lending club scandalAs one of the biggest platforms of alternate lending, LendingClub is now facing big issues. Unsecured personal loans from $1000 to $35 000 were the main product of the service. However, while the company was established in 2006, today it threatens the whole financial technology sector.

Also, check unsecured personal loans from $1000 to $5 000.

But what exactly has happened to the pioneer of the lending industry? What made their stock drop in price? It is only a matter of time before this whole situation influences the loan market. This is why financially savvy people should learn about the situation and make conclusions.

Details of the Fraud

The investigation has shown that one of the clients applied to a $22 million loan that did not correspond to buying criteria. It should be mentioned that the client indicated that this kind of loan is faulty in the first place. Later it was exposed as a fraud.

The data about the loan agreement was forged as the dates on the expired documents were altered. This was willingly done by the company’s engineer Andreas Oesterer. Nonetheless, the man claims that this was done in accordance with the order from the vice president of the company Matt Wierman.

Once the chief director of LendingClub Renaud Laplanche learned about the situation he decided to handle this deal while avoiding the committee of directors. However, the fraud was exposed after an internal audit carried out by an independent law firm.

On the 9th of May, Laplanche was resigned, though he had a chance to leave by his own will. This very day the company received a message from the Ministry of Justice for trial.

Opinion of Experts

The client base was alerted by these events. After all, LendingClub was a giant of the financial technology sector and its former success influenced the whole market. Today numerous competitors of the company have to work with Wall Street to guarantee stable capital inflows.

Some experts believe that this situation proves that lending can bite you back. There is a certain risk unless the client is 100% sure about the outcome and familiar with all details. Sadly, not all companies play fair and end up feeding their clients with false promises. In the end, it might be a good chance to expose those cheaters and help their potential clients avoid the unnecessary risk.

While LendingClub stock is getting cheaper, the whole market experiences hardship. Nonetheless, it can become a decent opportunity for companies that conduct fair business to get some attention.

Possible Outcome

fraud of LendingClubAs soon as the information about the fraud was exposed, numerous investors ceased to provide funds and started to withdraw their money. Officials of LendingClub admit that unless something changes, they will have serious budgeting problems. Needless to say that some of the investors and clients will never turn to the company again.

The administration of the company will have to look for additional funds and decrease the number of loans they provide to handle the crisis. However, this is not the only issue LendingClub has to deal with. It is vital to resolve the investigation carried out by the Ministry of Justice and a few other litigators including the client himself.

The stock price and shattered reputation are not helping and the future of LendingClub looks grim. But the worst part is that the whole lending market has to adjust. These events forced Securities Commission to check other lenders as well. It is only natural that from now on all clients will be extra cautious even with well-known companies. The best advice is to be aware of these checks and eliminate lenders that are unworthy of your trust.

Related: Intercept Corporation was sued for illegal internet loans.