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200 Community Banks Suspend LendingClub Loan Purchases

Despite its best efforts, the largest online lending platform, Lending Club, cannot seem to assure investors and customers that operations are all clean.

Days after investment banking firms Jefferies and Goldman Sachs stopped buying loans from the company amid a loans review, a group of 200 small banks also temporarily halted purchases from Lending Club, according to the Wall Street Journal.

BancAlliance, representing 200 community banks from around the country, has decided to review events leading up to CEO and founder Renaud Leplanche’s resignation. In total, the banks have recommended $200 million worth of loans from Lending Club to their consumers. Jefferies and Goldman Sachs have also, at least temporarily, paused buying and securitizing loans as they attempt to understand the situation.

Lending Club’s troubles began when Laplanche abruptly resigned Monday, after the company reportedly improperly sold $22 million in loans to—allegedly—Jefferies, that it was later forced to buy back. Additionally, Laplanche did not adequately disclose his stake in Cirrix Capital—a company that buys loans from Lending Club. The last straw came when Laplanche failed to cooperate with an internal investigation launched by the company’s board of directors. Lending Club’s stock has plunged 47% since then.


Despite being considered a pioneer of the fintech industry and one of the most promising companies in the space, Lending Club’s shares have been southbound since its IPO in 2014. Its most recent travails will also likely shake confidence about transparency and practices in the nascent industry, which has already troubled investors such as Goldman Sachs pulling away.

A day after Laplanche resigned, the U.S. Treasury released a white paper calling for stronger regulations and oversight for peer-to-peer lenders.