Online lenders haven’t been verifying income and employment on their loans, and that should set alarm bells ringing
Online lenders may be lowering their standards and taking greater risks on borrowers as they chase higher profits.
Prosper Marketplace and Lending Club, two of the largest players in the online personal loan business, don’t always verify key borrower information like income and employment, according to a report from Bloomberg’s Matt Scully.
Bloomberg found that the two companies frequently take the customer’s word on key loan information, and they don’t necessarily nix a loan if it has errors, such as overstating income.
Here’s Scully:
“Prosper Marketplace Inc. doesn’t verify key information like income and employment for around a quarter of the loans it makes, according to documents tied to bonds that Prosper sold last month. LendingClub Corp. said it only verified income about a third of the time for one of the most popular loans it made in 2016, according to company data seen by Bloomberg. If either lender finds mistakes in a borrower’s application, such as overstated income, they may still go ahead with the loan, according to disclosures linked to bond sales from the companies, including documents for securities that LendingClub is offering now.”
The companies defended their practices, citing advanced risk-control procedures that help root out fraud.
Prosper told Bloomberg that it verifies identities and bank accounts for all of its loans, and that it has “developed some of the industry’s leading risk-mitigation controls.”
A Lending Club representative told Bloomberg that the company uses “machine learning and other techniques to build robust models that segment which borrower applications need verification and which do not.”
Despite a relatively robust economy, online lenders have seen loans falter quicker than expected, Bloomberg noted, citing data from Morgan Stanley.
They aren’t the only lenders hitting bumps and coming under scrutiny. Moody’s revealed last month that Santander Consumer USA, one of the country’s largest subprime auto lenders, checked income on just 8% of borrowers as part of a $1 billion bond offering.
Meanwhile, credit card companies have seen customer defaults spike, suggesting that they’ve also started to loosen their standards and issue credit more aggressively.
Filed under: foreclosure | Tagged: Lending Club, Prosper |
You are welcome…people need to know what they are dealing with in this banking environment. This woman is my mother-in-law. I have sent them notice to try and help. For now, they have backed down!
Santander Consumer USA works with M&T Bank. I have in my possession paperwork from a friend who purchased a car in MA. The title has zero miles on it and the buyers order has 61,000 miles on it. The person who bought the car traded it in and bought another car with the same bank, the old car never had transfer papers and a payoff. The balance of the first car was carried over to the the newer car, totaling over $32,000. for a 2007 Dodge and a 2007 minivan (the total book value is not over $16,000). This was done using the mother’s name, with no power of attorney and the mother claims she never signed a thing in this regard.
Just saying, this is what we now have. This woman is 80, sickly and has not the money or fortitude to fight. They are chasing the mother for the money, as we speak!