Diving into Recent Credit Policy Changes

December 11, 2019

We continuously monitor shifts in economic conditions, consumer behavior, and investor feedback to inform adjustments to the LendingClub platform. In the past several months, some changes have been made to the credit policy which reflect a continued shift to lower risk borrowers, in line with investor demand. While it’s too early to draw definitive conclusions, initial indicators of these changes on investor returns are positive.

New Tools Identify Riskier Borrower Segments

One of our recent findings included identifying certain borrower segments that may pose higher risk, especially in lower loan grades (C, D, and E), certain FICO bands, and longer loan terms where losses have historically been volatile. We took several steps to reduce exposure to these segments. For instance, we recently announced we’ll be removing Grade E from our platform as of July 1, 2019.

Additionally, earlier this year, we launched a new “early delinquency” tool which leverages customer risk signals in addition to credit bureau data. This tool allows us to flag potentially higher risk customers before they take out a loan.

Reducing Risk Segments is Only Part of the Story

Reducing exposure to higher risk borrower segments is only part of the story. We also continuously optimize platform products, adjusting mix toward lower-risk loan segments that have higher investor demand. More than 50% of our current offering consists of grades A and B. We’ve also been expanding custom loan programs, and ramping up our balance transfer loan offering which allows borrowers to pay down higher interest rate debt in exchange for lower interest rate personal loans through LendingClub.

Interest Rate Adjustments

Interest rates were also adjusted in some key parts of the platform. We use a dynamic approach to loan pricing that involves constant monitoring and testing on a number of factors, including loan size and applicant risk signals. This approach is reflected in the June 2019 grade C interest rate increases. As always, we’ll continue to refine pricing by incorporating our learnings from customer behavior and FICO score bands, among other inputs.

Removing Barriers for Borrowers

We also continue to enhance the borrower customer experience in a number of ways, including reducing friction for low risk applicants. For example, during Q1 2019, approval took 24 hours or less for nearly three quarters of approved loan applicants. By removing barriers for lower risk customers, we believe we will continue to see more high-quality borrowers on the platform.

Credit Policy Changes Should Have a Positive Impact

While it’s too early to draw definitive conclusions, initial indicators of these changes on investor returns are positive. Ultimately, our work managing credit is never done. We monitor myriad data, trends and feedback in order to prepare for, and react quickly to, changes in the market, aiming to produce a great customer experience for our borrowers and investors.

As always, contact us if you have any questions about this update or investing with LendingClub.


Forward-Looking Statements and Other DisclosuresSome of the statements above, including statements regarding anticipated yields and volume are “forward-looking statements.” The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “project,” “will,” “would” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include those set forth in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each as filed with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Information in this posting is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Additional information about LendingClub is available in the prospectus for LendingClub’s notes, which can be obtained on LendingClub’s website here.

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