CircleBack Lending has stopped making loans. This is according to a report by Bloomberg. The online lender said that funding had vaporized as some borrowers failed to repay their loans. CircleBack provides unsecured consumer credit for loans from $3000 to $35,000.
Michael Solomon, CEO and co-founder of CircleBack, stated;
“We are not originating loans at this time.”
He also stated CircleBack would transfer existing loans to another company if they cannot find funding soon.
Simon, along with co-founder Todd Walters, are from the early days of online lending. The two entrepreneurs launched the 3rd peer to peer lending platform in the US back in 2008 – following in the footsteps of Lending Club and Prosper. Loanio started originating loans before the SEC required securities registration. The registration requirement helped to force Loanio close up shop in 2011. An interesting article by Peter Renton in 2011 also cited the high default rate of Loanio loans.
Bloomberg reported that CircleBack had higher losses than expected. Pointing to data from Morgan Stanley, cumulative losses for CircleBack loans in 2015 were pegged at 13.5%. At one point in time, CircleBack appeared to have a promising future as it signed a deal with Jefferies for sale and securitization of up to $500 million in loans. CircleBack had signed up Jefferies earlier this year to “explore strategic options.”
The online lending industry has struggled to regain funding channels as default rates inched up. The unexpected departure of Lending Club’s founding CEO put the entire industry in a tailspin as funding dried up. Recent reports from more established online lending platforms have been more encouraging. Lending Club has stated that many funding channels have returned to the platform. Prosper is said to have signed to a deal that provides $5 billion in funding.