LendingClub Founder Is Back and Wants to Replace Credit Cards

(Bloomberg) -- LendingClub Corp. founder and former Chief Executive Officer Renaud Laplanche, who shocked the online lending industry with his controversial departure two years ago, is taking a stab now at shaking up credit cards.

Upgrade, his new San Francisco-based startup, is launching a personal credit line that’s meant to bring together the fixed-rate interest of a loan with the freedom of using a card. While LendingClub was largely used to help consumers refinance credit card debt, this new product is meant to be an alternative altogether.

“We’re going to replace credit cards,” Laplanche said. “We designed the Personal Credit Line to give consumers the two things they want most: the flexibility to access funds when they need them, and the predictability of a fixed rate and equal monthly payments.”

Laplanche left LendingClub in 2016 after an internal review found abuses tied to the sale of a loan and a failure to disclose a personal interest in an investment fund. The shares never recovered, sitting about 75 percent below 2014’s initial public offering price. Other online lenders, such as On Deck Capital Inc. and Prosper Marketplace Inc., have also seen valuations fall.

Laplanche started working on Upgrade the summer after he left, focusing on offering personal loans of $1,000 to $50,000 with repayment plans of 36 or 60 months. Many borrowers used the money to repay credit cards or for home improvement projects. He raised his first round of funding in March 2017, counting Union Square Ventures, FirstMark Capital and Ribbit Capital as investors.

The line of credit will lend between $500 and $50,000, and consumers will be able to draw from it when they need, only getting interest rate charges on the amount they use. The funds are deposited directly into the customers bank account. The offering resembles what’s known as a HELOC, or home equity line of credit, but Upgrade’s offering won’t require the customer to use their home as collateral.

The new product will compete with former PayPal Holdings Inc. executive and co-founder Max Levchin, who now runs financial technology startup Affirm Inc. Levchin’s company made a name for itself by working with brands like Peloton Interactive Inc. and Casper Sleep Inc., offering financing for larger purchases that consumers may want separate from their credit card statement. Since then, it has expanded to more than 1,000 retailers and recently rolled out a mobile app that acts as a virtual credit card, advertising lower interest and late fees than a typical credit card.

To contact the reporters on this story: Julie Verhage in New York at jverhage2@bloomberg.net, Dakin Campbell in New York at dcampbell27@bloomberg.net.

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Molly Schuetz

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