LendingClub Raises Rates, Tightens Credit as Delinquencies ClimbBy
Moves build on earlier efforts to entice loan buyers this year
Company also is stepping up efforts to collect on loans
LendingClub Corp. took additional steps to improve the returns that investors get buying loans from its online platform, raising interest rates that it charges and tightening credit standards for at least the second time this year.
“We have continued to observe higher delinquencies in populations characterized by high indebtedness, an increased propensity to accumulate debt, and lower credit scores,” the San Francisco-based company said Friday in a regulatory filing. “Although the trend can now be observed across grades, it is less notable in lower-risk grades and more notable in higher-risk grades.”
LendingClub will charge a weighted average of 0.26 percentage point more to take out a loan, with the biggest increases going to borrowers who receive its lowest credit grades. The firm said it would no longer approve loans to borrowers who meet a “combination of several risk factors,” including high levels of revolving debt and multiple recent installment loans.
LendingClub has been working to shore up confidence among investors who buy its loans. Global market turmoil at the start of the year and an uptick in loan charge-offs left many buyers of the debts on edge. Then, in May, the company’s founder and Chief Executive Officer Renaud Laplanche resigned amid an internal probe into a botched loan sale.
His departure revealed weaknesses in controls and caused many loan buyers to suspend purchases. While most of the biggest investors on LendingClub’s platform have returned, the company has said they’re buying in smaller quantities.
To entice investors, the company gradually raised interest rates a weighted average of 135 basis points from last November through June and tightened its credit policy in April. On Friday, the company said it was stepping up its effort to collect on delinquent loans.