First Trade Union Bank
| Company type | Public |
|---|---|
| Industry | Financial services |
| Founded | 2006 |
| Headquarters | San Francisco, California , United States |
Key people | Renaud Laplanche (former CEO) |
| Products | Peer-to-peer lending, personal loans, auto refinancing loans, banking services |
Number of employees | (not specified) |
| Website | https://www.lendingclub.com |
LendingClub Corporation is a U.S.-based financial services firm with its main office located in San Francisco, California. It was the pioneer peer-to-peer lending company to register its loan offerings as securities with the SEC and to facilitate loan trading on a secondary marketplace. At its height, LendingClub held the position as the largest peer-to-peer lending platform globally. By December 31, 2015, the company had facilitated loan originations totaling $15.98 billion through its platform.
The platform allowed borrowers to secure unsecured personal loans ranging from $1,000 up to $40,000, generally repaid over a three-year term. Investors had the ability to review loan listings and choose loans based on criteria such as borrower profiles, loan amounts, credit grades, and intended use, earning returns via interest payments. LendingClub’s revenue model involved charging borrowers origination fees while collecting service fees from investors.
Additionally, LendingClub provides traditional direct-to-consumer lending products, including auto refinancing loans, through WebBank, an FDIC-insured and state-chartered industrial bank headquartered in Salt Lake City. These loans are not funded by individual investors but are assigned to other financial institutions.
In 2014, LendingClub completed the largest technology initial public offering (IPO) in the United States that year by raising $1 billion. Despite its pioneering role in fintech, the company encountered difficulties in early 2016 such as investor withdrawals, controversies related to loan practices, and board concerns regarding CEO Renaud Laplanche’s disclosures. These issues triggered a sharp decline in stock value and ultimately led to Laplanche’s resignation.
In 2020, LendingClub acquired Radius Bank and simultaneously announced the discontinuation of its peer-to-peer lending platform. While existing investors continue to receive interest payments on outstanding loans until they are repaid or defaulted upon, no new individual investments or secondary market transactions are permitted.
History
LendingClub began as one of the initial applications launched on Facebook. Following a successful Series A funding round in August 2007 that raised $10.26 million from investors including Norwest Venture Partners and Canaan Partners, LendingClub expanded into a comprehensive peer-to-peer lending service.
On April 8, 2008, LendingClub temporarily halted new lender sign-ups and terminated its affiliate program pending SEC approval for issuing promissory notes. Subsequently, on June 20, 2008, it submitted an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) seeking approval for $600 million in "Member Payment Dependent Notes." By August 1, 2008, the company amended this filing to revise interest rate calculations and introduce a system for trading notes on a secondary market. After completing SEC registration on October 14, 2008, LendingClub reopened lender registrations and began issuing tradable notes via the Foliofn platform. In March 2009, it secured $12 million in Series B funding led by Morgenthaler Ventures.
Pre-IPO Expansion
In April 2010, LendingClub raised $24.5 million during its Series C financing round, spearheaded by Foundation Capital and supported by existing backers such as Morgenthaler Ventures, Norwest Venture Partners, and Canaan Partners.
By August 2011, the firm secured an additional $25 million from Union Square Ventures and Thomvest, boosting its post-money valuation to $275 million—a growth of $80 million compared to the prior year. Peter J. Thomson of Thomson-Reuters also made a personal investment. Later that year, LendingClub shifted its headquarters from Sunnyvale and Redwood City to downtown San Francisco. Co-founder Soul Htite departed to launch Dianrong.com, a peer-to-peer lending platform based in Shanghai.
In 2012, under CEO Renaud Laplanche’s leadership, LendingClub employed roughly 80 staff members. The company averaged daily loan originations of $1.5 million, accumulating $600 million since its founding. Its SEC registration was renewed for $1 billion in Member Payment Dependent Notes as of April 10, 2012. In June, LendingClub received $15 million from Kleiner Perkins Caufield & Byers alongside a $2.5 million personal investment from John J. Mack; Mary Meeker of Kleiner Perkins joined the board during this round, which valued the company at $570 million. By November 2012, LendingClub had surpassed $1 billion in loans issued and achieved positive cash flow.
In May 2013, Google Capital invested in LendingClub. The company also established collaborations with smaller banks such as Titan Bank in Texas and Congressional Bank in Maryland to optimize small loan operations that had previously been unprofitable for these institutions.
Initial Public Offering (IPO)
LendingClub expanded into small business lending in March 2014 and acquired Springstone Financial in April of the same year. On August 27, 2014, the company filed for an IPO with the SEC and completed the offering by December 2014. The IPO raised close to $900 million, marking the largest U.S. technology IPO of that year; shares closed the first trading day up by 56%, placing LendingClub’s valuation at approximately $8.5 billion.
Automotive Loans and Mortgages
In April 2015, CEO Laplanche announced intentions to enter the auto loan and mortgage markets. LendingClub partnered with companies including Google, Alibaba.com, BancAlliance, and HomeAdvisor to broaden credit access and link borrowers with community banks. The company also teamed up with Opportunity Fund to provide $10 million aimed at supporting underserved small businesses in California. Moreover, LendingClub collaborated with Sam’s Club to offer its “business lending center” product to small business clients.
Controversy and Challenges, 2016-2017
Similar to peers like Prosper and Sofi, LendingClub encountered mounting investor doubts in early 2016, which led to three successive interest rate increases on loans within a few months. Coupled with concerns about a decelerating U.S. economy, this contributed to a steep decline in LendingClub’s stock value.
An internal audit in April 2016 revealed that dates on roughly $3 million worth of loans had been manipulated. A subsequent external investigation exposed additional problems involving $22 million in loans sold to Jefferies that did not meet their investment standards; these loans were repurchased and resold by LendingClub.
The inquiry also determined that CEO Renaud Laplanche failed to disclose his ownership stake in an investment fund that LendingClub was considering acquiring and did not fully reveal his awareness of the flawed loans. On May 6, the board withdrew its support for Laplanche, leading to his resignation on May 9. Several other executives either resigned or were terminated amid the ensuing turmoil. Following his exit, LendingClub’s stock price fell another 34 percent, reaching just 70 percent of its IPO value. The Securities and Exchange Commission reportedly initiated an investigation into the company’s investor disclosure practices.
By December 2017, despite improvements in governance, LendingClub was still grappling with the consequences of the scandal and faced challenges maintaining key investors. These issues forced upward revisions of loss projections and contributed to further declines in share price amid broader difficulties within the peer-to-peer lending industry.
Conclusion of P2P Platform, 2019–2020
In December 2019, executive Valerie Kay emphasized LendingClub’s strategic pivot toward institutional investors through the "Scale" initiative, which involved delivering loan samples via the "Select" program. By 2018, the company had achieved $10.8 billion in annual loan originations.
Facing the anticipated economic effects of the COVID-19 crisis, LendingClub announced in April 2020 a reduction of roughly one-third of its staff. Subsequently, in August 2020, the firm terminated its secondary trading platform operated by Folio, thereby restricting liquidity options for peer-to-peer investors.
As part of its transformation into a neobank following the Radius Bank acquisition, LendingClub ceased issuing new loans on its website in October 2020. By December 2020, it had completely withdrawn from peer-to-peer lending activities.
Acquisition of Radius Bancorp, 2020–
In February 2020, LendingClub agreed to purchase Radius Bank for $185 million in a combination of cash and stock, marking the first fintech acquisition of a regulated U.S. bank since the 2008 financial crisis. Radius was fully integrated under the LendingClub brand during 2021.
Originally established in 1987 as First Trade Union Bank by the Massachusetts carpenters union using pension funds, Radius faced difficulties during the subprime mortgage crisis due to significant commercial real estate exposure. The institution rebranded as Radius Bank in 2014. In June 2016, private investors acquired nearly 95% ownership of Radius Bancorp amid regulatory pressures stemming from Dodd-Frank legislation.
In April 2025, LendingClub acquired the property at 88 Kearny Street in San Francisco’s Financial District for $74.5 million to serve as its corporate headquarters.
Summary
LendingClub enabled borrowers to request unsecured personal loans ranging from $1,000 to $40,000 by submitting personal and financial information. Creditworthiness was evaluated based on credit score, history, requested loan amount, and debt-to-income ratio; this assessment assigned a credit grade that determined applicable interest rates and fees. Standard loan terms were three years; five-year options were available with higher rates and fees. Prepayment was permitted without penalties.
Investors residing in 39 states across the U.S. could purchase notes through the platform. They chose loans based on borrower details, loan size, assigned grade, and stated purpose, investing a minimum of $25 per note at fixed interest rates established by LendingClub.
Investor yields ranged from 6.03% to 26.06%, correlating with loan grades from A (highest quality) to G (lowest), each subdivided into five sub-grades. LendingClub generated revenue through origination fees charged to borrowers (ranging from 1.1% to 5.0% depending on credit grade) and a servicing fee of 1% on borrower payments. The platform provided more attractive rates than many traditional banks and delivered average investor returns between 6% and 9% through 2013. However, earnings were taxed as ordinary income rather than capital gains.
Loan Ownership Structure
Upon issuance, LendingClub purchased loans from the originating bank; consequently, notes became obligations of LendingClub rather than direct borrower debt. Holders of notes were unsecured creditors to LendingClub itself, which introduced risk exposure if LendingClub faced insolvency despite borrower repayments.
Until August 2020, investors had the option to sell notes prior to maturity on a secondary market operated in partnership with FOLIOfn Investments that imposed a 1% transaction fee. LendingClub pioneered this secondary marketplace among peer-to-peer lending platforms; similar offerings appeared later elsewhere. This secondary market was discontinued effective August 28, 2020.
By 2016, hedge funds had become major providers of LendingClub’s capital. To address funding constraints that year, the company pursued securitization of hundreds of millions in loans into bond offerings.
Credit risk
At its inception, LendingClub marketed itself as a social networking service, utilizing group affiliations to lower borrower default risk through an algorithm named LendingMatch. This system analyzed elements such as geographic region, education level, and professional experience to assess risk.
Following its registration with the SEC, LendingClub moved away from highlighting social connections as a means of risk reduction. Instead, it promoted its algorithm as a resource for investors to choose Notes based on borrower and loan characteristics including loan duration, interest rate, credit score, employment length, and homeownership status. To minimize default occurrences, LendingClub focuses on borrowers with strong credit profiles, rejecting approximately 90% of applications as of 2012 and applying higher interest rates to riskier candidates within accepted parameters. Only individuals with a FICO score of 660 or above are eligible for loans.
By December 31, 2016, 62.3% of borrowers indicated their loans were primarily used to consolidate existing debts or pay off credit card balances.
Loan performance statistics
As of June 30, 2015, the typical LendingClub borrower had a FICO score of 699, a debt-to-income ratio excluding mortgage payments of 17.7%, an average credit history spanning 16.2 years, and a personal income averaging $73,945. The average loan amount stood at $14,553, predominantly utilized for debt consolidation or credit card repayment. Investors had funded loans exceeding $11.2 billion in total, including $1.9 billion disbursed in the second quarter of 2015 alone. The nominal average interest rate was 14.08%, accompanied by a default rate of 3.39%, resulting in an average net annualized return—accounting for defaults and fees—of 8.93%. LendingClub investors experienced returns ranging from 5.47% to 10.22%, with a consistent record of positive returns across 23 consecutive quarters as of mid-2013.
Banking services
LendingClub runs an online-centric community bank headquartered in Lehi, Utah. It holds membership with the FDIC, is recognized as an Equal Housing Lender, and participates in the NYCE SUM ATM network.
Consumer banking
During its Radius Bank era, LendingClub operated a single physical branch located in Boston. Currently, it provides online banking services along with mobile applications compatible with iOS and Android platforms, offering complimentary ATM fee reimbursements worldwide.
Partnerships
The bank launched its fintech collaborations beginning with LevelUp in 2013 and later partnered with Prosper in 2015 to extend personal loan offerings. In July 2015, Radius Bank joined forces with Aspiration to introduce a new personal checking account aimed at enhancing its digital banking services.
Commercial banking
LendingClub Bank delivers deposit services and financing solutions tailored to small and mid-sized enterprises. Operating as an SBA Lender since 2009 with an initial focus on the U.S. northeast region, the bank expanded its SBA lending nationwide in May 2016 by forming a dedicated team for government-backed loans. In December 2016, LendingClub Bank bolstered its equipment financing portfolio by acquiring NewStar Financial’s equipment finance division.
API Banking
On October 29, 2020, LendingClub Bank enhanced its collaboration with Treasury Prime by unveiling its Business API Banking Software alongside a developer sandbox testing environment, aimed at improving B2B banking capabilities.
Recognition
LendingClub was honored with a spot on the AlwaysOn Global 250 list in both 2011 and 2012 and was awarded the Technology Pioneer distinction by the World Economic Forum in 2012. Forbes featured the company among America’s 20 most promising enterprises in 2011 and 2012. Additionally, Fast Company recognized LendingClub as one of the top ten most innovative financial firms worldwide. CNBC included the company in its Disruptor 50 rankings for 2013 and 2014, highlighting its advancements in financial services. In 2014, Inc. magazine placed LendingClub at #248 on its list of the 500 Fastest Growing Private Companies in the United States. That same year, founder and CEO Renaud Laplanche received The Economist Innovation Award for consumer products.
Additional resources
- Peter Renton, Renaud Laplanche (2012), The Lending Club Story