I dunno, wouldn't the better question be if I am at all comfortable using a third party app for financial transactions? Because I'm not. But I'm not super concerned about me, I'm curious how the thinking goes when someone decides to collect information about the loans that other people are taking out.
Maybe they are pretty sure that users understand it, the app could have a strong disclosure for all I know.
There is a rich ecosystem of LC apps and services because of LC's open API. The only thing the API's allow you to do is invest in loans and transfer money in and out of your account. I would be quite shocked if any service (such as lending robot) is able to operate without recording any transactions occurring. I hope users wouldn't be offended by the (very general) information revealed above, but I suppose some could.
Presumably LC itself is recording the transactions? It's obvious that apps would want to do so as well, but that certainly isn't a necessity. An app could remember a transaction long enough to ensure that it had posted, and then forget about it forever.
Primarily what I allude to in my initial comment, it indicates that they are in possession of specific user information. As I also point out above, I have no idea how informed the users would be about that.
I guess that might not meet all definitions of reasonable concerns.
The latest disclosures Tuesday, uncovered by a company probe, found that in the last few weeks of December 2009, Laplanche and three relatives took out 32 loans for a total of $722,800. All but three of those loans were repaid in full over the next two months, implying they were taken out to artificially goose Lending Club’s loan origination numbers.
Really, yes obviously that's fraud but apparently it's perfectly normal as long as you don't get caught.
Artificially inflating the numbers whilst shopping for investments is definitely not acceptable. Pumping money around is an old trick to inflate the visible size of a company, some of these schemes are surprisingly hard to detect (the one here definitely isn't).
I'm somewhat surprised that there was no oversight in place that would have stopped this, that's serious money.
I feel like almost every startup that "made it" used dark-hat growth hacking tactics to pad their numbers. But the other companies were typically in the consumer internet space. I would expect some additional rules to exist for a highly regulated market like Finance.
Wow, so the crown of the "fintech" movement is just as bad as the banks, and the two biggest Silicon Valley successes of the last decade, Uber and AirBnB, are really just cases of massively successful regulatory arbitrage. Nice innovation!
Please, the handful of irregularities they found at LC doesn't begin to amount to the shady stuff large banks have been caught doing. More importantly if you are a regular investor in LC loans none of the things found have caused investors in LC notes to lose money.
Why not just group the fraudsters and the gangsters together like we normally do? These banks have had about 15x as much time to make that mistake, to me it looks like LC was headed that route.
It seems a common way to "disrupt" a market is to find a loophole to call yourself something else so you can avoid all the laws everyone else is beholden to that were put in place for people's protection.
That sounds pretty legitimate if the laws don't actually protect people, and have been corrupted by wealthy interests, such as taxi medallion owners. Or if the laws are outdated.
Ubers are consistently safer than taxis, provide better customer service, don't intentionally take long routes to scam you, actually take credit card instead of pretending their credit card reader is broken, don't refuse to drive you because you have luggage or are going a short distance or are living in a bad part of town, etc etc.
It turns out that Uber's rating system is much better for people's protection than whatever laws and background checks taxis are subject to.
> actually take credit card instead of pretending their credit card reader is broken
After you've arrived at your destination, have you really found any taxi driver who would rather take _no payment_ than a credit card? If all you have is plastic--and if the driver is required to accept that form of payment--then I guess I don't see the problem (for riders). I've had drivers take my credit card # on a carbon copy physical swipe. I've had drivers admit that the card reader actually _did_ work. Unfortunately for them, I've even had drivers accept underpayment in cash because they were legitimately unprepared.
So, when it is unclear whether they are scamming you, your response is: here, have a physical copy of my credit card information? Sure, the liability is with your bank, but still seems like bad decision making.
- You are using "scamming" as a binary yes/no behavior, when in fact there is a huge difference between lying about a faulty machine and committing credit card fraud. The most likely reason for the lie (not "scam", that's too strong of a word here) is to avoid the credit processing fee. And that's _if_ they are lying in the first place. There simply isn't much (risk-adjusted) benefit for the driver to escalate that situation into credit fraud.
- The information on a hard-copy swipe is identical to a magnetic swipe and also the information provided to any online merchant (i.e. CC#, name, expiration; not CVV). Why should I be any more worried about this information on a piece of paper vs. the risk of a card skimmer at a gas station? Or a security breach of any one of the multitude of online retails who I have _ever_ shopped with?
- As you stated, the risk goes to the bank, as I am not liable for fraudulent transactions on my card. In fact, there's actually risk going to the driver as well: without an immediate approval, they don't know if I'm handing them a worthless card!
- The implication from your statement seems to be that... you wouldn't pay the driver, who has already rendered services and is capable of accepting valid payment from you. Is that what you mean? If so, that is not OK.
Protect people! Ha! The laws covering cabs require them to go into undesirable areas so those that can't afford a full car can still get around, accept cash payments for those unable to get credit, vehicle inspections, and so on. When you say protect people, do you just mean the people in your bubble where everyone has a card?
Taxis in many cities will refuse to go somewhere (e.g. JFK, South London, outer Beijing, ...) even though they are legally obligated to take you anywhere. There is little recourse. The driver's medallion won't be taken away for breaking the conditions of the monopoly.
If that were true, I would expect the experience of using Uber to be identical to using a taxi, or for AirBnBs to be identical to hotels.
They're different experiences and certainly innovating. Just because they had to overcome legislation to grow does not mean that regulatory subversion is their only benefit.
Uber lacks the safety precautions taxis do, and they're leaving cities who mandate the level of accountability taxi companies have. AirBnB customers have reported heavy amounts of racism and bigotry, things that wouldn't fly very far very fast in the hotel industry.
Regulatory subversion is what gives them the margins to operate, and if a few people get hurt or discriminated against, I'm pretty sure Uber and AirBnB are okay with that trade-off.
Name those precautions and how exactly they relate to safety.
> AirBnB customers have reported heavy amounts of racism and bigotry
Millions of people stay in AirBnBs and the vast majority of them have positive experiences. There's no evidence of rampant racism or bigotry and any host who acted that way would be kicked off the platform.
This continued insistence that Uber and AirBnB are categorically inferior to legacy companies and only profit by skirting (useful) regulations is ridiculous. If taxis were better than Uber, why would anyone ever use Uber?
People have dreamt about on-demand car hailing for a long time, but it's always been a pipe dream - building the two-sided network is such too hard and too expensive, and a small network is just not worth using as a consumer. How is this not innovation?
Most of the innovation there was in the cell phone[1]. You've been able to order a car by phone in major metros for longer than those have been around. In fact, Uber started off as an app for using those very services.
Props to Uber for execution, but all the pieces were there.
[1]-edit: some in the smartphone, but most in the old "makes calls" cell phones
Execution and timing. Uber had a big advantage in being new & shiny just as the market was ready for it. They tried it multiple times and the first few it failed to gain any traction.
Ummm... as a matter of fact, Uber was only a black car service until Lyft (and perhaps others) started P2P service. Uber was a fast follower in that space.
yeah, but unless you're in a city like New York (possibly a handful of others) the wait is FOREVER. In Phoenix it was routine to have to wait half an hour or more. Same in SLC. It's awful. Uber and Lyft reduced the wait to a fraction of the time with better, quicker and cheaper service.
This complaint makes no sense to me. You just call the taxi company further in advance of when you need the ride. If you know it's always around a 30 minute wait, just call 45 minutes ahead of time and tell them the time you need picked up.
Phoenix & SLC are also not cities in which people are likely to rely on on-demand ride sharing. Most people own their own car especially if they care about being able to determine exactly when they engage in transiting.
Further, in all of the non-mega / non-already-has-developed-rapid-transit-system cities I've been in, apart from one single city (San Francisco), the wait time for Uber is on the order of the wait time for a taxi. The difference between needing to call or book ahead to avoid a 30 minute wait vs. a 15 minute wait is utterly irrelevant.
The real reason why Uber succeeds in these markets is that they currently subsidize the rate paid to the drivers and thus compete on price. They also have way better marketing and do a good job of making people think the market for Uber rides is more liquid than the market for taxi rides (though in truth it's not more liquid except in dense areas).
Uber is not profitable in these areas, and is just hoping it can subsidize the losses on most decentralized transit regions long enough to defeat regulatory issues, outlast competitors, and put pressure on taxi services. It's still quite a significant gamble.
I just logged in specifically to tell you that as a SLC resident without a car, I use lyft extensively. Similarly all my friends do as well, for the almost perfect example people use of preventing drunk driving.
I'm already pretty strapped for cash, hence why I don't have a car but I utilize Uber & Lyft when I'm unable to get to my destination in a timely manner.
I would not however get a taxi simply because I don't know the number to call, I don't know when they'll arrive at my house, and simply the entire taxi experience is just horrible.
> Further, in all of the non-mega [...] cities I've been in, apart from one single city (San Francisco), the wait time for Uber is on the order of the wait time for a taxi.
As a data point to the contrary, in Chicago we stopped calling taxi dispatchers to our apartment because they would arrive up to 30 minutes late. Even if we scheduled ahead of time, it didn't seem to matter; as if the dispatchers were holding our request until the last minute and then dispatching into the general queue (so why call ahead?)
With the Uber app, whenever we call a car (even a taxi) we get an ETA based on GPS coordinates of the driver, which is both accurate and updates live. There's a level of accountability that was never available with the existing taxi dispatch.
For me still this equation holds true.
Taxes are abundant and cheap in Singapore. Riding in someone's car makes me uncomfortable. (But that is just me, I suppose)
The success of Uber in a city is directly proportional to how much taxis suck in that city.
So Singapore is one of a few cities where that's the case (NYC also -- Uber doesn't really work there. I was there for 8 days and requesting an Uber as a 10-15 minute wait. You can get into one of a million cabs that go by in that time. I gave up).
Same in Bangkok. Taxis are plentiful and cheap. But like elsewhere if you flag one down they often refuse you if you want to go somewhere inconvenient for them. That's where a taxi hailing app like GrabTaxi is useful. It works like Uber except it's a taxi that picks you up. Uber exists here but hasn't got much traction (as far as I know).
NYC is actually one of Uber's most important cities. Don't forget that NYC is more than just Manhattan below 125th street. Getting a taxi in the outer boroughs was miserable. The green ones help but were a little too late. The black car services are entirely unpredictable and unreliable, doubly so if you are not of the ethnicity of the dispatcher/drivers they employ.
And let's not even talk about the number of times a cab driver straight up refused to take me to Brooklyn, both during the day and late at night. Totally illegal, but it happens all the time.
Agreed, when I was living in the Valley in 2003/4 public transportation was terrible and taxis nowhere to be found.
But then I was driving a shitty Ford ....
That's not my experience in Singapore. The one time I was there I had to wait 15 minutes to get a taxi and then had to argue with them to get them to take me where I wanted.
In contrast, Uber took less time and required no negotiation.
Taxis are abundant and cheap in Shanghai... unless it's raining (very common). Then they won't pick you up at all. They're still driving around, but you can't actually get one.
...ok, how? I understand it's "all about execution" but were there not explicit laws governing taxis and related services, as well as running a hotel out of your home? Did we as a society not choose to put those in place?
You can apply your logic to basically any entity in history to belittle them. Everything can be positioned as a "massive case of blah" if that is your goal.
No you can't. Was there ever a law explicitly saying coding an OS was illegal? Versus operating a cab company without registering with the government to prove compliance with laws already in place to deal with those? Or similarly running an illegal hotel out of your house?
Disagree. Transistor, car, heck even the iPhone (and I say this as a massive hater against apple) are not describable by this. Neither is anything which 1) actually solves a problem 2) in a legal way (Airbnb is pushing legislation, Uber is breaking it, and it appears lending club simply commited fraud)
No, making cars was never outright illegal. Operating a cap company, (or rather an illegal one), without proper licensing was. Operating a hotel out of your house was. Nice strawman.
But hasn't professional licensing and regulation gone a bit too far when driving someone in your car for money is supposedly illegal? What's the crime in that?
Nothing they have disclosed has caused me to stop investing in their loans. In fact you can get some nice high grade loans on their secondary market from people trying to unload their portfolio at a 3-5% discount to face value.
As long as they don't have any debt on the books you are pretty safe. If they did have debt there might be some question about order of payment to creditors.
From this halcyon point, there's more downside risk than upside going forward. Unless the cyclical nature of debt defaults suddenly stopped after centuries.
Stock's up 7% as I write this. I'm assuming nothing has been revealed that isn't already at least suspected, and layoffs are generally good for a stock's price. I've already made money on one dip-and-bounce, but currently in at 4.88, so here's hoping it will claw it's way back a little bit. I'm in no way qualified to declare a bottom, but I'm guessing all of the bad news is out of the way. This in no way constitutes investment advice; in fact, I'd steer clear of LC if I were you. But I'm not you, I'm me, and sometimes I invest poorly.
Check this chart, which shows LC returns relative to SPY (S&P 500) over the past 5 days. The stock is up from the open today, but relative to the market it looks like it is tracking mostly unchanged from last week, or slightly negative. If I had to guess, I'd suppose that the negative trend is related to brexit's impact on the entire financial sector, and the sharp drawdown/recovery is related to the news: sharp drop on reaction, then partial recovery after value traders decide that the "wash" lending apparently doesn't matter much for future value.
LC has been bouncing up and down with 5-10% daily changes very frequently ever since the news broke about their security fraud and CEO departure. The 7% change today (given the general market rally today) likely means that the market sees this news as neutral.
Yeah, I'm not sure exactly what to make of it. Everything else I track is up 3-4% today, so that's why I view 7% as a positive outlook. But as you point out, it's a pretty volatile stock, so it may just be riding the rest of the market and got a little extra bump from volatility.
But personally, I don't try to read tea leaves. Set my stop limits so I don't have to watch it like a hawk, set an alert for the upper limit, and watch LC news strictly for entertainment value. Because thought the story is somewhat interesting, it's not anything we haven't seen before with companies like Tyco and Adelphi.
In just world this would result in a prison sentence, banishment from stock exchanges, and revocation of their corporate charter. The fact that there is no capital punishment for companies, especially public ones, provides a moral hazard.
I agree. Our society tolerates white collar crime far more than we should.
We've got a good handle on things like punishing criminals that rob someone at gunpoint. However, we struggle with seeing the CEO making short term loan to his company as theft from investors (the short term loan hid the fact that the company wasn't meeting its presumably publicly announced growth targets).
The issue is that white collar crime needs to show criminal intent. But, in this case the CEO didn't have criminal intent to steal, rather his intent was simply to boost his business (with the consequence of misleading investors).
I view white-collar crime as primarily an individual act. Corporate crime, such as we saw with HSBC, Dow Chemical, and even Mitchell Jessen, escapes significant punishment, only very rarely rising to criminal conduct. That the conduct is legal, or considered legal, is a policy and legislative outcome.
As for intent, the law has centuries of precedent to incorporate into criminal statutes that affect corporate activities. It's just that the standards are artificially high and don't take into account the diffuse nature of the enterprise. But we have several decades of even that which could be applied, but isn't.
If corporations are persons, and they can commit felonies, why not give them punishments that are analogous to what you'd give a person who committed a felony?
> If corporations are persons, and they can commit felonies, why not give them punishments that are analogous to what you'd give a person who committed a felony?
Because corporate personhood is a legal fiction, and a corporate death penalty doesn't really hurt the people who a corporation stands in for very much, and hurts lots of other people a lot.
Corporate death would just be another form of bankruptcy, which hurts shareholders and employees but wouldn't harm anyone else. Actually since this would be a rare form of bankruptcy with plenty of assets, it could be set up to pay restitution to various corporate victims as well.
Yes, punish the hundreds who simply do their job by forcing the company to go out of business, instead of trying to steer it towards a more productive future. We've gotta justify that pitchfork investment, don't we?
I'm sure I've seen "just doing my job" invoked in a pejorative sense, in close parallel to "just following orders"? When one's job is to harm society, society might step in, even if one "didn't know".
I don't think you need to do any of this shady stuff to be a small loan marketplace for unaccredited participants. But the shady stuff kills your chances to feed the CLO pipeline and selling (large batches of) small loans to accredited buyers.
So just... why take _these_ risks? It doesn't have a realistic chance of helping any viable strategy that I can think of.
You answered your question. It is a risk... a risk that not many are prepared to take. LC seems like it serves those who are willing to take that risk in hopes of getting better returns.
It's ludicrous that someone would risk their reputation and their company's future for a mere 32 more loans on the company growth report. I can't imagine how these loans made a significant difference to these reports. These revelations could be just a scapegoat for more serious fraud.
Look at the date: they were made in 2009, when the company was barely a year old. At that time, an additional 730K in loans could have been a needle mover.
- New users have fallen by 50% per month, although of course users to my app are a fraction of total new users, but you can extrapolate
- Total net, users are withdrawing about as much money as users are putting in
- The amount of loans purchased has dropped significantly
So without a doubt, retail investors know what's going on and fear for the safety of their investments.
[0] https://itunes.apple.com/us/app/lendingclub-order/id10461141...