Lending Club to Beta Hardship Plans for Borrowers (and Protect Returns for Investors)
Lending Club wants to make it easier to accommodate borrowers facing hardship and in the process potentially protect the investor from unnecessary losses. A full explanation of the program was sent out to Lending Club investors on Wednesday, the full text of which we’ve pasted below:
Last modified: April 5, 2017
At Lending Club, we are committed to improving experiences for both borrowers and investors. We’re excited to announce that after a beta test, we will begin offering hardship plans to borrowers effective May 4, 2017. Hardship plans allow borrowers to temporarily make interest-only payments to accommodate an unexpected life event. As part of this change we are also making additional data fields related to these plans available for investors.
Lending Club continuously looks to put lending industry best practices to work. Hardship plans are commonly offered to borrowers in the lending industry because they allow borrowers time to adjust to a life event (like a medical emergency, temporary job loss, unexpected car or home repairs, death in the family, or other events). Hardship plans are in accordance with commercially reasonable efforts to service and collect on loans, as well as with our prospectus, which provides us flexibility to work with a borrower to structure a new payment plan if needed.
Our hardship plan program specifically targets borrowers who are more likely to return to repaying their loan. Under the plan, borrowers are allowed to temporarily make interest-only payments for a period of 3 months to accommodate an unexpected life event. After 3 months, regular payment terms and obligations resume. Only borrowers who fulfill specific characteristics (such as a demonstrated history of repayment) and who claim a hardship will be offered plans. Importantly, borrowers’ loans must be either current or between 1 and 30 days past due to qualify for a hardship plan.
We believe the hardship program will work to protect investor returns as borrowers whose loans may otherwise progress to charge-off status have the opportunity to make interim payments and some portion may revert to current status.
Finally, we are adding 15 new data attributes of borrowers who utilize hardship plans to investor reports and the API. The fields will only apply for hardship plans offered as of May 4, 2017 and going forward. You can find more information on these new data fields here.
Offering hardship plans is both consistent with our values – doing the right thing by borrowers while they’re getting back on their feet – and helps to protect investor returns. We will potentially look to expand to different types of hardship plans in the future as we gain further insight into borrower behavior and continue to listen to customer feedback.
Please feel free to reach out with any questions – we welcome your feedback.
The Lending Club Team