Your guide to peer to peer lending

No Google, Lending Club is Not a Scam

by Peter Renton on December 21, 2011

Lending Club scam and other search terms

I was tooling around on Google earlier this week and I noticed this screen above. When you type the term “Lending Club” into the Google search box Google tries to anticipate what you are really wanting to know. So it provides some suggestions.

The graphic above shows the top four suggestions that Google thinks is relevant. The first two are what you would expect. If someone types “lending club” into the search box then they are likely looking for that actual term or a review of the site. But many people might be surprised to see that “scam” and “complaint” are the next two most likely searches.

I did a little more digging and decided to check out the monthly volume of these searches that you can see in the table below. Sure enough the vast majority of people are looking for just “lending club” but 2,400 searches a month are for “lending club scam” and 720 searches a month for “lending club complaints”.

My Theory on the Lending Club Scam Searches

I have a theory as to why there are so many searches for “Lending Club scam” and “Lending Club complaints”. While some suspicious investors will just type that into Google to see what they get, others are likely doing it out of a real concern.

A few months ago I applied for a loan on Lending Club. Now, my credit score at the time was 815 and I applied for a $2,500 loan. Lending Club rejected my application outright. If I was counting on that loan I would not have been a happy camper. How could Lending Club possibly reject me? My credit is perfect, I have not had a late payment on any account for over 15 years (my problem was that I am self-employed). I might start to think this whole peer to peer lending thing is a scam.

There are around 20,000 loan requests denied every month on Lending Club and that number is climbing. Some of these people will be very disappointed and angry to have been denied a loan. It is only natural that a portion of these people will turn to Google and see if others have had similar experiences. I get emails at least twice a month from irate borrowers who have found me on Google and who can’t believe that Lending Club turned them down for a loan.

And Yes, Prosper.com is a Legit Website

Prosper.com google searches

Lucky for Prosper they don’t have as much of a problem here. You have to add a .com on to the search because prosper is such a common word. But the only negative thing that comes up is the fourth option “prosper.com legit” which brings up a number of sites that wonder about Prosper’s legitimacy. Given their checkered early history with investors I would have thought more disparaging searches may have come up here.

So, for the casual searcher that might have stumbled across this post through Google you can be rest assured that both Lending Club and Prosper are indeed legitimate businesses. They are regulated by the Securities and Exchange Commission and between the two of them they issue tens of millions of loans each month. But they do have fairly strict underwriting standards so if you don’t have decent credit you may well be disappointed when applying for a loan.

{ 16 comments… read them below or add one }

Peter December 21, 2011 at 4:05 pm

I actually get a fair amount of search visits from people searching for Lending Club scam I believe – all because someone mentioned something about a scam in the comments section. I guess a lot of people just think it’s too good to be true! :)

PeerLend December 22, 2011 at 3:48 am

Way to optimize for that Lending Club scam traffic. ;)

Marc December 22, 2011 at 5:56 am

Anything that is “too good to be true” is automatically considered a scam (or potential scam) by many. These are the ones who hesitate just enough to miss out on the hey-day. Just because it’s too good to be true doesn’t mean it’s not true.

Peter Renton December 22, 2011 at 7:43 am

@Peter, Well I glad they are going to your site and not some other dubious site.

@PeerLend, Yes, that is an added benefit of doing a post like this.

@Marc, That is certainly true. I also find that many savvy investors simply don’t believe they could have missed p2p lending. If they don’t know about it how could it possibly be any good?

Charlie H December 22, 2011 at 8:07 am

When I first read about Lending Club on Investor Junkies blog… first thing I did was google it for SCAM and Fraud and check the BBB.

It did sound to good to be true. That was ~14 months ago. :)

Bilgefisher December 22, 2011 at 8:52 am

I think we all did our research, as anyone should. Anyone investing blindly deserves to loose their money. Anytime I see something like this my first search is for scam, review, fraud etc etc.

Peter Renton December 22, 2011 at 11:11 am

@Charlie/@Bilgefisher, I did some research, like anyone else, but it never occurred to me that it might be a scam. I read several articles in mainstream publications before taking the plunge so I was confident it was a legitimate investment. Of course, I only started off with $500….

Jason Iannone December 22, 2011 at 12:08 pm

Interesting that if you actually search for Lengin Club Scam, the top hit is for http://www.lendingclubscam.com which is more or less proselytizing both Prsoper and Lenging Club’s services.

Dan B December 22, 2011 at 6:50 pm

This is just another one of those words that’s thrown around as a default word in lieu of actually thinking, & usually by people who have already been scammed but don’t even know it.

Besides, the definition can vary widely. For example, does it have to be illegal or can it be merely dishonest, but perfectly legal? Does it have to involve a pattern of deliberate deception or can it be just a non disclosure of certain facts? Can it still be called a scam if it’s perpetrated with purely altruistic ends in mind?

Peter Renton December 23, 2011 at 7:48 am

@Jason, I noticed that site as well and it looks like someone is just using that domain to promote Lending Club.

@Dan, You bring up an interesting point. The definition of a scam is somewhat subjective and there will be those people who will believe something is a scam if it doesn’t appear to be exactly what they expect. Either a borrower or an investor could genuinely believe that Lending Club or Prosper are scams if they have a negative experience.

Moe December 23, 2011 at 5:37 pm

Check it out on Bing Lending Club scam is in first place, and with Yahoo second. @Peter I was sure you would mention that Lending Club removed the compare option this week, did you not notice?

Dan B December 23, 2011 at 5:41 pm

Peter…………That’s right. Some people use that word to describe the commodities market, real estate markets, stock market &, prior to the run up of the past few years, the precious metals market. And I’m almost certain that before this decade is out that word will be widely used to describe all of the above again at some point or another.

What’s always amused me is that if faced with convincing evidence that some people make money consistently in a category that they believe is a scam, these people will then usually default to the word “rigged”. The lesson from all this is that there’s some people that you really just shouldn’t talk to.

Peter Renton December 23, 2011 at 9:21 pm

@Moe, Yes I noticed the Compare feature at Lending Club went away early this week and I thought about doing a post about it but decided against it. I was told several months ago this would happen but that they were also thinking about something to replace it with. That obviously hasn’t happened yet but I am waiting to hear back about their plans.

@Dan, Very true. I think many people think if someone else can make money at any investment over an extended period and they can’t, then it must be rigged.

Emery December 27, 2011 at 12:50 pm

Now do the one where you type “Is it wrong” into Google Suggest!

Peter Renton December 28, 2011 at 7:07 am

@Emery, Now that does bring up some interesting suggestions…

Graymoment January 4, 2012 at 5:15 pm

People can be researching whether or not something is a scam purely out of due diligence. If I’m considering investing in an unknown company, I’m going to Google search terms like “complaints,” “review,” or possibly even “scam” for my own due diligence.

I do believe there is a percentage of people scamming peer-to-peer services like Lending Club, attempting to borrow the maximum amount of unsecured money they can before applying for bankruptcy. As someone who has put money into Lending Club, I have several notes that were charged off a month or two after receiving the money for a “home improvement,” which couldn’t possibly have even been completed yet. Investors interested in wondering how these people got through the system to obtain $35,000 in unsecured free money could be Googling for this reason after being what they feel to be “scammed” (that’s how I got here), or prospective borrowers looking to scam the Lending Club system could be Googling to see if there is any precedence or recourse for their intended actions.

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