Lending Club Blog

Universal Default

As I was browsing through loan requests on the Lending Club site, I saw one user recounting how his credit card rate jumped from 13% to 25% without warning. Such jumps are quite common. While the cause of the jump in this situation was likely the end of a teaser rate (a low rate when you first sign up for a new account) such rate changes are often the result of a practice known as universal default.

Universal default is a common method for raising rates used by credit card companies (for more information, see this GAO study). Clauses in your credit card agreement may allow card issuers to raise your rate if you have a late payment on a different card or line of credit! By monitoring your credit report, the credit card company could see that you paid another bill late and jack up your rate as a result.

While it may not seem fair that one card could change its rates because of payment activity on another account, there is actually more alarming news: the rates used by credit card companies for customers who experience universal default tend to be extremely high. Some cards will raise the rate as high as 32%.

Pressure from lawmakers and consumer outrage are slowly having an effect on credit card companies. A few have done away with universal default. In the cat and mouse game of fees and excessive charges, it will likely only be a matter of time before a new method of exploiting customers will be created to take the place of universal default. It’s not only the method that triggers the high rate that’s outrageous; it’s the rate itself.

Consumers looking for reasonable interest rates are increasingly turning to funding sources like Lending Club. The P2P loans they find there have some of the most affordable interest rates available. As loans from Lending Club have a fixed interest rate for their entire 3-year term, they aren’t subject to changes in the interest rate through universal default. My hope is that over time practices like universal default, used liberally by profit-driven credit card companies, will be eliminated completely.

Friday, September 28th, 2007 at 7:03 am

Comments (0)


Welcome Home

Lending Club named #5 on Forbes’ Most Promising Companies List

Get ready for tax season with Lending Club’s Tax Form Guide

New Adjusted Return Metric

See more
Lending Club Awards
  • Archives z

Recent Posts

Welcome Arkansas, Iowa, and Oklahoma Investors!

We recently welcomed residents of Arkansas, Iowa, and Oklahoma… Read More »
July 14, 2015

Renaud Talks Marketplace Lending on Jo Ann Barefoot’s Podcast

This week, CEO Renaud Laplanche… Read More »
June 24, 2015

Lending Club Teams Up with Sam’s Club to Deliver Small Business Financing

Read More »
June 8, 2015

New Lending Club TV Commercial Makes its Debut!

Last week we began testing a new TV commercial showcasing… Read More »
May 26, 2015

Lending Club Honored with Entrepreneurial Company of the Year Award from Harvard Business School Association of Northern California

Read More »
May 15, 2015

Renaud Talks to Jim Cramer

A few months ago, Jim Cramer remarked that he… Read More »
April 15, 2015

Lending Club 2 – Back in the Race

We’re excited to see Renaud back at the helm!… Read More »
March 26, 2015

Lending Club Store’s Grand Opening

We were thrilled at the support we received from… Read More »
March 20, 2015

LendIt is just one month away!

Congratulations to the LendIt team, who rang the opening… Read More »
March 13, 2015

Nearing Retirement – How an IRA Can Help

An Individual Retirement Account (IRA) can help you prep… Read More »
February 25, 2015


We went public today!

Ringing the bell this morning at the New York… Read More »
December 11, 2014

New and Improved Statistics Page

We recently redesigned our Loan Statistics page to make… Read More »
November 13, 2014

Lending Club Honored with Economist Innovation Award

This month I was honored… Read More »
October 15, 2014

Welcome Vermont Investors!

Today, we’re thrilled to welcome residents of the state… Read More »
September 4, 2014

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014
View All w