Lending Club has always pitched itself not as a bank or even as a lender, but as a "marketplace" -- an online matchmaker that connects investors looking to lend with consumers hoping to borrow.
Now, though, as the San Francisco company faces new scrutiny from investors and a federal investigation over its practices, it says it could have to do more of something it has always tried to keep to a minimum: lend its own money.
In a Securities and Exchange Commission report filed late Monday, the company said it "likely may need to use a greater amount of its own capital" to fund new loans if it can't find enough investors to do so.
That's a move that could make it more difficult for consumers to get loans from the company, which has previously relied on both individual and Wall Street investors to fund its lending.
In Monday's SEC filing, Lending Club said it "may need to reduce its platform's origination volume" -- that is, issue fewer loans -- because of a pullback by investors.
Other lenders, hit by some of the same investor concerns, are likewise pulling back, potentially leading to a broad tightening of the market for online consumer loans, said Anthony Hsieh, chief executive of Orange County lender LoanDepot, which offers mortgages as well as the kind of unsecured personal loans popularized by Lending Club.
"Anytime you have negative headlines around lending, it really gives everyone the excuse to pause," Hsieh said. "But the demand [from borrowers] doesn't go away."
Lending Club's filing came just a week after the company's board dismissed its founder and chief executive, Renaud Laplanche, over a batch of tainted loans sold to Jefferies, an investment bank.
An internal review investigating those loans also found that Laplanche did not fully disclose a stake he held in a company in which Lending Club was also considering an investment. The company was an acquirer of Lending Club loans.
On May 9, the day the company announced Laplanche's resignation, the Justice Department delivered a grand jury subpoena. The company disclosed the subpoena in Monday's SEC filing and said it is cooperating with the Justice Department.
Despite a letter sent by President Scott Sanborn to investors detailing new measures to strengthen internal controls, Lending Club shares slumped Tuesday, closing at $3.60 -- down 9% on the day and down 76% from its December 2014 IPO price of $15.
The letter listed 10 new measures, such as more intensive monitoring of loan data changes and retraining employees, to assuage investor concerns.
"The problems identified this quarter run counter to our values and will never be tolerated. We're working hard to make things right and prove to you that we continue to deserve your trust," wrote Sanborn, who is serving as acting CEO.
Though Lending Club's recent troubles are partly its own making, the firm is also grappling with challenges that have affected the entire industry, including rival San Francisco firm Prosper and New York small business lender On Deck Capital.
The firms have seen investors' interest in loans wane amid questions about borrowers' credit quality, fear over how loans will perform if the U.S. economy falters, and concern that new regulations and pending court decisions could cause lenders to change their practices.
All that has forced lenders to pare back.
This month, before the Lending Club fallout, Prosper announced it would lay off nearly one-quarter of its workers and On Deck cut back on its growth estimates for the year.
LoanDepot's Hsieh said it makes sense for lenders to cut back and focus on issuing loans only to the most qualified borrowers. Eventually, he said, that will bring investors back.
"You had a lot of irrational behavior," he said. "The fact that the market is going to tighten up is good for the marketplace. You're going to see the market get stronger."
The Associated Press contributed to this report.
5:36 p.m.: This article has been updated throughout with new information.
9:35 a.m.: This article has been updated with the current stock price.