This page describes the processes we have established to collect payments from borrowers, the regulatory environment in which we operate, and the tools at your disposal to monitor the payments related to your investment.
Normal Course of Operations
The primary method of payment for all Lending Club accounts is via an electronic funds transfer whereby we withdraw monthly payment amounts from the borrower's bank account. When funds are available in the borrower's bank account, they are automatically remitted to Lending Club for distribution to the individual investors who purchased the Notes corresponding to the loan.
In the event of a failed debit transaction, our dedicated internal collections team will reach out to the borrower on the same day via telephone and email. Usually, our collections team is successful in contacting the borrower. In cases when the debit failure was the result of a bank error or an inadvertent shortage of funds, we can usually successfully re-present the payment within a few days.
Collection Process in case of Late Payment
In cases where a failed debit transaction is not the result of a bank error or an inadvertent shortage of funds, Lending Club uses the best banking industry practices to bring delinquent borrowers back to current status. First, our internal collections team analyzes the delinquent account and reviews a recent credit bureau report on the borrower to understand the current credit status of the borrower. We attempt to contact the borrower by phone, email, and letter. If we are able to contact the borrower, our team will discuss the matter with the borrower. We will then make a good faith judgment call about the fastest and most likely way to bring the account current.
If our team is unable to make contact with a borrower, or if the borrower does not cooperate with our efforts, we will turn the delinquent account over to our external collections agency for further action. This typically happens when a payment is 30+ days late. Our external collections agency has more resources, including more sophisticated tools to track changes of location and contact information. These agencies typically make diligent telephone, email, and letter attempts to contact delinquent borrowers. In some instances, our external collections agents may work with the borrower to structure a new payment plan. In other instances, they may take direct legal action against the borrower.
In general, when a Note is 121+ days past due it enters Default status. A loan that is in "Default" will still appear in your Notes, in the status of "Default." When a note has entered Default status, Charge Off occurs no later than 150 days past due (i.e. No later than 30 days after the Default status is reached) when there is no reasonable expectation of sufficient payment to prevent the charge off. A loan that has been "Charged Off" will appear as charged off, and the remaining principal balance of the Note will be deducted from your account balance. Please note, bankruptcies may be charged off earlier based on date of bankruptcy notification.
We believe that a strong and diligent collections process is necessary to keep our community thriving and to continue earning the trust of our investors.
It is important to note that the collections process in general is highly regulated. Our internal collection team and the professional third-party debt collection agencies we work with are required to comply with the federal, state, and municipal laws related to collecting delinquent accounts of our borrower members. Below is some information about one of the many regulations related to collecting delinquent accounts of our borrowers:
Federal Fair Debt Collection Practices Act ("FDCPA")
FDCPA provides guidelines and limitations on the conduct of third-party debt collectors in connection with the collection of consumer debts. The FDCPA limits certain communications with third parties, imposes notice and debt validation requirements, and prohibits threatening, harassing or abusive conduct in the course of debt collection. While the FDCPA applies to third-party debt collectors, debt collection laws of certain states impose similar requirements on creditors who collect their own debts. We use our internal collection team and a professional third-party debt collection agency to collect delinquent accounts. They are required to comply with the FDCPA and all other applicable laws in collecting delinquent accounts of our borrower members.
Where to look for up-to-date information on any particular account
Investors can review the payment history and, if applicable, collections status of any of the Notes they have invested in by logging into their account, selecting a Note and clicking on the "status" link.