With business suffering from the economic fallout of the coronavirus pandemic, LendingClub is laying off 460 staffers — 30% of its workforce — including its president, Steven Allocca.
The online consumer lender disclosed Tuesday that the job cuts are part of a board-approved restructuring plan, which also includes a temporary 30% base salary reduction for CEO Scott Sanborn.
Allocca, a former PayPal Holdings executive who joined LendingClub
Other executive officers at the company will take a temporary 25% cut in their base salaries, while members of the firm’s board will receive cash retainers that are reduced by 30% in 2020.
In connection with the job cuts, LendingClub expects to incur $10 million in pretax charges over the rest of the year. About $1 million of that sum is for relief to employees impacted by the pandemic; the rest represents future cash expenditures for severance and employee benefit costs.
LendingClub had 1,538 employees at the end of 2019, according to its most recent annual report.
The restructuring plan is designed to reduce expenses and reflects current loan volume, LendingClub said in the regulatory filing, noting that the COVID-19 outbreak has resulted in a reduction in investor demand for its loans.
Last month, the San Francisco company disclosed that it was tightening its lending standards for first-time customers and higher-risk borrowers.
LendingClub operates a digital platform that matches borrowers — often consumers seeking to refinance credit card debt — with investors who fund the installment loans.
One longstanding criticism of LendingClub’s business model is that the firm relies heavily on revenue from loan origination fees, which can decline precipitously in an economic downturn.
Even before the pandemic-induced economic crisis, LendingClub, which went public in 2014, was slashing costs in an effort to become profitable. Last year, LendingClub outsourced more than 400 operations support jobs and opened a new office in Utah, enabling the company to reduce its presence in high-cost San Francisco.
