LendingClub hikes certain interest rates, tightens credit policy
According to a regulatory filing, LendingClub said that it raised interest rates for certain loans and tightened credit policy that would result in some high-risk borrowers being denied loans. In the first and second quarters of 2016, the company previously commented on mixed economic data and pockets of underperformance on the platform, which caused it to be cautious in its overall credit performance outlook and prompted changes to credit and interest rates. Interest rates on the Lending Club platform increased by a weighted average of approximately 135 basis points from November 2015 to June 2016. Rate increases were concentrated in grades D through G in order to improve risk-adjusted returns in pockets experiencing higher losses. The credit policy was tightened in April 2016 to remove populations primarily characterized by borrowers with high indebtedness, an increased propensity to accumulate debt, and lower credit scores. In June, the maximum debt-to-income threshold, excluding mortgage and the requested program loan amount, across the prime loan program was further reduced to 35% from 40%. As a result of these changes, the platform no longer approves loans for approximately 9% of borrowers who previously would have been able to obtain a loan under prior underwriting criteria. "We anticipate loans originated in the second half of 2016 and going forward to benefit from these combined changes," the company said.