Has anyone used Lending Booth for a loan? This tribal lender was a pretty big operation for a period of time, particularly in 2010 and 2011 the company was doing quite well. Then they started to fade out in 2012.
Why did Lending Booth lose their popularity? Was it due to new, stronger competitors? Probably not, one thing that customers of tribal lenders do not do is shop around. The problem could have been the number of complaints the company faced over the years.
There were a few complaints scattered around in 2010 but as 2011 and 2012 progressed the number of complaints ballooned. Evidently it was not the (normal) high interest rates that customers were complaining about; instead consumers were facing a new problem with this tribal lender which was a lack of follow through by the Lending Booth customer service team.
Many of the complaints about Lending Booth actually have nothing to do with the high rates that were inherent with the company. The customer service at Lending Booth apparently was not too concerned with responding to customer requests such as taking out specific (prearranged) dollar amounts for repayment, and instead just taking out the regular withdrawal that was scheduled back when the loan was originally issued.
Another big complaint you'll find out there was the following, a customer would make an agreement over the telephone regarding a current debt that was about to go into late status, or a debt that was already in past due status.
The customer would give some terms to Lending Booth and on the surface it would appear that the customer service agent at the company would agree to go along with the conditions. But even though there was apparently a deal in place (albeit a verbal agreement but one that should have still been valid and theoretically there should have been a phone record of the deal) it seems that Lending Booth didn't care much and would still hit the (now past due) customer with a late fee.
The problem most likely was that the staff at Lending Booth was overworked and had some very clear cut instructions, and those instructions were as follows...
Customers were either in good standing with their debt, meaning they were paying off the loan in full or were at least paying the minimum amounts due on the loan and paying them on time, as the arrangements in the loan documents called for. And then there was the second group, which was anyone who did not fall into line, meaning they had fallen out of step with the prearranged program.
The people that had fallen out of repaying on time per their loan stipulations were not treated very well. In addition to extra fines it seems like Lending Booth simply didn't do a good job of listening to the deals and plans of the customers who wanted to get back into good standing. That's the complaint you will find floating out there as much as any other, well technically it will be second only to the people who didn't realize how a Native American loan works and were so mad at paying all the interest on a revolving loan.
The situation is probably as follows...
Lending Booth was an early entrant into tribal lending and back in 2009 and 2010 we were in the midst of the worst financial crisis since the Great Depression. There was literally no place an individual could get a loan; the reality was that many businesses also could not qualify for a loan, sometimes it even prevented them from making their payroll. To say credit was tight would be a huge understatement because credit had vanished.
With the banks and state licensed lenders all but locked up and in shut down mode it provided a great opportunity for tribal lenders to jump into this vacuum and grab a bunch of the unsecured personal lending that was the bank's business only a few years before.
Lending Booth moved into the scene, and Western Sky moved in with an even bigger push, and both of them were dominant players in online lending within a year of their first loan offerings. But this massive influx of new business might have been a poison pill for both of these lenders. Why is that? How can you go from a great, booming business to being out of business only four years later?
The answer entails quite a bit of hubris, the false pride of thinking that customers can be treated poorly and dismissively simply because you have so many thousands. As Lending Booth (and Western Sky) exploded their number of customers it looks as though they both decided to not put much effort into a certain segment of their customer base, and that segment were the people who had some degree of difficulty repaying their debt.
Why does that matter to their long-term viability? On the surface it wouldn't seem like it would matter at all. If you have a huge number of customers and you are charging a 500% or 700% APR on your loans, and say the majority of the borrowers (let's say 80% of the total) are repaying diligently and on time, then why worry about the 20% who are struggling to pay or who have stopped paying at all? You (the owner of the company) are making plenty of money and why give a care as to what happens to the 20% who failed to repay?
That's the thinking that took over Lending Booth. And even though it wasn't a big financial burden for them to deal with the non-paying customers it did turn out to be a big problem for them in the end.
Those thousands of customers who struggled to repay were treated like garbage. Lending Booth would get calls from people trying to work out time frames and methods on how to pay, and from all the sounds of the complaints out there, Lending Booth decided to just say "who cares" and wouldn't work with these struggling borrowers.
Even worse, on some occasions the firm discussed work-arounds and changes to existing payment plans (these were essentially refinancing situations on already issued loans) but then they failed to implement the new agreements.
People online complain bitterly about the fact that they had reached a deal over the phone with a customer service agent at Lending Booth only to be hit with late fees and be told their account was in default status a week later with a phone call out of the blue or a snail mail letter.
At the time this probably seemed trivial to the owners and management of Lending Booth. They were making millions of dollars, and even on the small percentage of customers that failed to repay they could milk them for late payments and then eventually sell their loan off to collection agencies for a few extra bucks and be done with the "bad" borrowers and their bad debts.
There was one key problem with this flawed thinking, and that was the human element. There were so many thousands of unhappy, insulted, dissatisfied, angry and outraged customers that they all started complaining about the company. Soon (by 2011) you couldn't look for Western Sky or Lending Booth on the net without coming across multiple sites each with multiple complaints that were very descriptive and many times written with a very impassioned tone.
The displeasure was noticeable and many Americans who were interested in debt starting to think twice about working with a company that so many people had taken the time to bash online. Then the BBB started getting a pile of unresolved complaints and then a good number of people starting complaint to their attorney generals around the various states, not to mention complaining to the federal government.
All of these complaints started to build some momentum and before you knew it Lending Booth was part of civil lawsuits. And those civil lawsuits garnered enough attention that it eventually created some state regulatory suits.
All of this pressure, along with the consistent bad reviews on the internet led to the end of Lending Booth. Despite the fact that the company has been dissolved for at least a year the complaints are still out there and some new complaints continue to show up. This is a lesson to companies that feel they can treat their customers (or a certain segment of their customers) poorly. With all the options of communication available now the word will get around that you (meaning the firm) will eventually get such a bad reputation that it will hurt your business.
Lending Booth was on top of the world in 2010 and out of business by 2014. To all lenders and business owners out there, it's a good thing to treat your customers in a friendly manner.
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