The Bankwatch

Tracking the consumer evolution of financial services

LendingClub ceases operation in Massachussets

This is an unusually strongly worded order that requires Lending Club not just cease operations in Massachusetts, but to unwind and refund all fees collected since 2007 within specified dollar limits (eg. since April 17, 2007 and shall reimburse each borrower from whom borrower origination fees were collected in excess of twenty (20) dollars)

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The order notes that there has been an examination ongoing for what appears to be years, and obviously did not conclude well.

WHEREAS, an examination/inspection of LendingClub was conducted pursuant to General Laws chapter 140, sections 96 to 114A, as of June 9, 2008 (the "examination/inspection"). Because of concerns regarding the Corporation’s compliance and financial condition, the examination/inspection continued in 2010 and concluded on March 10, 2011, to assess the Corporation’s level of compliance with applicable Massachusetts and federal laws and the Division’s regulations governing the conduct of those engaged in the business of a small loan company in the Commonwealth; and

Relevance to Bankwatch:

As I write this I know nothing about the circumstances beyond what I read there on the Massachussets government web site.

My comment is that this is an investigation  which has dragged on for three years.  The legal and work effort this entails for over 3 years is enormous.  Then the work effort to comply with the Order to refund fees charged over the last 4 years plus is gigantic, involving people who will have moved etc..  

The result is certainly not one that will encourage innovation in Massachusetts.

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Written by Colin Henderson

June 5, 2011 at 15:47

Posted in Uncategorized

3 Responses

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  1. I’m not sure how you make the connection between this announcement and “encouraging innovation in Massachusetts.” I can’t for the life of me see how it will impact anyone or any firm engaging in anything that even remotely resembles innovation, unless that person or firm is involved in p2p lending.

    Ron Shevlin

    June 6, 2011 at 06:48

  2. @Ron – that is one view that it pertains to P2P lending. I see it as anything new that is not included in the current banking and loan business models.

    Colin Henderson

    June 6, 2011 at 09:09

  3. “Unwind and refund all fees since 2007”? Seems absurdly harsh. What are they beating up LendingClub so much? What did it do that was so egregious?

    John Philip Green

    June 6, 2011 at 09:13


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