Many investors have lost faith in the stock market, real estate and other investments to provide consistent return over time. As a result, investors are increasingly seeking alternative investments to round out their investment portfolios. One new investment that has garnered some media attention is providing funding for personal loans through services such as Lending Club and Prosper.com.
Not everyone qualifies to be a Lending Club investor though. Because of state regulations, only potential investors in the following states can invest: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kentucky, Louisiana, Maine, Minnesota, Missouri, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming.
There are also “suitability” requirements that are imposed by state law. In most states, Lending Club investors must have a gross annual income of $70,000 or more and have a net worth of $70,000 or more. In the state of California, investors must have a gross annual income of $100,000 and a net worth of $100,000. If you have a total net worth of $250,000 or more, there is no annual income requirement.
Finally, Lending Club investors must not deposit more than 10% of their net worth in Lending Club notes.
Although Lending Club lists their suitability requirements on their website, it doesn’t seem that the company goes to any great length to make sure that investors meet the requirements. Lending Club does enforce state residency, but there’s typically not a check to ensure that you have the annual income level or net worth that you say that you do.
There’s also no way for the company to check if an investor has more than 10% of their net worth tied up in Lending Club notes.
