| Maybe in theory. But in practice they have 1) operational risk - insofar as they are the middle-man and so are exposed to investors suing them when the loans go south 2) Implicit credit risk - in that if their loans blow up the losses suffered by their levered investors will likely prevent them from coming back to the market place to 'roll the loans' 3) Explicit credit risk - in that they have invested capital in a subsidiary HF (Cirrix) which buys their loans and is on the hook for the losses (which could flow up to the parent) http://www.inc.com/business-insider/inside-lending-club-scan...
https://personalmoneyservice.com/lending-club-fraud/ Key passage: "As a result, the company may need to use its own funds to purchase these loans in the coming months." In other words, LendingClub is going to fundamentally shift its business model from taking no risk to taking on the risk of borrowers defaulting. The startup sold itself as simply a marketplace, connecting borrowers with investors, but now it is buying its own product. The equivalent would be Airbnb buying up loads of houses to list on its own platform, to keep it growing." |