LendingClub CEO resigns; internal probe of loan sale

NEW YORK — The chairman and CEO at LendingClub stepped down after an internal review determined that the company’s business practices were violated with the sale of a $22 million in loans to people with sketchy credit scores to a single investor.

The sudden departure of Renaud Laplanche, along with the firing or resignation of three senior managers involved in the sale, sent shares of the company plunging 26 percent Monday.

It was not immediately clear what role Laplanche played in the sale, but the company said that the sale of loans held by customers with low credit scores “failed to conform to the investor’s express instructions.”

The review of that sale was initiated after it was found that the dates on loans worth $3 million had been changed.

As it investigated that matter, another unrelated problem was uncovered that involved the failure to inform the board’s risk committee of personal interests held in a third party fund while the LendingClub was considering an investment in the same fund.

President Scott Sanborn will now serve as acting CEO.

LendingClub and other companies like it grew in the aftermath of the financial crisis.

The online companies pair borrowers, either individuals or businesses, with lenders. But the business model has come under pressure as investors find better payouts elsewhere.

LendingClub’s market capitalization neared $9 billion shortly after its initial public offering in late 2014. The value of the company in the past 12 months, however, has been clipped by almost 70 percent.

The shakeup at LendingClub led to a quick downgrade Monday from Stifel Nicolaus &Co.

“We put a lot of faith in the team’s ability to execute and build trust with lenders and consumers,” wrote analyst Scott Devitt. “Our faith and trust is shaken by the set of events announced this morning as could be the case with the company’s constituents.

Shares of LendingClub Corp. tumbled $1.87 to $5.23 in midday trading.