The 10 most important loan stories on the market in 2017
In our annual retrospective, we share some of the biggest news we’ve covered on Lend Academy this year.
It has been an interesting year. I can confidently say it was a better year than 2016 for the market lending space, but not all the news was good. While there were a lot of new positive developments in 2017, we also saw some negative news with the CEO of another major lending platform forced to step down. We have also seen many important new deals signed, none more important than the $ 5 billion pledge to Prosper. Regulatory wise, this was mostly good news with the exception of the now infamous Federal Reserve Bank of Cleveland report that they were forced to take down from their website due to numerous inaccuracies. Below are my top 10 stories from 2017.
For the second year in a row, the biggest news in our industry (in my opinion) has been the resignation of the CEO of a leading platform. Until September SoFi was the envy of the industry, raising more money at a higher valuation than any other platform ever. It was the first company to achieve an AAA rating in a securitization and has successfully expanded to other lines of business beyond its initial focus on student loans. Although very different from 2016 Lending Club News it was another self-inflicted injury that rocked the entire industry.
In November, researchers at the Federal Reserve Bank of Cleveland released a report titled The taste for peer-to-peer loans. They were trying to determine whether or not loans obtained from peer-to-peer lending platforms actually helped a consumer’s financial situation. The premise was good, but the execution was appalling. They used data from various lenders, including established banks, and decided to consolidate everything into “peer-to-peer loans”. They did the right thing and removed the report from their website, but not before causing a huge stir in the lending space of the market.
Rumors about the deal began to circulate in the summer of 2016. The $ 5 billion deal would be the largest funding commitment ever made in the history of the lending industry in the market. Prosper finally struck the deal in February of this year and there was a collective sigh of relief not just from Prosper, but the industry as a whole. While they had to give up a lot to get this deal signed, it helped put Prosper on a positive trajectory in 2017.
After Renaud Laplanche left the Lending Club last year, everyone wondered what his next move would be. In April, we all learned when the launch of Improve has been announced. Renaud has raised a record $ 60 million in a Series A for his new consumer lending platform. He’s clearly planning a great second act, taking everything he’s learned as CEO and founder of Lending Club and applying it to his new business.
The year saw the emergence of new players in the small business lending arena, such as Amazon, PayPal, and Square, all of which made significant inroads into the space. These companies have a unique advantage over other lenders in that they target their existing large customer base, so customer acquisition costs are negligible. These companies are now primarily focused on their own customers, but if they start to expand their offering to all small businesses, they will become even more formidable competitors.
While this article examines how quickly major consumer lending platforms have reached $ 1 billion, it’s actually about Marcus. When Goldman Sachs CEO Lloyd Blankfein said in a CNBC interview in June that Marcus had already spent $ 1 billion in total loans, the industry took note. They had only been launched in October 2016 and in eight months they had passed this milestone. We now know that Marcus surpassed $ 2 billion as they emerged as one of the leading consumer lenders.
Since inception Reached used alternative data in their subscription models and the models themselves relied heavily on artificial intelligence. It was never entirely clear that the use of this data complied with all fair loan laws. Thus, Upstart requested a “letter of no action” from CFPB which they received in September. This means that the CFPB has essentially validated their use of not only alternative data but the subscription models themselves, which is big news for Upstart and the industry.
The OCC Fintech charter has been a hot topic for some time now, but it wasn’t until March of this year that we discovered some of the details of the charter. The OCC published a 16-page supplement to its licensing manual that outlined its plans for the new charter. The decision sparked legal challenges from states and the OCC itself said it was not yet ready to start receiving requests. It will be a story to watch in 2018.
The “Madden issue” is the one that has hovered over the industry since 2015 when we first covered the case. It focuses on exporting interest rates in a case unrelated to market lending, but since a decision of the second circuit all loans to individuals in New York, CT and VT must have been under the usury limits of those states, regardless of who originated those loans. This decision created uncertainty as to whether or not this would be extended to other states. Thus, two bills were presented to Congress last year that would provide a legislative solution to this problem. Neither bill has yet been voted on, but there is optimism we could see some movement in the coming months.
In December, LendingClub hosted its very first Investor Day in New York. The management team shared their vision for the company and the opportunity they see ahead of it. While Wall Street was not impressed with the day, as equity investors drove the stock down sharply, several interesting things emerged, including LendingClub’s plans for a new type of investment vehicle called a negotiated partnership. in stock exchange.
There was more important news for the industry that didn’t make it to my top 10. There was a lot of important funding commitments in 2017 not included here, we had the first requests for an industrial loan charter filed, Ron Suber, also known as the godfather of fintech, stepped down as chairman of Prosper, we had the emergence of China as a global fintech force and much more.
It has been an interesting year and now we are moving to 2018. Happy New Year everyone. I wish you a pleasant extended weekend and all the best for this coming year. I have a feeling it’s going to be another fascinating year.