Basically you are saying, LC should help borrowers more due to the crisis. This is a good thought.
But LC already does a lot for those late on payments. Look at the collection log for notes which have been charged off. Many phone calls, messages left, emails sent, paper letters sent, over usually a four-month period. Almost invariably I see one or more of the following:
- Borrower stops answering the phone.
- Borrower does not respond to emails.
- Borrower does not respond to paper letters.
- Borrower tells LC to stop calling (a legal right).
- LC is informed that the borrower is in bankruptcy.
For example, I just looked at a recent charge-off: 130 phone calls (none answered), 3 messages left, 7 emails sent, 3 paper letters sent. (Obviously LC finds phone calls more effective at getting responses.)
I do see loans where LC contacts the borrower and they set up a new payment schedule. Often this doesn't work -- clearly a borrower who is behind in payments is already in trouble -- but the possibility is offered.
As Fred points out, the borrower can still pay off the loan even after it's been charged off. Perhaps someone here with a larger number of notes has seen this happen. I haven't.
If I were a borrower and unable to make a payment, I'd be answering every phone call, explaining my situation, asking what I can do. I don't know how long I'd be able to string it out, but I'd try. The difference of course is that I've never gotten into that situation. Very likely most P2P investors have always been astute enough to avoid that situation.
So really the only thing that might change is at what point LC sends a black mark to the credit reporting agencies. I don't know when that happens -- likely when payments are 30+ days overdue. It might indeed be reasonable to delay that reporting during a crisis.
But what do you do when the borrower won't answer the phone?
Edward
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