Can a Laplanche change its spots?
Lending Club’s founder and former CEO Renaud Laplanche intends to stage a comeback with a new company, Credify Finance Corporation, but will the ghosts of his past come back to haunt his new venture?
Once known as the father of marketplace lending, Laplanche kickstarted the industry when he pioneered a way to fill the credit vacuum in the post-crisis economy by cutting out banks and connecting investors directly with borrowers looking for money.
He made headlines again in 2014 when Lending Club became the first marketplace lender to go public, a milestone for the then-nascent sector.
However, Laplanche shocked the industry that he helped to create when he resigned in May following an internal review of the sale of $22m of loans that found that the sale violated the buyer's purchasing criteria.
The debacle made critics question the viability and transparency of both Lending Club and the industry at large, but the recent performance of marketplace loan ABS backed by Lending Club collateral — and that of other industry players — indicate that both the platform and marketplace lending are here to stay.
Laplanche, on the other hand, has much to prove.
According to published reports, Laplanche’s new team comprises Jeff Bogan and Adelina Grozdanova, the capital market executives that Lending Club fired in the wake of his resignation, which could prompt questions about internal controls and best practices at the executives’ new venture.
It also remains to be seen if the negative headlines from May will deter investors from funding his new business, or from buying loans originated by Credify when it starts lending next year.
Already, Credify has one valuable advantage over Lending Club, in that it’s not under investigation by the Department of Justice and the Securities and Exchange Commission, and Thomas Curran — the former Treasury Department official that Laplanche has hired as Credify’s compliance head — should strive to keep it clean.
Most importantly, Laplanche also has the benefit of substantial experience, which sets him apart from first time entrants into the sector. Now that Laplanche is building a second company from scratch, it will be interesting to see what Credify does differently from Lending Club in terms of underwriting standards, loan offerings and funding strategies.
Laplanche, once the face of marketplace lending, may be on the road to a comeback, if investors are confident enough to get involved in the new venture. But the past could well come back to haunt him.