With bank lending dramatically down, Lending Club Corp. is taking the patriotic approach in promoting its ability to provide credit.
The Sunnyvale, Calif., peer-to-peer loan facilitator has just launched Uncrunch America, an outreach campaign intended to link — and comfort — sidelined investors and borrowers.
Taken broadly, the initiative is intended to get credit flowing again and help to revive the economy. But Lending Club also expects Uncrunch America, whose Web site debuted late last month without explicitly identifying the company as its backer, to help it meet the growing interest in its services.
Executives said that the campaign shows the niche service is becoming more widely accepted. Uncrunch America "is a really good way to take the concept of social lending mainstream by showing how relevant is it is in the current economic climate," Renaud Laplanche, Lending Club's chief executive, said in an interview.
Mr. Laplanche said he is trying to reach people who trade stocks online and want "a prime consumer loan portfolio that's not correlated with the stock market." The Uncrunch America campaign is "biased toward [attracting] lenders," because the number of lenders has been "the limiting factor on social lending Web sites."
Uncrunch America, which asks potential lenders to "invest in America," is designed to look like a grassroots social movement, with stories from consumers who have had trouble borrowing from banks.
"With credit cards raising interest rates and banks cancelling credit lines, we, the American people, will solve the credit crisis the American way: by helping each other," the site says. "By lending to creditworthy borrowers, you continue the country's long tradition of helping each other in time of greatest crisis. … This is not a hand-out; It is a hand-up."
Uncrunch America's site lists Lending Club as one of several companies involved in the project. However, all the links for people who want to borrow or lend lead to Lending Club's Web site.
Mr. Laplanche said he wanted Uncrunch America to appear distinct from Lending Club, because it is delivering a different message to prospective users than Lending Club has in the past.
Lending Club's previous marketing efforts have touted two main benefits. "One driver is making a better-than-average return, and the other driver is helping out other people — in that order," Mr. Laplanche said. By contrast, "Uncrunch really put more emphasis on the second one."
The campaign is the brainchild of Tobin Smith, a panelist on Fox News Channel's "Bulls & Bears" investment show and the founder and chairman of ChangeWave Research, a unit of InvestorPlace Media LLC. After discussing Lending Club on television, Lending Club approached him to develop ideas to market the company. Uncrunch America is the result.
"I'm going to be the cheerleader and the spokesman" for the campaign, Mr. Smith said. The overall message is that "we can solve this problem by Americans helping creditworthy Americans."
By directing people to Lending Club instead of banks, "where they're having their credit constricted, or it's been cut, or it's unaffordable, … we're cutting out the middleman," Mr. Smith said. This will enable Lending Club to say it offers lenders returns that are better than what they could get by depositing their money in a bank account; its Web site said Wednesday that lenders can earn rates of 6.69% to 19.37%.
Mr. Smith said his compensation is tied to the campaign's success — "I get a small piece of the entire portfolio."
Lending Club says it will fund the first $1 million of loan requests produced by the Uncrunch America campaign.
Analysts said that promoting the social value of peer-to-peer lending could attract users.
The marketing message would likely ring true for creditworthy borrowers who have been turned away by banks, said Bobbie Britting, a research director with the consumer lending practice at TowerGroup Inc., an independent research unit of MasterCard Inc.
"Average people are just having such a hard time getting money," she said. In the past 15 months, "lending policies got so tight that, literally, only the people who don't need credit are the ones who can get it right now."
Edward Woods, a senior analyst for Celent, the financial research arm of Marsh & McLennan Cos., said the campaign should help boost awareness of Lending Club's service, though its message could mask the risks inherent to social lending.
"Is it more effective than what they've done to date? Yes, because they're playing on the emotional side of what's going on in America," he said. "It's all about putting it back into peoples' hands. … That's a more powerful message than P-to-P lending on its own."
However, Mr. Woods expressed concern about the anti-bank rhetoric. "That's going to permeate the marketing and play on people's lack of knowledge of what's going on," he said.
The social aspect of peer-to-peer lending has always been core to Lending Club's marketing message, but it should not overshadow the fact that "these are investments," Mr. Woods said. "You can look at it as social lending and helping somebody out, but at the end of the day, this is an unknown third party to you."
Attracting lenders is important to Lending Club. Last year it launched a secondary market that lets lenders trade their loans, but as part of the process for creating that system, the Securities and Exchange Commission required that the company raise its standards for prospective lenders, including introducing a minimum income requirement. In most states, lenders must have a gross annual income of $70,000 and a net worth of $70,000.
Mr. Laplanche said those restrictions eliminated 25% of Lending Club's lenders, who accounted for 10% of the money lent through its site.
The privately held Lending Club has facilitated $25 million of loans since it launched its service in 2007. Mr. Laplanche said he hopes the campaign will attract another $100 million in its first three to six months.
Lending Club, which charges processing fees to borrowers and servicing fees to lenders, has also reached out to several other nonbank providers of financial advice, account aggregation, and other services, including Geezeo Inc. and Credit Karma Inc., to attract attention to Uncrunch America.
Shawn Ward, Geezeo's co-founder, said it is participating as an information resource. "Primarily we will be a content feed," providing the Framingham, Mass., company's own articles and those generated by its users.
Kenneth Lin, Credit Karma's CEO, said the credit data provider has signed on to help promote Uncrunch America because "our goal is just to always be supportive of things we believe are pro-consumer."
Mr. Laplanche said he is open to including others in the P-to-P lending industry, such as Prosper Marketplace Inc., in the campaign, but he has not approached any.
Prosper said it would not discuss the matter, because it is in a quiet period mandated by the SEC, as part of the process of creating its own secondary market.
