If you can’t beat ’em, join ’em.
Lending Club, the upstart online lender that went public last year, has today announced plans to partner with Citigroup, America’s third-largest bank by assets, to make $150 million in loans to low- and middle-income consumers.
The deal marks the latest illustration of how Wall Street is embracing the online lenders that originally went into business expressly to bypass banks and connect borrowers directly with individuals over the internet. It follows similar match ups with community banks.
Lending Club CEO Renaud Laplanche announced the move at Lendit USA, the annual pep rally for the online lending industry.
“Commentators have asked us when will the online marketplace lending industry reach a level of maturity and attractiveness where we see one of the big major banks in the country start participating,” Laplanche told attendees. “This just gives more credit to the idea that marketplace lending is going to transform the entire banking system.”
Citi and Lending Club will offer $150 million in subsidized loans to low and middle-income creditors. For Citi, that means the matchup will help satisfy quotas under the Community Reinvestment Act, which mandates that banks offer credit to people traditionally underserved by financial institutions.
“It’s been very hard for Citi to meet their CRA requirements and because we lend online, this will help them make credit available to low- and moderate-income customers,” Laplanche said.
John Heppolette, co-head and managing director of Citi Community Capital said the partnership will “help provide a viable source of responsible credit.”
“It is important that we help increase access to financing alternatives for American families,” he said in a prepared statement.
For its part, the partnership will help Lending Club expand its reach and find more borrowers for the massive number of lenders itching to invest in online loans.