to be acquired by Opportunity Fund. The pilot
phase of this partnership plans to facilitate up to $10M in loans to small businesses
in underserved areas of California, helping an estimated 400 businesses create
1,000 jobs. If the pilot is successful, the parties intend to expand the effort nationally.
Beyond utilizing the marketing channels identified above, Lending Clubs strengths in consumer
acquisition lie in its ability to use a simple online experience for borrowers who come through
any channel and its relentless focus to measure performance and optimize the process to
further enhance the overall borrower experience.
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6.
How are borrowers assessed for their creditworthiness and repayment ability? How
accurate are these models in predicting credit risk?
Lending Club and its issuing bank partners have developed sophisticated systems to assess
creditworthiness (which should take into account, through a variety of assessments, the
probability of a borrowers successful on-time repayment of the loan) and prevent fraud. As a
result, the Lending Club platforms risk model is currently twice as effective as generic bureau
risk scores, and our fraud prevention systems minimize fraud losses to rates currently much
lower than industry standards.
Effective Assessment of Creditworthiness
All lenders should assess a borrowers creditworthiness that focuses on a borrowers ability to
successfully repay the loan in full and on time, consistent with responsible lending practices.
The foundation of the Lending Clubs platforms loan decisioning is automated credit models
that provide borrowers with instant loan offers. These models draw on current and past credit
behavior data provided by credit bureaus, application information provided by the applicant, and
credit and payment data from other third parties. We believe that these models are strong
predictors of credit risk, with actual losses generally tracking forecast losses.
Lending Club has invested significantly in its credit expertise and continuously enhanced the
risk models. To develop these risk models, Lending Clubs risk team, data scientists, and credit
modelers work in close partnership with our issuing bank partners credit and risk teams to
develop and deploy risk assessment systems at a pace and scope that exceeds that of most
traditional lenders. The platforms risk models are regularly reassessed and rebuilt to
incorporate recent and additional data and any changes to electronic data. The teams
collectively examine thousands of potential credit attributes to enhance the risk prediction
capabilities of the credit model and sub-models.
Lending Club is not only able to deploy credit model improvements on the platform more
frequently, but also can respond more quickly to changes in the portfolio or economic
environment. After design, review and internal testing, and validation of new models,
independent third parties are engaged to validate these new custom risk models. Once this
independent validation is complete, new models are moved onto the platform and into
production in approximately eight weeks. Updates to these new models can be developed and
placed into production in as little as two to three weeks. In contrast, a traditional bank loan
program may require months to complete similar processes needed to develop, validate, and
implement a new model into production. Our risk infrastructure and automated Q/A systems
ensure that we are able to both develop quickly and test and validate models in a
comprehensive and efficient fashion.
The high quality of the platforms risk assessment systems can be demonstrated in two ways: (i)
the currently deployed model on the platform outperforms industry generic scores such as FICO
by more than double in the KolmogorovSmirnov test, an industry standard measure of the
effectiveness of a risk model and (ii) as evidenced by declining platform losses (on a percentage
basis) and increasing investor confidence, the platforms pricing has correspondingly declined
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over time, resulting in a benefit to borrowers with even more affordable creditover the last
three years, the risk premiums required by investors on Lending Clubs platform have
decreased by 270 basis points.12
Effective Income and Employment Verification
Lending Club and its issuing banks have developed and refined statistical models over the last 8
years to determine the amount of verification necessary for any given loan application. We have
also developed processes to cost-efficiently verify income and/or employment when such
verification is necessary and is likely to improve loan performance, yet we do this in a way that
minimizes the burden on the borrower.
The chart below shows that these models and processes have been effective at identifying the
lowest risk loans that do not require income or employment verification. Loans that have not
been subject to verification of income have on average performed better than loans that were
income verified.
Effective Fraud Prevention

Fraud prevention is critical to reducing risk and improving loan performance. Lending Club has
developed industry leading fraud prevention systems that protect investors from investing in
fraudulent loans and also protect borrowers who may be subject to identity theft. Similar to
creditworthiness, Lending Clubs fraud detection system begins with models that analyze a wide
variety of credit and other data to predict the likelihood that a loan application may be
fraudulent. Our fraud team then performs additional verifications in order to proceed with the
application. In the first nine months of 2014, the platforms fraud loss rate related to verified ID
12
The weighted average interest rates on 36-month loan portfolio have declined from 13.2% in June 2012 to 11.2% in
June 2015, down 200 bps. Meanwhile, 3-year treasury yields have increased 70 bps over the same period, resulting
in a 270 basis point spread reduction. Spread based on weighted average monthly interest rate on 36-Month loan
portfolio minus monthly 3-year treasury yield. Source: FactSet, www.factset.com/
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theft was less than 0.01%. By comparison, the net identify fraud loss of top credit card issuers
was generally 0.10%-0.15%.13
How does the credit assessment of small business borrowers differ from consumer borrowers?
For both consumers and small businesses, Lending Club employs a consistent approach with a
data and technology-enabled highly automated process; our underwriting approach is
specifically tailored to the repayment behavior of the segment. Small businesses and
consumers have different credit characteristics and require different underwriting processes.
The Lending Club platform loan decisioning for small businesses underwrites the business and
a guarantor with available data, using a credit model designed specifically for the repayment
behaviors of the types of businesses that we serve. The applicants financial statements, credit
history and behavior, additional data, and other information are analyzed to properly decision
each business loan application.
Does the borrowers stated use of proceeds affect underwriting for the loan?
For consumer loans, the use of proceeds can influence pricing and loan amount available based
upon historical risk performance, but Lending Club does not verify the actual use of the loan
proceeds. For small business loan applications, the stated use of proceeds can allow us to tailor
the terms of the loan to the businesss need. For example, a business borrowing for expansion
may be best served with a longer loan term, while a business borrowing to purchase and sell
inventory may be best served with a shorter term. Additionally, when the stated use of proceeds
can be verified based on the product by sending money directly to the supplier of inventory, it
reduces risk and therefore can result in lower pricing.
13
Source: ID Analytics
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7.
Describe whether and how marketplace lending relies on services or relationships provided
by traditional lending institutions or insured depository institutions. (Note: relates to the
answer in Q1.)
We believe that marketplace lending is a catalyst that brings together a variety of service
providers and other relationships to create a more accessible and affordable lending
mechanism. We also strongly believe that marketplace lending provides benefits to bank
partners including: (i) an efficient lending mechanism for products essentially vacated by
traditional banks due to cost and competitive product constraints and (ii) the opportunity to
enhance our partners' product offerings to borrowers in a more efficient and affordable manner.
In addition, the marketplaces product offerings have helped our partners grow their balance
sheet with investments in the platforms high quality assets and benefited our platform through
our partners guidance and feedback on enhancing compliance, controls, and risk infrastructure.
The key relationships that marketplaces may have with traditional lending institutions desiring to
participate as borrowers and/or investors on a marketplace platform include the following:
Borrower-Side Banking Relationships
Issuing bank relationships
Marketplaces may rely on issuing banks to originate and issue all loans facilitated by the
platform and to provide strict oversight and control over the platforms compliance and risk
capabilities. Lending Clubs primary issuing bank is WebBank, a FDIC-insured Utah-chartered
industrial bank that handles a variety of consumer and commercial financing programs. Lending
Club also partners with NBT Bank, NA and Comenity Capital Bank as the issuing banks for its
K-12 education and patient finance programs. These relationships subject the marketplace to a
substantial degree of regulation and regulatory oversight that does not apply to non-bank
programs.
Referral or Joint Marketing banks
Over the last 30 years, there has been a tremendous shift in how credit is delivered to
consumers. In 1990, community banks accounted for approximately 80% of the consumer
lending market but they now account for less than 10% of that market.14 This shift was driven
largely by the inability of smaller banks to compete with large financial institutions given their
lack of scale and resources and the move towards credit cards and away from more traditional
loan products.
In order to increase the accessibility of the platforms loan products, we continue to develop
partner opportunities with banks and other traditional lending institutions in order to leverage the
cost efficiency of our platform and make its products available to our partners customers under
14
Ryan Tracy, " Lending Club, Small U.S. Banks Plan New Consumer-Loan Program," Wall Street Journal, February
9, 2015
Page 20 of 51
co-branded offerings. These partnerships also allow the banks to strengthen their balance sheet
by investing in their own customers.
Our partnership with BancAlliance, a national consortium of over 200 community banks, is
representative of the collaborative relationship between marketplace lending and traditional
banking. We are working with a variety of consortium banks to enable them to deliver a cobranded loan product to their customers where previously none existed and allow the bank to
invest in these very loans and demonstrate their commitment to their community and clients.
Improve access to affordable credit to bank customers
Another notable partnership that illustrates the benefits of collaboration between the Lending
Club platform and banks is our initiative with Citi and Varadero Capital. This innovative
partnership aims to deliver $150 million of affordable credit to underserved, low- to moderateincome borrowers. Through our marketplace and its innovative online process, we are able to
reach underserved populations with a level of efficiency that we believe traditional lending
institutions will increasingly find attractive as a complement to their overall lending strategy.
Investor-Side Banking Relationships
Banks as investors
As discussed above, traditional lenders are not only expanding the suite of credit products to
their customers through Lending Clubs marketplace; they are also are becoming a growing
source of investor capital for our marketplace. We believe insured depository institutions are
one of the key components of our strategy to attract diverse and stable investors. These
relationships further strengthen and balance our marketplace and provide us with additional
flexibility to facilitate an even wider variety of loans through a range of business and economic
cycles.
Other Benefits of Banking Relationships
In addition to the rigorous review and audit by our issuing bank partners, our marketplace
benefits from the increased scrutiny, diligence, and on-going audits of bank participating on the
platform both as investors and joint marketing partners.
Bank diligence and vendor management review enhance our compliance and controls
With the diligence that our bank and other partners perform on us prior to participating on the
platform, we have developed a rigorous compliance management program to ensure
compliance with laws applicable to our users and also to satisfy the scrutiny of our bank
partners internal compliance functions. As outlined in the following question, we regularly
review our compliance management policies and procedures to ensure our program complies
with the evolving regulatory environment.
What steps have been taken toward regulatory compliance with the new lending model by the
various industry participants throughout the lending process?
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Lending Club takes its regulatory compliance very seriously and sees it as a competitive
advantage. Lending Club has established a robust compliance management that enables it to
assess, monitor, and test its platforms compliance with applicable lending and other rules to
which it is subject. To support its compliance management program, Lending Club has
established three lines of defense (the business unit/QA & QC, an independent compliance
group, and an internal audit function) to continually assess, monitor, and test the operation of its
platform. The results of Lending Clubs internal testing are shared with our issuing bank to
ensure they remained informed of all findings.
In addition to this internal review, Lending Club is subject to three quarterly audits and one
annual audit from its primary issuing bank. The platform is also subject to an annual audit for the
issuing bank from an independent third party in line with good vendor management policy. In
addition to the banks testing, Lending Club is also subject to review by the banks prudential
regulator (the FDIC and the Utah Department of Financial Institutions) on a periodic basis as the
regulator assesses the oversight and controls exhibited by the bank over the program.
Furthermore, the platform undergoes a multitude of testing, auditing, and diligence from our
financial institutions and investment partners, which further strengthen our compliance
management program. In order to process and understand the findings of these various reviews
and audits (both internal and external), Lending Club has established a management level risk
committee chaired by our Chief Risk Officer that meets at least quarterly to assess and
understand the status of the platforms compliance program. This committee reports into a
Board of Directors Risk Committee that meets formally at least four times a year to assess and
discuss both current and future platform risks. Lending Club also requires all employees,
consultants, and directors to undergo annual compliance training commensurate with their
respective roles. The depth and breadth of this training is approved by the issuing bank and
reported to the bank quarterly. Employees who do not complete their training timely are subject
to discipline up to and including termination. Lending Club feels that other marketplace
participants, whether they use an issuing bank or otherwise, should have a similarly robust
compliance management program to that described above.
What issues are raised with online marketplace lending across state lines?
Marketplaces that operate with an issuing bank rely on two basic tenets regarding the issuance
of the loan. One is the basic rule that a loan, after origination, can be sold to a third party, and
the third party can then enforce the terms of the loan as written. Sometimes called the valid
when made doctrine, this rule determines whether a loan is compliant with usury laws at the
time the loan is originated, and recognizes that subsequent events (including assignment of the
loan) do not change that conclusion. This rule has been widely applied across U.S. jurisdictions
for more than a century. The second rule is that of choice of law, which looks to the state law of
the issuing bank to determine the validity of the terms of the loan when made.
In the case of marketplace programs, the issuing bank is the creditor of the loans, and the loan
terms are compliant with the banks ability to charge interest under federal law, typically 12
U.S.C. 1831d (the Federal Deposit Insurance Act, applicable to state banks) or 12 U.S.C. 85
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(the National Bank Act, applicable to national banks). Programs other than marketplaces have
long operated under these principles, which have been viewed as settled law. In May 2015, the
Second Circuit Court of Appeals issued its decision in Madden v. Midland (Madden), 786 F.3d
246 (2d Cir. 2015). In that case, the court ruled that the National Bank Act, 12 U.S.C. 85, did
not preempt state usury law as applied to a debt buyer that was seeking to collect a charged-off
credit card debt originated by a national bank. The court ruled that preemption did not apply
because the defendant was not a national bank, and because application of state law would not
significantly interfere with the business of a national bank. The case remanded to district court
the determination of the choice of law for the debt in question.
We believe Madden was wrongly decided, as it applied the wrong preemption standard and
failed to recognized the established valid when made doctrine. We also believe that the facts
of Madden (the collection of a charged off debt) are far different from most marketplace lending
programs, such that the conclusion in Madden would not apply. Finally, we believe that state
law separately recognizes the valid when made doctrine, even if not recognized (per Madden)
as a matter of federal law. We also believe that the strong choice of law establishment in
marketplace lending further supports our position.
While Lending Club firmly believes in the distinguishing facts of its marketplace program from
Madden, Lending Club and its issuing bank partners are assessing a variety of options to try
and further strengthen their position including:
further clarifying the choice of law elements of the issuing banks documents and overall
transaction elements as to more firmly tie the transaction to the issuing banks charter
jurisdiction;
enhancing the aspects of the program, including the issuing banks ongoing involvement
in the program, to further distinguish the facts of Madden; or
the acquisition of licenses by non-bank buyers of loans to enable the continued
enforcement of the agreed upon contractual rate.
We believe these changes will continue to allow the marketplace program to operate in its
efficient manner.
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8.
Describe how marketplace lenders manage operational practices such as loan servicing,
fraud detection, credit reporting, and collections. What, if anything, do marketplace lenders
outsource to third party service providers? Are there provisions for back-up services?
Loan Servicing
Lending Club services all loans originated through its marketplace (with the exception of
education and patient finance loans facilitated through its subsidiary Springstone Financial, LLC,
which are serviced by the issuing bank partners). Servicing is performed through its proprietary
platform and comprises account maintenance, payment processing from borrowers, and
distributions of payments to investors. Lending Clubs goal is to provide our users with a
superior customer experience. We provide as much detail on our website as possible to allow
borrowers to manage their loan online. In accordance with our contractual servicing
relationships, Lending Club uses commercially reasonable efforts to service and collect the
loans in good faith, accurately and in accordance with industry standards customary for
servicing such loans.
Borrowers can make payments either by ACH or via check. Most borrowers sign up for
automatic payment via ACH for the scheduled monthly principal and interest payments due on
their loan due to the cost-free convenience of the process. This automated payment process
allows a higher degree of certainty for timely payments, as well as prompt notice and the ability
to quickly inform a borrower of a missed loan payment and work with them to rectify the issue.
Borrowers are notified automatically each month prior to the payment due date, with ample time
to cancel via a simple email or call should they desire. Borrowers who pay by ACH are less
likely to incur a late fee.
Collections
Collections are facilitated through a process involving both in-house and outsourced collections
staff. The intent of our collections process is to maximize asset recovery through early
intervention. Generally, in the first 30 days that a loan is delinquent, our in-house collection
team works to bring the account current. After that time, we typically outsource collection efforts
to third-party agencies that are licensed to conduct activities in each state where borrowers
reside. As part of Lending Clubs vendor management program, Lending Club performs
diligence on its outsourced collections agencies, and carefully audits and monitors these
agencies on an ongoing basis to ensure policies and practices are in accordance with
applicable law. Lending Club also conducts quarterly business reviews, annual audits, and site
visits to its providers.
Customer Advocacy
In the interest of achieving the highest standard of consumer protection, support, and
satisfaction, Lending Club created a Customer Advocacy team within its Member Support
Department, and staffed it with the most experienced associates we have in production roles.
This team handles all customer complaints, attempting to resolve each in a way that addresses
the concerns raised. In addition, this team performs root cause analysis and, with our legal and
Page 24 of 51
compliance team, trend analysis on complaints that it then shares with the management risk
committee, and has monthly goals in using this data to improve the business.
Operational Governance
Lending Club has created a team within consumer-facing operations (Operations Development)
that is responsible for developing and optimizing processes and managing risk. This group has
members who do quantitative analysis, design processes, document policies and procedures,
train agents, perform quality and risk monitoring, create scorecards, and lead performance and
risk-related business initiatives. This heavy investment in scalable operational infrastructure is
designed to ensure the highest standard of consumer protection and experience.
Investor Funds Processing
Investor funds, including cleared payments collected by Lending Club from borrowers, are held
in a bank account at Wells Fargo in trust for (ITF) and for the benefit of investors. This account
is a pooled, non-interest-bearing demand deposit account. This account is governed by a trust
agreement that provides that Lending Club disclaim any economic interest in the assets in the
ITF account. It also provides that each investor disclaim any right to the assets of any other
investor. Lending Clubs assets are not commingled with the assets of investors held in the ITF.
In addition to the ITF account, Lending Club maintains sub-accounts for each investor on the
platform. Sub-accounts are used to track and report funds committed by investors, as well as
payments received from borrowers that are paid on the related loan.
Investors authorize Lending Club, as account trustee, to initiate cash transfers out of the ITF
account to finance the investment in loans selected by the investor. Lending Club will collect
principal and interest payments and deposit funds back into the same account, net of a
servicing fee.
Vendor Management
Like many banks and other businesses, Lending Club engages vendors and third-party service
providers for a wide range of other products and services. In todays business environment,
financial industry regulations and commercial best practices require Lending Club to proactively
identify and manage vendor relationships, minimizing risk exposure to Lending Club. Lending
Clubs Vendor Management Program provides the company with a framework and guidance for
managing the full vendor lifecycle relationships. We also work in partnership with our issuing
bank to ensure that our vendor review and management process is consistent with their
standards and subject to their review and ongoing oversight. As discussed above in
Collections for instance, active vendor management includes performing risk assessments and
additional vendor due diligence commensurate with assessed risk(s). Additionally, developing
and sustaining effective vendor relationships after contract execution enables Lending Club to
optimize vendor performance and value, as well as manage any associated or residual risks.
Post-contract monitoring activities include, but are not limited to, ongoing monitoring of vendors,
monitoring of service level agreements, onsite audits, collecting market intelligence (e.g., M&A
activity, bankruptcy), and reassessing vendor risk profiles on a periodic basis.
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Credit Reporting
Lending Club and its issuing bank partners comply with the federal Fair Credit Reporting Act
(FCRA), as amended by the Fair and Accurate Credit Transactions Act (FACTA). The FCRA
requires our issuing bank partners and us, as the case may be, to have a permissible purpose
to obtain a consumer credit report and requires persons to report loan payment information to
credit bureaus accurately. FCRA also imposes disclosure requirements on creditors who take
adverse action on credit applications based on information contained in a credit report.
In the application process, we obtain explicit consent from borrowers to obtain such reports. As
the servicer for the loan, we report loan payment and delinquency information to all three
consumer reporting agencies. We provide an adverse action notice to a declined borrower on
the issuing banks behalf at the time the borrower is declined that includes the required
disclosures under the Equal Credit Opportunity Act (ECOA) and FCRA.
We also have processes in place to ensure that consumers are given opt-out opportunities, as
required by the FCRA, regarding the sharing of their personal information.
Back-up Servicer and Back-up Issuing Bank Partner
Lending Club has a backup and successor servicing agreement with a back-up servicer,
Portfolio Financial Servicing Company. The back-up servicer is ready to service loans should
Lending Club cease to be able to service loans. Upon the back-up servicer becoming the loan
servicer, the back-up servicer would be entitled to earn servicing fees paid by our investors.
Lending Club also executed an agreement with Cross River Bank, a New Jersey chartered
bank, to operate as a back-up issuing bank in the event WebBank can no longer be an issuing
bank for our marketplace program.
Business Continuity and Disaster Recovery
As part of our issuing bank relationship and based upon sound business practices, Lending
Club maintains a Business Continuity Program that ensures the continuation or recovery of our
operations following a disruptive event. Dependencies on resources such as people, facilities,
information technology, data, and third-party service providers may put the organization at risk
should a disruptive incident occur. Lending Club takes a pragmatic approach to risk, recognizing
that while not every risk can or should be mitigated, often there are solutions that lessen
likelihood of disruption or impact or enable continuation of services.
Our Business Continuity Program identifies the resources the business relies upon to meet
stakeholder expectations, risks that could influence resource availability, and strategies that will
reasonably mitigate or manage those risks. Our goal is to implement effective strategies that
enable a timely, effective response and recovery effort within stakeholder expectations following
a disruptive incident.
Lending Clubs Business Continuity Program includes:
Business continuity governance and program management
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Business impact analysis and risk assessment

Strategy identification and implementation
Business continuity plan documentation
Training and awareness
Exercising and testing
Continual improvement
Lending Club reviews its Business Continuity Program, documentation, and strategies at
planned intervals and when significant changes occur within the organization.
Lending Clubs Business Continuity Program addresses operations at Lending Clubs San
Francisco, California, and Westborough, Massachusetts, locations, and expands to address
future facilities as applicable. The scope of the Business Continuity Program, defined using an
analysis of customer dependencies, expectations, and willingness to accept downtime, includes
key processes and business capabilities.
The satisfactory performance, reliability, and availability of our technology and our underlying
network infrastructure are critical to our operations, customer service, and reputation, as well as
our ability to attract new and retain existing borrowers and investors. Much of our system
hardware is hosted in a facility located in Las Vegas, Nevada that is third-party owned and
operated. We also maintain a real-time backup system at a third-party owned and operated
facility located in Santa Clara, California.
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9.
What roles, if any, can the federal government play to facilitate positive innovation in
lending, such as making it easier for borrowers to share their own government-held data
with lenders?
The federal government could create significant benefits for borrowers by improving borrowers
ability to share government-held data with lenders with the express consent of the borrower, by
creating incentives in the tax code to increase economic growth in underserved communities
and promote savings, and by simplifying the tax reporting and statement delivery for
investments in marketplace loans.
Automation of sharing of government-held data
The most promising government-held data opportunity would require only a small improvement
in the current process used to share tax return datathe creation of an API for the IRSs 4506t
tax return transcript process. This simple improvement could enable lenders to offer lower cost,
faster, easier, safer, and more access to credit, across consumer and small business lending.
The IRSs 4506t process15 allows taxpayers to request a summary transcript of their filed tax
returns to be provided to a third party such as a lender. The IRSs processing of these forms is
currently manual. Bringing this process up to current technology in order to make that data
available instantly for analysis would provide great benefits to borrowers. We believe this would
be relatively easy for the federal government to accomplish. The IRS currently accepts
electronic signatures, and has since 2011. The IRS currently sends this tax transcript data to
third parties, which is a purpose of the 4506t. However, currently an unnecessary manual
process, including paper forms rather than current API technologies that provide instant online
transmission of data, adds 2-8 days of delay to access the data. This prevents the use of tax
data in credit models that price and approve loan applications instantly.
Tax returns and the 4506t are an important part of the platforms loan underwriting process, but
also the most cumbersome and underutilized. (Please note that the benefits of the 4506t API
apply similarly throughout the mortgage, personal finance, auto lending, and other lending
industries. We focus here on Lending Clubs small business lending for the sake of illustration.)
Lending is increasingly structured around providing applicants with instant loan offers online.
The platforms process provides applicants a loan decision and interest rate online, immediately
after they complete our 5-minute online application. This is an attractive experience that creditseekers prefer to submitting an application and waiting uncertainly for days or weeks to receive
a decision.
As a result, our pricing and approval decisions are largely limited to using information that we
can access instantly via APIs. We collect tax returns from the borrower, but only after we've
decided to make a loan offer at a specific price. In this process, we do not know which
businesses we declined but might have been able to approve if we had seen their tax data
15
http://www.irs.gov/pub/irs-pdf/f4506t.pdf
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before making a decline decision. It is also expensive for lenders to pay a third party vendor to
manage and expedite the manual IRS 4506t submissions for us, but also unthinkable to use the
IRSs 4506t process without a third party expediter, who can accelerate the process by up to 45
days.
Tax return data could do so much more if the existing IRS 4506t process were upgraded with an
API. A 4506t API providing instant, online access to tax records could benefit borrowers by
allowing lenders to offer: (i) faster loan decisions, (ii) lower pricing, (iii) higher loan approval
rates, (iv) more attention to smaller loan requests, (v) easier application process, and (vi) higher
income verification rates.
An API would benefit the IRS in two ways: (i) lowering IRS costs by decreasing the need for
manual processing of the 4506t and (ii) potentially increasing tax revenue by encouraging
people and businesses not to under-report earnings, given that those tax returns would be more
likely to be used to evaluate and price loan applications.
See the Appendix for additional information on a 4506t API.
Government incentives to support investment in underserved segments
The federal government also has the opportunity to increase investment and economic growth
in underserved communities and certain economic sectors by creating incentives in the tax code
that parallel existing tax programs. Currently investors only have the ability to offset charge-offs
against capital gains, which is very unfavorable.
We propose that investors who provide capital in defined underserved areas and to low- to
moderate-income small businesses borrowers be taxed at the capital gains tax rate, rather than
the current marginal income tax rate, if the loan is held for over 12 months. This sort of tax
incentive to encourage investment in underserved areas parallels the Treasury Departments
successful New Markets Tax Credit program, which attracts investment in commercial real
estate development in low-income census tracts.
Additional tax incentives to encourage investment and saving
Policymakers in the United Kingdom have taken a broader approach to encouraging investment.
In the UK, investors are able to invest in P2P loans tax-free though an Investment Savings
Account (ISA) called an Innovative Finance ISA, or IFI. Investors can deposit up to 15,240
per year (standard for ISAs), or transfer in money from other ISAs. Unlike a U.S. IRA, there is
not a tax penalty for withdrawing before retirement. The proposed U.S. marketplace investing
incentive could similarly attract investment in underserved consumers in the same geographies,
and in small businesses nationwide. By encouraging investment in underserved communities,
the federal government could create economic growth in the communities where it is needed
most.
Additionally we propose that investors in marketplace loans have the ability to offset losses and
charge-offs against interest income and gains and earn tax-free returns on the first $5,000 of
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investment in order to encourage savings and stimulate access to affordable credit. Currently,
the IRS does not directly address how Notes are treated for U.S. federal income tax purposes.
As a result, the tax treatment for the investor is uncertain and the related rules are complex. We
propose clarity from the IRS to promote consistency among investors and within the industry,
similar to the IRS guidance on Virtual Currency (Notice 2014-21). Currently, Lending Club
treats Notes as debt instruments issued with original issue discount (OID). As a borrower
makes payments on the loan, Lending Clubs treatment of the Notes requires the investor to
include these payments as ordinary income. However, when a borrower stops payments on the
loan, the losses are treated as a capital loss to the investor. Due to the capital-loss rules, the
investor may only deduct net capital losses up to $3,000 against the investors ordinary income.
If investors were to only invest their savings in LC Notes, the investor could only generate
capital losses without ever generating capital gains to offset their losses. We propose that the
IRSs tax treatment of the losses match the treatment of income from marketplace lending.
Further, given the attractive returns profile for these investments, the Treasury could encourage
savings for investors, particularly in retirement accounts, by reducing or eliminating the tax
burden on small dollar investments up to $5,000.
Simplifying tax reporting and statement delivery
The federal government can also play a positive role in consolidated tax reporting and electronic
statement delivery.
Consolidated Tax Reporting
Currently, investors purchase Notes in $25 increments to diversify their portfolio and reduce the
impact of any single loan loss. $2,500 can be invested in 100 borrowers. If an investor were to
sell all 100 Notes of their investment, 100 separate tax forms would be sent to the IRS. The IRS
should view the investors disposition as one transaction with a yearly consolidated
reporting. This consolidated reporting will save time in investor tax reporting and increase
accuracy in reporting because the investment, viewed as one transaction and reported on one
form, will agree to LCs year-end investor statement.
Electronic delivery of tax forms
As with many online marketplace companies, a valid e-mail address is a requirement to open an
account. Since there are no physical branches, borrowers and investors use the Internet
exclusively to facilitate transactions. Under current regulations, Lending Club must provide
paper copies of all Form 1099s unless the taxpayer specifically opts in to receiving the Form
1099 information via online delivery (via e-mail or website). While a majority of LCs borrowers
and investors opt in to electronic delivery, we suggest that regulations contain a provision to
allow online marketplace companies to make the default delivery method of tax forms electronic.
For an industry dedicated to the use of technology to do business that operates exclusively
online, the requirement to print and mail Form 1099s is both an unnecessary cost and damaging
to the environment. Investors and borrowers who continue to request paper copies of their tax
forms will continue to have the option to opt out of an electronic delivery.
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What are the competitive advantages and, if any, disadvantages for nonbanks and banks to
participate in and grow in this market segment? How can policymakers address any
disadvantages for each?
Non-bank lending has been recently propelled by innovations in technology and in the
development of the marketplace model. Competitive advantages exist for companies most able
to use technology and data to meet customer needs, and who utilize the benefits of the
marketplace model.
Technology and data is a critical core competency of Lending Club, and we are fortunate in
employing some of the most talented engineers and data scientists in the technology industry.
One-third of our staff is in product and technology, and we release new code every two weeks.
We prefer to solve business problems by developing technological solutions rather than hiring
additional staff. This contributes to the efficient operations that allow us to provide lower rates
and increased access to capital. The importance of technology is not necessarily a
disadvantage for traditional banks, though few traditional banks have established core
competencies in technology to the extent that many non-bank lenders have. Many traditional
banks are hindered by outdated technology systems, and lack the ability to attract top engineers
and employ technology-driven strategies. To access technological advantage, community
banks, regional banks, and national banks have partnered with Lending Club in order to lend
more efficiently, reach new customers, and provide the unmatched customer experience
Lending Club has developed. Please see our discussion of the BancAlliance partnership in
Question 7 and the Citi partnership in Question 4 for additional detail on these bank
partnerships.
How might changes in the credit environment affect online marketplace lenders?
The marketplace lending business model provides distinct advantages in a changing credit
environment including no intrinsic leverage in the platform, a highly diversified funding model,
and a dynamic proprietary credit model that can be adapted quickly. Additionally Lending Club
does not participate in deep subprime lending (FICO less than 550), which may experience
significant losses during a downturn and the marketplace employs performance data going back
through the last credit crisis in 2007-2009 in its innovative pricing models.
No platform leverage
The absence of a balance sheet used for lending will enable Lending Club to weather economic
cycles. Traditional or balance sheet lenders rely on leverage to fund loans, often using ratios
such as 10% equity and 90% borrowed capital. During periods of financial crisis, a small decline
in the value of the asset can erase a significant portion of a lenders equity position. Traditional
lenders and balance sheet lenders also generally rely on highly concentrated funding with terms
that are not matched against the terms of the loans. As a result, when funding is withdrawn or
becomes less available during a downturn, a liquidity crisis can result. Because marketplaces
match investor capital with each loan, they do not share a balance sheet lender or banks risk of
liquidity crises.
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Diversified funding model

Traditional lenders and balance sheet lenders generally rely on highly concentrated funding and
may experience liquidity crises when funding is withdrawn or becomes less available during a
downturn. Additionally, as the leading marketplace, Lending Club diversifies its investor base to
a degree not possible by balance sheet lenders. Lending Clubs marketplace investor base
consists of 20% self-directed individual investors, 50% individual investors investing through a
fund or managed account, and 30% institutional investors16. Lending Clubs individual investor
base has consistently added assets to their accounts going back to 2009. If marketplaces
cannot draw sufficient capital to meet loan demand, they can increase pricing to borrowers until
the returns drive capital to those small businesses and consumers seeking difficult to come by
credit.
While traditional lenders are exposed to risks resulting from leverage, mismatched asset and
liability terms, and concentrated sources of capital, which can cause them to stop providing
credit at the time when small businesses and consumers need capital most, marketplaces share
none of these vulnerabilities.
Focus primarily on prime credit quality borrowers
While enabling access to credit for a broader range of consumers and small businesses,
Lending Club is focused on serving primarily prime borrowers and even when facilitating loans
to higher risk borrowers, does not pursue deep subprime lending. This disciplined borrower
focus ensures that the loans facilitated are likely to remain attractive to investors during an
economic downturn, enabling marketplace lenders to provide credit when it is otherwise scarce.
Long performance track record (including previous crisis) and proprietary credit model
Having launched prior to the last financial crisis, Lending Club has performance data going back
to 2007 and leverages this data and insight in the platforms decisioning model. In addition,
Lending Club develops granular grade level loss forecasts that account for changes in
employment data and other information. We refresh proprietary credit models regularly and
innovate using machine learning to accelerate the speed of refresh. In fact we can deploy a full
model and credit strategy improvements in as little as two to three weeks in order to react
quickly to economic changes. Lending Club employs ongoing portfolio monitoring, which allows
for fast iteration and test cases, which are informed by Lending Clubs stress scenario testing.
This approach to credit and portfolio monitoring is reinforced by our vintage performance of 25% for vintages initiated during the last economic downturn (2008 and 2009).17
The proven capacity of the marketplace model to provide attractive investments during a
downturn, and avoid the liquidity crunches of mismatched terms and fragility of highly leveraged
investing, contributes to the marketplaces ability to sustain lending through strong and weak
16
17
Q2 2015 for the standard loan program

https://www.lendingclub.com/info/demand-and-credit-profile.action. Net Annualized Return By Vintage.
Page 32 of 51
economic cycles and potentially to grow market share during challenging credit environments.
These abilities are complemented by Lending Clubs history and data from prior credit
environments, focus on more stable market segments, active preparation for an economic
downturn, and track record of sustained investment success.
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10. Under the different models of marketplace lending, to what extent, if any, should platform or
peer-to-peer lenders be required to have skin in the game for the loans they originate or
underwrite in order to align interests with investors who have acquired debt of the
marketplace lenders through the platforms? Under the different models, is there pooling of
loans that raise issues of alignment with investors in the lenders debt obligations? How
would the concept of risk retention apply in a non-securitization context for the different
entities in the distribution chain, including those in which there is no pooling of loans?
Should this concept of risk retention be the same for other types of syndicated or
participated loans?
We believe that Lending Club and other credit marketplaces have sufficient skin in the game
and alignment of interest with marketplace investors, and it would be unnecessary and in fact
detrimental to the proper functioning of the marketplace and to the availability of affordable
credit to impose additional requirements in that respect. We believe analogies can be drawn
with other situations where capital-based risk retention has equally been deemed unnecessary
and detrimental. We do believe, however, that other mechanisms can offer better investor
protection and should be considered. We will accordingly answer this question in four parts:
A.
B.
C.
D.
Background for risk retention discussion

Existing alignment of interest in marketplace lending
The risks of risk retention
Alternative investor protection mechanisms
A. Background for risk retention discussion

The evolution of the subprime mortgage industry in the years that preceded and followed the
2008 financial crisis illustrates the benefits and risks of the originate to distribute model
enabled by the advent of the securitization markets. As banks and other mortgage lenders sold
an increasing portion of the loans they originated to investors, the resulting enhanced liquidity
made credit more widely available at a lower cost. That model also resulted in the lenders
transferring the risk of defaults to securitization investors, which contributed in the period
leading up to 2008 to a rapid deterioration of underwriting standards and loan quality, ultimately
resulting in substantial losses for investors.
We believe that what led the mortgage industry down that path were the results of a misaligned
incentive system, the creation of risky mortgage products, lack of transparency and
accountability, and a significant amount of leverage in the system:
1. Mortgage brokers and lenders were not properly incented to maintain strong
underwriting standards and documentation: they earned fees for originating loans and
had no or little incentive (financial or otherwise) to ensure that the loans would perform.
Lenders did not service the loans, and as such earned no ongoing servicing fees (as
most credit marketplaces do), and the feedback loop between loan
servicing/performance and origination was loose or nonexistent.
2. As part of the degradation in underwriting standards, mortgage lenders started offering
exotic and more risky product structures such as adjustable rate mortgages, interestonly mortgages, and even negative amortization loans, often with no or little money
Page 34 of 51
down. These product structures gave the appearance of good loan performance during
the first few years when smaller monthly payments were due, until rates reset or monthly
payments increased. It is worth noting that no such structure exists in marketplace
lending, and marketplace operators have consistently offered responsible, fixed rate,
and fully amortizing loans.
3. There was no transparency as to individual loan quality and performance and very little
transparency on an aggregate pool basis as part of a securitization structure. Investors
had no ability to closely monitor, let alone influence, underwriting quality. True
performance data lagged originations by several quarters and sometimes by years,
particularly in the case of the most exotic and risky products where the true
performance wouldnt be known for several years.
4. Lenders were insulated from the consequences of their underwriting decisions: the
amount of structuring (with junior and senior tranches, credit enhancement, bond
insurance, etc.) and the number of intermediaries involved in the securitization chain
(investment banks, rating agencies, and loan servicers, among others) created a diffuse
chain of responsibility and no direct correlation between the performance of the
securities held by investors and the quality of the underlying loans.
B. Existing alignment of interest in marketplace lending
Lending Club has both direct economic interest and non-monetary reputational interest in
ensuring the good performance of the loans originated through its marketplace.
1. Direct revenue incentive. Lending Club earns revenue from transaction fees and
servicing fees and management fees collected from investors over time. Servicing
comprises account maintenance, collections, processing payments from borrowers,
and making distributions to investors. For each loan facilitated through our
marketplace, we earn a transaction fee equal to an average of 4.5% of the principal
amount and nearly 1.2% servicing or management fee over the life of the loan. While
the transaction fee is paid upfront and is not dependent on loan performance, the
servicing or management fees (depending on the type of investor) representing
about 20% of our revenue per loan are subject to loan performance:
a. Our servicing fee is calculated as a percent of payments actually made by
borrowers, and we therefore do not receive our servicing fee until payments
are received from borrowers.
b. Our management fee is calculated as a percent of outstanding balances, and
we therefore do not collect our management fee with respect to loans that
charge off.
2. Building investor base Incentive. Lending Club operates a two-sided marketplace.
Lending Clubs customer base comprises investors and borrowers, both sides being
equally important to us. This is a fundamental difference with the situation referred to
in Section 10. A. above: far from being insulated from loan performance, the Lending
Club platforms ability to facilitate new originations is directly dependent on past and
current performance. Much like a mutual fund, asset manager, or investment advisor,
our ability to retain and attract investors is highly dependent on investors continuing
to earn returns generally in line with, or better than, their expectations. Fidelity and T.
Page 35 of 51
Rowe Price are not required to retain a percent of every investment they make or
recommend to their clients because there is an inherent alignment of interest: if their
clients earn disappointing results, they will pull their assets out, much as a
disappointed Lending Club investor would. In terms of relationship to investors, we
believe there are four fundamental differences between marketplace lending and the
mortgage market situation described in Section 10.A:
a. The direct relationship between Lending Club and marketplace investors
builds a tremendous amount of accountability and reputational incentive for
Lending Club to ensure good loan performance.
b. There is extreme transparency in the credit quality and the performance of
the investment at a very granular level: investors can monitor the credit
characteristics of new loans being originated through the marketplace each
quarter and the performance of each individual loan on a daily basis. All that
information is available directly from the Lending Club website.
c. The short duration nature of the assets reinforces this accountability: as the
performance of each new loan vintage becomes apparent within 6 to 9
months, the sanction of the market would be immediate if we were to lower
our underwriting standards and we would likely start losing a significant
portion of our investor base in a matter of a few quarters.
d. Investors are making their own individualized investment decisions in each
loan. From that standpoint, investors have full control over the terms and
quality of their investments, in stark contrast to the mortgage industry, where
lenders would make origination decisions and investors would buy into a pool
of loans for which no individual performance data existed.
C. The Risks of Risk Retention
We believe there already is sufficient alignment of interest between credit marketplaces and
investors and further alignment would be unnecessary. In fact, we believe that further
alignment with investors could be counterproductive and contrary to borrowers interest and
the availability of affordable credit.
As the operator of a two-sided marketplace, Lending Club should remain neutral with
respect to both sides of its marketplace (investors and borrowers). Requiring Lending Club
to hold loans or pieces of loans on its balance sheet could cause Lending Clubs interests to
be inappropriately aligned with the investors interests, to the detriment of borrowers. As an
example, platform rates are set based on expectations of future loan performance and the
balance of supply and demand on the platform. As investors showed strong appetite for the
loans originated through our marketplace, we were able to lower interest rates to borrowers.
Over the last three years, the risk premiums required by investors on Lending Clubs
platform have decreased by 270 basis points.18 If we invested our own capital and earned
18
The weighted average interest rates on 36-month loan portfolio have declined from 13.2% in June 2012 to 11.2% in
June 2015, down 200 bps. Meanwhile, 3-year treasury yields have increased 70 bps over the same period, resulting
in a 270 basis point spread reduction. Spread based on weighted average monthly interest rate on 36-Month loan
portfolio minus monthly 3-year treasury yield. Source: FactSet, www.factset.com/
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interest on a portion of the loans, our financial incentive would be to keep interest rates
artificially high irrespective of what the balance of supply and demand would otherwise
suggest. This situation would result in making credit more costly for consumers and small
business owners.
D. Alternative Investor Protection Mechanisms
We believe that there are alternative mechanisms that can enhance investor protection and
further preserve underwriting standards, without the above noted downsides of capitalbased risk retention.
Disclosure Requirements
As mentioned above we believe that loan-level data reporting is extremely helpful in
protecting investors against the risk of degradation in underwriting standards, without
presenting the same potential pitfalls as capital-based risk retention. It is useful in that
respect to refer back to the discussions that preceded the adoption of Reg. AB2: in its
adopting release for the credit retention rules, the SEC attributed vulnerabilities in the
financial system that led to the financial crisis to inadequate information19, specifically
noting that investors did not have access to the same information about the assets
collateralizing asset-backed securities as other parties in the securitization.20
Lending Club and other credit marketplaces provide a tremendous amount of information,
disclosure, control, and transparency to investors, both in terms of loans or Notes made
available for investment and on-going performance, including:
a. Over 40 credit and financial data points about each loan through a simplified Web UI
and over 80 data points through our API;
b. Loss forecasting and historical performance for any given portfolio built by an
individual investor;
c. Detailed loan level performance reporting, including a full payment file showing the
payment history for each loan ever made through the Lending Club platform that
retail investors had an opportunity to invest in since inception;
d. Aggregate statistics and analytics on past performance, including interest rates,
credit losses, and net returns by vintage of loan origination;
e. The credit characteristics of the loans issued each quarter that retail investors had an
opportunity to invest in;
f. Within each investor account, the daily performance of each loan an investor has
exposure to, including collections status and collections notes for delinquent loans.
This level of transparency to both investors, and the public at large, would make it very
apparent if we were to lower our underwriting standards:
19
20
SEC Credit Risk Retention Adopting Release at page 13.

Id.
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a. The quarterly origination file would immediately show any degradation in loan
quality or underwriting standards: average FICO score would drop; average debtto-income ratio would rise, etc. In that same file, we report publicly the ratio of
loans flagged for income and employment verification. Any degradation in that
ratio would be immediately visible to both investors and the general public.
b. The payment file that contains the details of every payment made on every loan
that retail investors had an opportunity to invest in since inception is being
updated daily and posted on our Website. Any uptick in delinquencies would be
immediately visible to both investors and the general public.
Mandate loan-level disclosure requirements
We believe it would be a productive development, and would ensure continued investor
protection, for the SEC or other regulators to mandate these loan-level disclosure requirements
to Lending Club and other credit marketplaces.
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11. Marketplace lending potentially offers significant benefits and value to borrowers, but what
harms might online marketplace lending also present to consumers and small businesses?
What privacy considerations, cybersecurity threats, consumer protection concerns, and
other related risks might arise out of online marketplace lending?
The risks arising out of a loan transaction facilitated through a marketplace are very similar to
transactions conducted through traditional banking channels including identity theft, money
laundering, privacy, and data protection. Lending Club is committed to protecting the financial
security and privacy of its marketplace members.
Given our online business model, Lending Clubs technology was built with online transactions
in mind ensuring that our systems were purpose built with online security and data protection
and a focus on lowering risk. Further, given our necessary compliance with all applicable
consumer protection regulations, our technology is built with the intention to deliver information
and disclosures in a more understandable and user-friendly format. We believe the success of
our marketplace is tied to financial safety of our investors and borrowers and we strive to
exceed industry standards for privacy and security.
Cybersecurity Threats and Information Security
We view cybersecurity as a vital risk element that must be appropriately managed for all online
finance transactions, whether the transaction is facilitated by a marketplace or traditional bank.
Given the focus here is to combat cyber-attacks, we maintain a comprehensive information
security program based on international standard ISO27001 to ensure confidentiality, integrity,
availability, and privacy of our marketplace members' information. We have established
extensive security policies, standards, procedures, and processes to address physical security,
access controls, encryption, segregation of duties, continuous monitoring, incident response,
personnel security, and service provider oversight.
Privacy
We maintain a detailed privacy policy, which complies with applicable rules and regulations,
including GLBA. Lending Club also maintains numerous security controls to safeguard the
personal information of our borrowers and investors and to prevent unauthorized access. In
addition, we have a strong information security program in place including network firewall with
zone based policies, static code analysis, anti-virus and anti-SPAM, and web access filtering.
We invest significantly in experienced security staff, undertake background checks prior to hiring
employees, and provide security training for them on an ongoing basis. The information security
program is reviewed and adjusted periodically based on ongoing risk assessment and security
control effectiveness assessment. Our policies are also subject to ongoing oversight and review
by issuing bank partners to ensure we are in compliance with the appropriate rules and
regulations.
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Fraud Risk
Fraudulent transactions is a key area of risk that seems to have not yet presented itself as a
significant concern among marketplaces, though we believe it merits high vigilance by industry
participants. We believe industry best practices for marketplaces to mitigate identity and fraud
risk include the robust use of technology systems and data to provide real-time review and
validation of online transactions. A comprehensive incident response program is essential for
marketplaces to be most effective at mitigating identity, fraud, and cyber-security risks. Lending
Club has developed proprietary systems and processes that we believe substantially mitigate
risk of fraud and identity theft that have led to industry-leading low fraud rates. In the first nine
months of 2014, the net identify fraud loss of the top credit card issuers in the ID Analytics
network was 0.10%-0.15%. For Lending Club during the same time period, our verified identify
fraud loss was less than 0.01%. We have achieved this best in class low rate by using new data
sources and techniques to screen for fraudulent identities in applications. To stand behind its
commitment to stopping identify theft, Lending Club also repurchases any loan where there is
confirmed identity theft (as supported by a police report and identity theft affidavit).
Marketplaces also can assist their members by informing them how to protect themselves from
online criminal activities through online educational campaigns and other preventative
communication strategies.21
CIP/BSA/AML/OFAC
As part of our ongoing compliance management program, for each applicant we perform the
necessary elements of CIP/BSA/AML in conjunction with our issuing bank partners. We
leverage technology to efficiently perform these tasks and facilitate ongoing monitoring. We
have customer identification processes in place to enable us to identify users and deter
identification fraud. We also compare each user against applicable governmental lists, such as
those provided by the Office of Foreign Assets Control and the Financial Crimes Enforcement
Network. If a user were to appear on a list, we would take action to resolve the issue and report
it to the appropriate authorities.
Transparency and Consumer Protections
Lending Club and our issuing bank partners take consumer protection seriously and Lending
Club has invested in a high standard of compliance, in technology to lower costs, reduce
judgmental decisioning, and simplify experience, and more broadly by offering responsible
credit products. We place a strong emphasis and diligent focus on a high compliance and
regulatory standard given we are subject to such regulations as equal access to credit, fair
lending, truth in lending disclosure requirements, fair credit reporting and fair debt collection.
Further our technology is built with the intention to automate decisioning so that borrowers can
be evaluated on the merits of their credit and we can deliver information and disclosures in a
more understandable and user-friendly format, thus helping borrowers make better financial
21
See e.g., https://www.lendingclub.com/public/safety-and-privacy2.action.
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decisions. As the CFPBs eClosing pilot demonstrated, borrowers felt the electronic closing
process improved their understanding of the process and improved their sense of empowerment
during the closing process. Finally Lending Clubs marketplace facilitates responsible credit
products including personal and small business loans with an interest rate cap of 36% and an
average rate in Q2 2015 of 11.25%, fixed rate, no hidden fees, and transparent disclosures with
all terms disclosed upfront in a manner that is easy for borrowers to understand and plan for.
Through our investments in compliance and automation, we are focused on maintaining the
safety and security of the technology infrastructure we develop and ensuring that we are
protecting consumers interests.
Do existing statutory and regulatory regimes adequately address these issues in the context of
online marketplace lending?
Yes, we believe that existing statutory and regulatory regimes adequately address the issues
noted above in the context of online marketplace lending provided the marketplace has a
strong banking partner that also takes regulation and compliance of its partners seriously. Bank
partnership and vendor management requirements and guidance from the issuing banks
prudential regulators effectively result in the application of all the issuing banks applicable
obligations and regulations onto the marketplace. When this regulatory framework is combined
with daily oversight by the bank, at least annual independent third party audits, quarterly bank
audits, internal testing and monitoring, technology driven QA/QC, automated decisioning, and
the platforms technology innovation, we believe that consumers are as protected, if not better
protected, than in traditional lending environments.
As to small business lending, while the applicability of regulations is lessened for all participants
by the commercial nature of the transaction, we are concerned that small business owners may
not benefit from the same level of protections and transparency as consumers. To help bring
these issues to the fore, Lending Club joined a multi-sector coalition to develop the first-ever
consensus on responsible small business lending practices, the Small Business Borrowers' Bill
of Rights.22 This Bill of Rights initiative was the result of an unprecedented partnership of
nonprofit and for-profit lenders, CDFIs, marketplaces, brokers, the Aspen Institute, and Small
Business Majority, in consultation with small businesses and consumer advocates concerned
about unscrupulous lending practices. Here are the fundamental rights we, as a coalition,
believe all small business owners deserve:
1. The Right to Transparent Pricing and Terms, including a right to see an annualized
interest rate and all fees
2. The Right to Non-Abusive Products, so that borrowers dont get trapped in a vicious
cycle of expensive re-borrowing
22
Lenders, marketplaces, and brokers are required to attest that their organizations adhere to the practices and
th
principles contained in the Small Business Borrowers' Bill of Rights. As of September 28 , The Small Business
Borrowers' Bill of Rights has been signed by 26 lenders, marketplaces, and brokers, and endorsed by 8 organizations
who do not themselves provide small business financing services. See http://www.ResponsibleBusinessLending.org.
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3. The Right to Responsible Underwriting, so that borrowers are not placed in loans
they are unable to repay
4. The Right to Fair Treatment from Brokers, so that borrowers are not steered into the
most expensive loans
5. The Right to Inclusive Credit Access, without discrimination
6. The Right to Fair Collection Practices, to prevent harassment and unfair treatment
While we believe the current regulatory regime is generally more than sufficient, there are
potential areas of enhancement. More consistent oversight of issuing bank partners would
ensure maintenance of prudent underwriting standards and compliance requirements across
marketplace lenders. We believe there is an opportunity for the industry to fully adopt the
practices and principles enumerated in the Small Business Borrowers' Bill of Rights, and for the
appropriate regulatory agencies to continue to monitor the industrys progress in that respect.
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12. What factors do investors consider when: (i) investing in Notes funding loans being made
through online marketplace lenders, (ii) doing business with particular entities, or (iii)
determining the characteristics of the Notes investors are willing to purchase? What are the
operational arrangements? What are the various methods through which investors may
finance online platform assets, including purchase of securities, and what are the
advantages and disadvantages of using them? Who are the end investors? How prevalent
is the use of financial leverage for investors? How is leverage typically obtained and
deployed?
We believe that investors first consider the following macro benefits of investing through a
credit marketplace:
1. Marketplace lending is providing access to asset classes (consumer and small business
loans) that were previously unavailable to most investors. The only way for investors to
access the asset classes previously was through highly structured and fee heavy
securities or riskier investments in financial stocks.
2. Marketplace investing returns appear to be uncorrelated with equity market investments,
and thus provide investors with attractive diversification within their overall portfolio.
3. Marketplace lending is delivering attractive risk-adjusted returns, across all grades of
loans offered via the marketplace. The median adjusted net annualized returns for
Lending Club investors with 100+ Notes have been 7.3%23 vs. returns from alternative
assets:
23
For Retail investors with at least 100 Notes and 100 different borrowers and no Note accounting for more than
2.5% of the portfolio assuming 24 to 30 months of average age of portfolio as of September 15, 2015.
Page 43 of 51
($B)
Sources: SIFMA, US Bond Market Issuance and Outstanding as of May 2015. Board of
Governors of the Federal Reserve System, Consumer Credit - G.19 as of December 2014.
Bond market yields as of June 2015 from Barclays, S&P, and BlackRock.
4. Marketplaces provide greater transparency for investors. Lending Club enables investors
to examine key credit characteristics of each standard program personal loan at a
granular level prior to investing in it and allows investors to continue to monitor ongoing
performance of the loans they have selected to invest in by providing investors with daily
servicing and collection information on the loans. We provide investors with more than
40 unique loan level credit and financial characteristics and monthly performance
information for every loan that has been facilitated through our platform since inception.
We also provide the performance data in a format for investors to build their own models
and perform their own historical analysis.
5. Marketplace investing provides tools that allow investors to easily build or modify
customized and diversified portfolios by selecting loans tailored to their investment
objectives and to assess the returns on their portfolios and, if desired, to enroll in
automated investing (for retail investors) or invest in a passive form (institutional
investors and high net worth individuals).
Page 44 of 51
In choosing a credit marketplace, we believe that investors consider the following factors:
Description
Brand and Reputation of
Marketplace Lending
Potential Risk Adjusted

Return
Length and
Comprehensiveness of
Historical Data
Easy to Use Reporting

Tools
Diversity of Investment
Opportunity
Fees and Other Costs

Associated with
Investment
Scale of marketplace platform

Experience of management team
Regulatory compliance standards
Diversity and scalability of investor base
Current and expected interest rates and losses on
the platform
Predictability of historical returns by risk band
Availability of performance data and length of track
history
Sophistication of credit modeling
Significance of historical volume that allows for
meaningful performance analysis and risk
management
Ease of access to information including portfolio
holdings and performance by asset class
Ability to view and analyze data in simple to
understand and use user interface
Diversity of borrower product types depending on
type, size, and objectives of investor
Diversity of investment structures depending on
type, size, and objectives of investor
Products to satisfy a broad range of risk / return
investor appetites
Sizable investment opportunity to attract strategic
capital (e.g., insurance companies, pension funds)
Servicing / access fee to investors
No management fee vs. asset managers who
typically collect fees of 2% on AUM and have built
additional incentive fees based on performance
There are a number of investment options to satisfy a variety of different investor preferences.
Lending Club believes that having multiple investment structures allows us to be relevant to
more investors. It also gives more flexibility to investors to design and implement an investment
strategy that meets their financial goals. Investors can implement a variety of investment
strategies through all offered structures. Additionally, Lending Club investors can significantly
diversify their portfolios by investing as little as $25 per Note and can build diversified portfolios
across various credit grades and loan terms.
Page 45 of 51
Investors can invest through the marketplace through three types of investment channels that
we believe meet investors' varying objectives and requirements for their portfolio (e.g., fractional
vs. whole loan purchases, bankruptcy remoteness or liquidity):
1. Notes on platform: A Member Payment Dependent Note corresponds to a fraction of a
single consumer loan facilitated through our platform to one of our borrower members.
Investors do not make loans directly to our borrower members; instead, pursuant to an
effective shelf registration statement, investors may purchase unsecured, borrower
payment dependent Notes issued by us that correspond to payments received on an
underlying loan selected by the investor. Lending Club is obligated to make payments to
investors for an amount equal to the investors pro rata share of amounts we receive
with respect to the corresponding member loan for that Note. Notes investors are
individuals and organizations.
2. Trust Certificate: Bankruptcy-remote vehicle where qualified investors (which include
individuals and pooled investment vehicles such as funds managed by LC Advisors, a
subsidiary of LC), can purchase a trust certificate. The trust certificates are settled with
cash flows from underlying loans selected by investors in a manner similar to the Notes.
3. Whole loan purchase: Certain investors, including banks and financial institutions, seek
to hold the actual loan on their balance sheet. To meet this need, loans selected by
investors are sold to investors and serviced by Lending Club.
Standard personal loan investment opportunities are equally available to all investors,
irrespective of investor type, and measures are put in place to ensure that all investors have
equal access. For newer types of loans with shorter historical performance records, investment
is limited to more sophisticated investors who can better assess and bear the risk.
Lending Club has built a diversified investor base consisting of 20% self-directed individual
investors, 50% individual investors investing through a fund or managed account, and 30%
institutional investors as of Q2 2015 for the standard loan program. Lending Club's diversified
institutional investor base, which includes foundations, endowments, insurance companies,
banks, finance companies, asset management firms, and corporate pension funds, continues to
provide the platform with the flexibility to broaden the scope of originations and expand credit
offering into very high credit quality super prime loans as well as lower credit quality in near
prime. We believe this diversity of risk appetite ultimately provides more consumers with access
to affordable credit.
The vast majority of investors do not rely on leverage. However, when leverage is used
responsibly, it can allow for long-term strategic capital from insurance companies that require a
credit rating to invest in marketplace lending products, which ultimately lowers rates for
borrowers. Lending Club has taken a proactive approach in educating and establishing
relationships with banks in order to create a diverse and sustainable network of potential
leverage providers for investors.
Page 46 of 51
13. What is the current availability of secondary liquidity for loan assets originated in this
manner? What are the advantages and disadvantages of an active secondary market?
Describe the efforts to develop such a market, including any hurdles (regulatory or
otherwise). Is this market likely to grow and what advantages and disadvantages might a
larger securitization market, including derivatives and benchmarks, present?
The breadth of Lending Clubs investor base (retail investors, high net worth individuals,
endowments, pension funds, insurance companies, asset managers, banks, finance companies,
etc.) allows us to deliver the most efficient capital to the platform to fund borrowers. The vast
majority of investors intend to retain their positions through to maturity, but we recognize that
some investors might need access to liquidity at times.
Retail investors have access to Folio Investing, a registered broker dealer with which we
partner, who makes available a secondary market platform (an alternative trading system or
ATS) to existing holders of Notes and investors interested in purchasing Notes in the
secondary market instead of on origination. While the volume of activity as measured by the
number of trades on the ATS of individual Notes has grown, in relation to the current aggregate
outstanding principal, the dollar volume is small. The ATS provides benefits to holders and
potential investors in Notes, but it generally is not essential to investing in Lending Club Notes,
as the vast majority of Note holders are long-term investors.
Holders of Trust Certificates do not currently have a secondary market option while institutional
investors in loans are able to access a secondary market through securitization. Currently, all of
Lending Clubs institutional investors purchase loans or trust certificates with the intention to
hold the loans to maturity. The secondary market is not critical for the institutional investors on
Lending Clubs platform but could ultimately lower return thresholds for investors and allow for
further savings to borrowers.
Unlike specialty finance companies, the Lending Club platform does not need to rely on the
securitization market as the primary avenue for funding and purchases with leverage constitute
only a small subset of total purchases on the platform. However, Lending Club supports the
responsible use of securitization as a way for long-term strategic capital providers such as
insurance companies to participate in the marketplace lending space, as we believe that their
participation will ultimately allow us to deliver more affordable credit for borrowers.
Advantages of Secondary Market (independent of investment vehicle):
Transparency through price discovery
Liquidity allows for lower return thresholds, which deliver savings to borrowers
Lower cost barrier to entry for investors (legal fees, account set up timeframe, etc.)
Greater diversity of investors; improves ability of investors to get access to consumer
loan credit
Larger appetite and capacity for the asset classes given liquidity
Page 47 of 51
Disadvantages of Secondary Market:

Lending Club has less control over who ultimately owns the Notes. However, as a
servicer, Lending Club will always know who owns its portfolios and continue direct
dialogue with the investor
Pricing is subject to macro volatility and investor sentiment as with all securities
traded on a secondary market. However, Lending Club can mitigate potential
volatility by continuing to provide performance and credit information for all loans
Securitization
The vast majority of Lending Club investors do not rely on securitization as a source of funding.
However, if executed responsibly and with a minimal number of intermediaries and control over
the process, the securitization of marketplace loans could help drive down the cost of funds for
investors. These savings could then be passed on to borrowers, allowing even greater savings.
Additionally, securitization allows non-bank investors with a higher cost of funds to invest
efficiently in asset classes that are currently underserved by banks. This ultimately allows
Lending Club to extend credit to a broader set of customers in these segments.
Also, unlike securitization issuers, Lending Club has been providing loan-level granularity and
transparency around all issued loans on the platform to all investors (direct purchasers or
securitization investors), which allows all parties to do extensive diligence and monitor changes
in underwriting standards on an ongoing basis. The transparency and breadth of data allows
investors to do multi-year diligence on Lending Clubs underwriting practices before making an
investment decision. Over 100,000 investors have the ability to monitor daily any changes to
Lending Clubs underwriting practices.
Page 48 of 51
14. What are other key trends and issues that policymakers should be monitoring as this
market continues to develop?
We have identified a few key trends that we believe the Treasury should be monitoring as this
market continues to develop:
Marketplace lending is becoming mainstream: We are seeing marketplace lending reach a
broader segment of the U.S. economy through partnerships with large banks, a broader mix of
borrowers affected and expanding types of asset classes impacted. For example, Lending Club
partnered with a number of community banks in 2013, Union Bank in 2014, and Citi in 2015.
Marketplace loans are reaching a broader mix of borrowers. Lending Clubs borrower mix has
shifted from primarily millennials to a mix more representative of the overall U.S. population.
Market participants are moving into larger lending verticals that have had little online lending to
date (e.g., mortgage), leading to increased transparency for borrowers and investors in these
markets, which have traditionally been less transparent.
Continued focus on responsible lending practices and innovation: As noted in the
response to question 11, Lending Club identified the need for responsible lending standards in
small business lending and joined with organizations across the industry to launch the Small
Business Borrowers Bill of Rights (www.ResponsibleBusinessLending.org).
Marketplaces are increasingly using partnerships to expand access: Marketplaces are
increasingly working with banks, for the greater benefit of consumers and small business
owners the best of both worlds: marketplaces have a low cost of operations and banks a low
cost of capital, with the combination of the two allowing an even lower cost of credit.
Marketplaces are working with partners to provide financing to borrowers and communities that
are typically hard to reach. Lending Club has partnered with Citi to provide financing to low- and
moderate-income families. Lending Club has partnered with Opportunity Fund to provide loans
to small business in underserved areas of California. Marketplaces are increasingly partnering
with companies to offer their customers and partners small business financing at low interest
and fees. As just one example, Lending Club has partnered with Google to enable Google to
invest its own capital in the growth of its partners and drive business growth, while giving
Googles partners access to financing with low interest and no fees.
Foreign governments are becoming active in supporting marketplace lending:
Governments are becoming more involved in marketplace lending by supporting marketplaces
through business practice changes and by investing in marketplace loans as well as providing
incentives for investments. For example, the UK Government has promised to invest 100M in
small businesses through alternative lending channels. They have instituted a practice requiring
designated banks to refer their declined small business loan applicants to marketplace lenders
and have expanded investor access to encourage investors to invest in marketplace loans
through tax-advantaged Individual Savings Accounts.
Page 49 of 51
Appendix: 4506t API and other valuable government data

For a 4506t API to be successful, we suggest the following:
1. Add additional data points The current 4506 transcript lacks a few necessary data
points available on the actual tax forms: Ownership information including names, %
owned, addresses, possibly SSN (Schedules K-1 and G), Compensation of
Officers including names (Schedule 1125-E). If this is not included, we may need to
collect tax returns anyway to get this information, eliminating much of the benefit of an
API. The following would also be valuable in lowering the cost of credit and increasing
credit access: balance sheet detail, depreciation schedule, and the statements showing
Other Depreciation and Other Income.
2. Retain multiple year access Multiple years of data will be critical to identify borrowers
whose finances are stable or improving over time.
3. Provide at an affordable cost To be widely used, especially at the top of the
application funnel, this API would need to be available at low cost, even for multiple
years of data (i.e., if 1 of 3 applicants are approved, this increases the effective cost
threefold of using the API to evaluate all applicants). Because of the cost savings to the
IRS, zero or low cost should be feasible.
4. Integrate borrower consent There will need to be a method for the API to obtain an
individual's consent before sending their tax information to a 3rd party. The API could be
built to use a token to accomplish this. This permission system would need to be
structured to take place instantly and seamlessly for the tax payer (i.e. within an online
application, rather than something like a separate email chain or website). If the addition
of the 4506t process adds friction to a loan application, it will not be widely adopted.
We strongly encourage the IRS to rapidly develop a 4506t API, and would gladly assist in its
development. Below is ranked list of other government data that could lower the cost and
increase access to credit.
Item
Automate the existing IRS 4506t
Request for Transcript of Tax Return
process that gives permission to share a
summary of tax returns. Include a few
additional tax data points the 4506t
doesnt currently include.
Value
Purpose
Extremely
valuable
A 4506t API would allow lenders to offer faster

loan decisions, lower pricing, higher approval
rates, more attention to smaller loan requests,
(Discuss in decreased fraud risk, and an easier application
detail
process. Could be transformative for consumer
above)
and small business credit.
HHS quarterly wage data in the National Extremely

Directory of New Hires
valuable
Verify consumer employment and income

instantly, and include that data in loan
decisioning. Same benefits as the 4506t API listed
above, for consumers only, not small businesses.
Page 50 of 51
Social Security
Extremely
Administration
valuable
benefits and earnings
data
To verify consumer SS income, present and historical, and SSN.

Data overlap with Nat'l Directory of New Hires. Same benefits as the
4506t API above, for consumers.
Census National
Business Register
(The firm-level data
would be very useful,
but is not public now)
Extremely
valuable
To verify business's existence, plus attributes like industry, size, and

number of employees. The need for this would be partially met by
the IRS 4506t API. If this data cannot be shared directly with
lenders, perhaps it could it be made accessible to lenders through
an intermediary organization, such as the Small Business Financial
Exchange (SBFE). SBFE is a nonprofit organization of financial
institutions that share information with each other in order to
improve the credit decisions of all members.
SBA individual loan

performance data
Helpful
To see how a specific business has performed in the past to assess

creditworthiness. Benefits: Better rates, more approvals, and easier
process for businesses with past positive performance on SBA
loans.
Payroll Tax data - firm Helpful

level
Review of a firm's historical payroll tax info could help us assess the
growth of a business. Use for verification and credit assessment
could lead to higher approvals, lower pricing, and faster/easier
application process.
Unemployment
insurance programs
earnings data
To verify consumer unemployment income.

(This data is owned by states, regulated by Department of Labor)
Helpful
SBA performance
Helpful
data sets, anonymous (doesn't
need to be
via API)
To improve commercial lending models with data on industry,

geography, # employees, and more detailed attributes, to improve
commercial lending risk models
Page 51 of 51

Lending Club Response To Treasury RF I

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Marketplace Lending RFI

Document ID: 80 FR 42866

71 Stevenson Street | San Francisco, CA 94105

September 30, 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

For small business owners:

Lending Clubs Response to Marketplace Lending RFI, September 2015

For community banks:

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

According to a survey by the National Small Business Association, 85 percent of small

More convenient access to credit A traditional business loan requires an overly

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Additionally, Lending Clubs diverse acquisition channels enable it to cost-efficiently acquire

Lending Clubs Response to Marketplace Lending RFI, September 2015

Is marketplace lending expanding access to credit to historically underserved market

Marketplaces are providing increased access to credit to historically underserved market

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Traditional Financial Institutions: We work with a large number of traditional financial

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Effective Fraud Prevention

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Business continuity governance and program management

Lending Clubs Response to Marketplace Lending RFI, September 2015

Business impact analysis and risk assessment

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Diversified funding model

Q2 2015 for the standard loan program

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Background for risk retention discussion

A. Background for risk retention discussion

Lending Clubs Response to Marketplace Lending RFI, September 2015

SEC Credit Risk Retention Adopting Release at page 13.

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

See e.g., https://www.lendingclub.com/public/safety-and-privacy2.action.

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Potential Risk Adjusted

Easy to Use Reporting

Fees and Other Costs

Scale of marketplace platform

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Lending Clubs Response to Marketplace Lending RFI, September 2015

Disadvantages of Secondary Market: