Online lending company LendingClub (NYSE:LC) has announced that it will lay off 179 employees, or 12 percent of its workforce, as a response to difficult market conditions. The lender reported the layoffs in a securities filing early Tuesday. The company also announced that it planned to spend $9 million in the quarter to increase incentives for investors. The company previously announced plans to raise interest rates for most new loans and cut back on lending to borrowers with high levels of existing debt.
After the company uncovered a number of loan irregularities, LendingClub founder and former Chief Executive Officer Renaud Laplanche resigned from the company. It is now believed that interim CEO Scott Sanborn will replace Laplanche as the head of the company. Interim executive chairman Hans Morris will be moved into the role of chairman. Shares of LendingClub are down about 40 percent since Laplanche’s departure.
According to allegations by the company, Laplanche took out loans from the platform with the intention of inflating the company’s loan volumes. Laplanche and his family had reportedly taken out 32 loans on the platform totaling around $722,800, boosting LendingClub’s total volume in the fourth quarter of 2009 by about 1 percent.
The loans in question reportedly occurred in December 2009, shortly before the company announced a major capital raising from outside investors. In April 2010, LendingClub raised $24.5 million from investors, including Canaan Partners, Foundation Capital, Morgenthaler Ventures, and Norwest Venture Partners. Laplanche was also accused of not disclosing his stake in a fund in which the company later made an investment.
In addition, the internal review uncovered that a subsidiary was valuing loans without following the company’s accounting standards. Falsified documentation was found for $22 million of loans to an investor. As a result, the company announced that it would be reimbursing $800,000 to those affected by the issue. It was also found that the firm had improperly changed the application dates on about $3 million in loans sold to an investment bank.
LendingClub, based in San Francisco, was long considered to be the standard bearer for the online loan industry. However, as company came under fire for its business practices, its reputation tumbled. The company’s share price is now less than a third of its IPO price of $15 a share in December 2014.