A group of small banks is teaming up with Lending Club Corp. in a joint effort to wrest a larger share of the consumer-loan market from the biggest U.S. banks, the Wall Street Journal reported today. The partnership, expected to be announced today, aims to reverse a trend in which big banks, through mass marketing of credit cards and other products, have grown to hold the vast majority of loans to U.S. consumers. Members of BancAlliance, a consortium of about 200 community banks, will start using Lending Club, a website that facilitates loans to individuals, to build new portfolios of consumer loans. The banks will each commit to buy a certain amount of loans from Lending Club, which will vet borrowers for their ability to repay. The borrowers will come either from the bank’s own customers, whom the bank will send to a Lending Club website, or other borrowers that come directly to Lending Club. The banks are expected to buy unsecured loans of less than $35,000 without requiring collateral. Until now, small banks generally haven’t been able to justify the cost of underwriting those loans because big banks can do so much more efficiently. Now, instead of analyzing the loans on their own, the banks will rely on Lending Club’s software, which uses a data-driven process to evaluate a borrower’s ability to repay.
