Everyone knows someone who has financed a vacation they could not quite afford.
That is the business LendingPoint is in. The fintech company lends to near-prime borrowers, people with credit scores between 620 and 659, who need money for trips, urgent vet care, or medical bills. Now the company's own finances are looking shaky, and the pain is spreading to the banks and investors who back it.
The nearly $70 million charge, say people with knowledge of the situation, reflects anticipated losses from loans connected to LendingPoint. It is a serious chunk of change for a bank that partners with fintechs lacking their own bank charters, including Walmart-backed OnePay, Robinhood, and Dave.
Investors did not take the news well. The bank called the charge precautionary, and three board members bought more than 25,000 shares over the past month, a sign they still believe in the business.
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LendingPoint's troubles go beyond Coastal. Apollo-advised MidCap Financial Investment Corp. has been carrying its LendingPoint loans at a steep discount - as of late June, it valued them at $40.2 million, versus a $63.2 million cost. Warburg Pincus, which holds a minority stake and a board seat at LendingPoint, is also feeling the squeeze.
The core problem is simple: borrowers are not paying back their loans. Defaults are up, and even after LendingPoint cut 10% of its staff in March, a rating agency said the company probably will not make interest payments on some of its securitized loan bundles. KBRA downgraded six classes of LendingPoint consumer-loan notes in May, citing continued deterioration.
Part of the damage came from a servicing-platform transfer that made more borrowers miss payments and raised loan losses. The mess cost LendingPoint its bank partner Midland States Bancorp in 2024. Midland said the conversion seriously hurt credit quality and made loan servicing harder, using the phrase "significant credit deterioration."
The company has seen frequent executive turnover. Co-founder and original CEO Tom Burnside stepped down in 2023. His replacement, Shawn Stone, formerly of Mr. Cooper Group, left after just over a year. CFO Mark Freeman then took the top job.
This is the latest sign of strain among cash-strapped Americans after years of inflation ate into savings. When the pandemic ended, rates jumped from near zero, and stimulus checks made borrowers look healthier than they really were. Once that money faded and higher rates took hold, delinquencies rose.
Other lenders have hit the same wall. Ally Financial had problems with loans originated in 2022 and tightened its standards. America's Car-Mart, which finances older, high-mileage used cars for deeply subprime buyers, has struggled to write new loans or buy more cars.
The through-line is that everyday people are running out of financial room. When someone cannot make payments on a vacation loan or a used car, it does not just hurt them. It ripples through banks, investment funds, and the companies that employ them.
For investors, the lesson is about watching who is lending and to whom. When a lender's customers are stretched thin, the lender's partners feel it next. Coastal's stock drop and the board members' share purchases tell two different stories about where this goes from here. The truth is probably somewhere in between, and it depends on whether borrowers can catch their breath.
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