Citi enters Marketplace Lending

Citi has partnered with Lending Club. 

Citi will be participating in a $150 million programme to make credit more affordable and available to low and moderate income families. Varadero Capital, an alternative management firm focused on specialized credit investments, has also partnered with Lending Club and will also be participating in this programme.

Renaud Laplanche, founder and CEO of Lending Club, commented:

"Many banks across the country are looking for opportunities to enhance their community lending efforts for low- and moderate-income families. We're excited to expand the use of the Lending Club platform to make this process easier for Citi and other banks, and help lower the cost of credit for borrowers."

The partnership is with Citi Community Capital, which is the group within Citi that focuses on providing community development loans and investments that help meet the credit needs of communities and which receive consideration under the Community Reinvestment Act (CRA).

Many big banks have struggled to hit their CRA requirements. Lending Club is helping to fulfil that requirement by serving as a national origination programme. The Community Reinvestment Act is intended to encourage banks to help meet the credit needs of the communities in which they operate, including low and moderate income neighbourhoods. A bank’s CRA performance record is taken into account in considering an institution’s application for deposit facilities.

John Heppolette, Co-Head and Managing Director of Citi Community Capital at Citi, explained:

"It is important that we help increase access to financing alternatives for American families. This partnership is a direct response to that need and will help provide a viable source of responsible credit. We are proud to be part of this initiative." 

Citibank will provide the credit facility and all qualifying loans will be issued by WebBank, a Utah-chartered Industrial Bank, and purchased by Varadero Capital. 

Fernando Guerrero, Managing Partner and Chief Investment Officer of Varadero Capital, L.P., added:

"This partnership benefits those consumers who need it the most, offering them better access to responsible credit at very competitive rates. We're proud to be a part of it."

In February Lending Club teamed up with a consortium of about 200 community banks. The banks use Lending Club to build a new portfolio of consumer loans. This program targets borrowers with high credit card debt who could secure better refinancing terms from one of the small banks.

Renaud Laplanche commented:

“Community banks are the lifeblood of American communities. The program will help them level the playing field with national banks by offering them affordable, consumer-friendly loans to their customers. We’re excited to make Lending Club’s low cost of operations available to community banks, for the greater benefit of their customers.”   

In May 2014 Lending Club partnered with Union Bank. This means that Union Bank purchase personal loans through the Lending Club platform. The partnership takes advantage of Lending Club’s low operational cost and Union Bank’s strong balance sheet and large customer base.  

The entry of the big banks into the marketlending space is one that has been greatly anticipated. Many big investment firms, such as BlackRock, are involved on the investment side but there hasn’t been the same level of activity on the origination side. The partnership with Citi will help provide lower cost loans to low and moderate income borrowers and as with the Union bank deal Citi will be able to take advantage of Lending Club’s low operating costs. We may see other big banks starting to utilise marketplace lending as a way to access customers that ordinarily could be difficult to fund.