Dive Brief:
- LendingClub plans to lay off approximately 460 employees, including Steve Allocca, the company’s president, the online lender disclosed Tuesday in an 8-K filing. The job cuts represent about 30% of the company’s workforce.
- CEO Scott Sanborn’s base salary will be temporarily reduced by 30% as part of a restructuring plan. Other executive officers at the company will take a temporary 25% pay cut, and members of the company’s board will receive cash retainers that are reduced by 30% in 2020.
- LendingClub isn't the only fintech to cut personnel during the coronavirus crisis. Online lender Kabbage had to furlough a "significant number" of its 500 U.S. employees last month and close an office in Bangalore, India, according to an internal memo seen by TechCrunch.
Dive Insight:
LendingClub’s layoffs come two months after the company announced plans to purchase Radius Bank for $185 million. The deal is expected to give the online lender cheaper funding for its loans. The company had been looking at "multiple options" that would allow it to obtain a national banking charter, Sanborn said last fall.
However, since the deal was announced, the coronavirus pandemic has pushed demand for personal loans into a lull. LendingClub’s business model relies heavily on revenue from loan origination fees, which can drop sharply in an economic downturn. The workforce cuts "realign" staffing with the current business environment, Sanborn said, according to CNBC.
"With these actions, we believe we are well positioned to achieve our long-term strategic goals and better serve our members, who will need us more than ever, once the economy stabilizes," Sanborn said in a statement.
LendingClub expects to incur $10 million in pretax charges over the rest of the year related to the job cuts, according to the filing. About $1 million of that will go toward relief for employees affected by the pandemic. The remainder accounts for severance and employee benefit costs.
Allocca’s last day at LendingClub will be May 12. He is entitled to severance, the company said in a regulatory filing. Allocca joined LendingClub in 2017 after serving for four years as vice president and general manager of global credit at PayPal.
The company had taken a number of steps to cut costs and reduce risk over the past year. It outsourced more than 450 operations support jobs last year and opened a new office in Utah, reducing its footprint in high-cost San Francisco. LendingClub also disclosed last month that it was tightening its lending standards for first-time customers and higher-risk borrowers, according to The Wall Street Journal.
Shares of LendingClub have fallen more than 40% this year, according to CNBC.
