Lending Club Complaints

 

Every company receives complaints about their services and features from disappointed consumers and Lending Club is no different.  Since the inception of the company in 2007, there have been several common complaints lodged against the company about its practices and payments to investors.  Although the complaints may appear valid to the individuals making them, in many cases the complaint is due to the consumer misunderstanding the role of Lending Club and its common practices.  The company has been able to meet all of the requirements imposed by the states that the company operates in and is regulated by the Securities and Exchange Commission.

One of the biggest complaints about Lending Club is about the rejection of the applications of borrowers that apply for loans through the company.  Lending Club routinely rejects around 90% of the loan applications they receive because the borrowers do not meet the stringent requirements of the company.  Borrowers that have a credit score that is lower than 660 are automatically rejected, along with any borrowers that have recent bankruptcies or delinquencies on their credit report.  The borrower requirements are designed reject all but exceptional borrowers in order to minimize the risks of default for the lenders associated with the company.

Another common complaint is that the interest rates charged by the company are above fair market value.  The interest rates charged to borrowers interested in obtaining a loan typically range between 6% and 25%, which is pretty competitive when compared to the interest rates charged by credit card companies, large traditional banks, and payday lenders.  The interest rate that is assigned to the loan request is formulated by an algorithm that takes into consideration the borrower’s credit score, the borrower’s debt to credit ratio, and the amount of the loan being requested.  Unlike some other peer-to-peer lending companies, Lending Club’s interest rates are set automatically and are non-negotiable.

Some lenders complain that they do not earn the return on their investment that they expected from the company.  Every lender interested in using Lending Club must understand that loaning money to borrowers through the system is an investment, with all the risks and rewards associated with making an investment.  The loans made through Lending Club are less likely to default than loans made through some other peer-to-peer lending programs, with an average default rate of 3%.  The safeguards put into place by the company and the stringent borrower requirements are designed to keep this default rate as low as possible.

Most of the Lending Club Complaints are unfounded or based on the individual’s personal experience with the loans they are working with.  In most cases, the company has been able to effectively answer complaints made by consumers and change its practices as needed to become a better facilitator of personal loans between individual borrowers and lenders.  As of 2011, the company had helped more than 30,000 borrowers obtain more than $300 million in loans and earned investors an average return of 9.6% on their investment.

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