Author Topic: Lending Club Q  (Read 3842 times)

nktokyo

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Lending Club Q
« on: May 25, 2013, 11:07:37 PM »
If I (or my company) loaned money through Lending Club from offshore, would I need to file taxes in the US?

I'll have to file were I live, not sure about the USA.

irastache

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Re: Lending Club Q
« Reply #1 on: May 26, 2013, 07:40:12 AM »
Not exactly an answer, but a reason to think twice about lending Club:

http://www.longtermreturns.com/2012/07/peer-to-peer-lending.html

aj_yooper

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Re: Lending Club Q
« Reply #2 on: May 26, 2013, 10:16:30 AM »
Irastache, thanks for the link on Lending Club.  Vanguard bonds seem much better than LC.

Nords

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Re: Lending Club Q
« Reply #3 on: May 26, 2013, 12:28:46 PM »
Not exactly an answer, but a reason to think twice about lending Club:
http://www.longtermreturns.com/2012/07/peer-to-peer-lending.html
So, to recap, the blogger had no time to research that post (although he wrote it anyway) and then he used the worst-possible (and outdated) data period of the shakiest P2P company.

Yeah, I can see why he'd conclude it's a bad idea too.

I happen to agree that P2P is not necessarily a good idea for lenders, but I'm certainly going to try to write a more even-handed assessment using more relevant data.

As for the OP's question, I think the IRS would decide that you were earning income from an American company.  If you have to pay tax on it in Japan then you might get some sort of foreign tax credit, but I'm skeptical that the IRS would offer a free pass on taxing your income.  Maybe Lending Club would answer your e-mail or phone call.  Better yet, Peter Renton at LendAcademy.com might be happy to research the issue with his contacts and write a post on the subject.

aj_yooper

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Re: Lending Club Q
« Reply #4 on: May 26, 2013, 01:02:07 PM »
Am I understanding P2P correctly? 

Firms that do P2P (like Lending Club) have a great business model: charge a fee for the loan to the consumer upfront; collect a fee from each payment transaction; and, charge a fee on loans that go to collections.  Liabilities on bad loans go to the other person in the P2P.  Unlike banks, they don't have to collect funds in CDs and checking accounts, maintain many buildings, or cover bad loans.  I am not sure who gets the consumer late or missed payment fees.  They do have to build an internet presence and spread the word.  If this is accurate, I can see why Google would want to get in on the internet mechanics of the process.

Nords

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Re: Lending Club Q
« Reply #5 on: May 26, 2013, 01:26:18 PM »
Am I understanding P2P correctly? 

Firms that do P2P (like Lending Club) have a great business model: charge a fee for the loan to the consumer upfront; collect a fee from each payment transaction; and, charge a fee on loans that go to collections.  Liabilities on bad loans go to the other person in the P2P.  Unlike banks, they don't have to collect funds in CDs and checking accounts, maintain many buildings, or cover bad loans.  I am not sure who gets the consumer late or missed payment fees.  They do have to build an internet presence and spread the word.  If this is accurate, I can see why Google would want to get in on the internet mechanics of the process.

Everything the SEC thinks you need to know about Lending Club is in this 102-page prospectus:
https://www.lendingclub.com/fileDownload.action?file=Clean_As_Filed_20121128.pdf&type=docs

I haven't chased after the Prosper prospectus yet.


Quote
Q: How does LendingClub make money from the platform?
A: We earn revenue from the fees we charge our borrower members and investors. We charge borrower members origination
fees that range from 1.11% to 5.00% that are paid upon the issuance of the loan. We charge investors a service charge of
1.00% of all amounts paid by LendingClub to investors with respect to each Note. We also earn interest on member loans to
the extent that we fund those member loans ourselves.

Quote
Q: Can investors collect on late payments themselves?
A: No. Investors must depend on LendingClub or our third-party collection agents to pursue collection on delinquent member
loans. If collection action must be taken in respect of a member loan, we or the collection agency may charge a collection
fee up to 35% of any amounts that are obtained (excluding litigation). These fees will correspondingly reduce the amounts
of any payments you receive on the Notes.


From what I've read, it appears that the biggest expenses of P2P finance companies are the office space and the salaries of the employees (who are processing the loan applications and dealing with delinquencies).  They also might be spending tremendous amounts of money on marketing their services to prospective borrowers so that they can grow the business.  We bloggers seem to be doing an outstanding job of stampeding eager flocks of P2P lenders to their websites.

To be excruciatingly precise, Google bought out an existing Lending Club investor.  LC did not get any funds from Google and the other shareholders were not diluted by Google's purchase.

aj_yooper

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Re: Lending Club Q
« Reply #6 on: May 26, 2013, 01:35:09 PM »
Nords, always great stuff from you!

nktokyo

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Re: Lending Club Q
« Reply #7 on: May 26, 2013, 04:20:17 PM »
Not exactly an answer, but a reason to think twice about lending Club:
http://www.longtermreturns.com/2012/07/peer-to-peer-lending.html
So, to recap, the blogger had no time to research that post (although he wrote it anyway) and then he used the worst-possible (and outdated) data period of the shakiest P2P company.

Yeah, I can see why he'd conclude it's a bad idea too.

I happen to agree that P2P is not necessarily a good idea for lenders, but I'm certainly going to try to write a more even-handed assessment using more relevant data.

As for the OP's question, I think the IRS would decide that you were earning income from an American company.  If you have to pay tax on it in Japan then you might get some sort of foreign tax credit, but I'm skeptical that the IRS would offer a free pass on taxing your income.  Maybe Lending Club would answer your e-mail or phone call.  Better yet, Peter Renton at LendAcademy.com might be happy to research the issue with his contacts and write a post on the subject.

Thanks!