How to Beat a Lending Club Charge Off

Chloe Meltzer

September 29, 2021

You can win your case if you make the right defense.

Summary: Is LendingClub trying to collect on an old charge off? Not sure how to respond? Learn how to win your case.

LendingClub is a company that provides peer-to-peer lending. It helps consumers pay down high-interest debt through different services. They offer securities and loan trading on a secondary market. Despite this, you may find yourself in a lawsuit or struggling with a Lending Club loan that you can not pay off. In this case, you may be given something called a charge-off. If you are being sued for this debt, you need to know what a charge-off is, and how to beat it.

How your account is affected: default vs charge off

In many cases, a default will occur but do minimal harm. Despite this, you want to avoid a default as much as possible to minimize harm. Defaults are essentially the stage after a loan is considered “late” being paid off. After being marked as Late it is marked as Default, followed by Charge Off.

Notes go into default when they are 121 or more days past due. After your note goes into Default status, it will go into Charge Off status when it is 150 days past due. This will be no later than 30 days after Default status. This will occur when there is “no reasonable expectation of sufficient payment to prevent the charge off.” Despite this, bankruptcies are often charged off earlier due to bankruptcy notification.

Defaults and charge-offs affect your account in different ways. For example, when a note moves to a status of default, it will lower your Net Annualized Return (NAR) but it will not change your account balance. Then once a loan moves from default to charged-off, the principal will be removed from your account and your balance will change. This might take up to 30 days to complete. When it comes to bankruptcy it may happen the same day. If your account is new, then your NAR may change dramatically when you default. This is why it is best to avoid them altogether.

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What happens if you default on a lending club loan

When it comes to defaulting on a LendingClub loan, you will be given late fees for each payment. When defaulting on a lending club loan, you will owe late fees. These will be 5% of the payment amount or $15 for each payment, whichever is greater. Your credit score will also decrease because these non-payments will be reported to the credit bureaus. This is because payment history is one of the biggest factors in your credit score. Late payments will exist for seven years on your report and will continue to impact your score. This will occur once your payment is 30 days past due. If you do not pay it, then your debt will be sent or sold to collections.

You may even be contacted by debt collectors looking to collect your debt. Lending Club itself will make efforts to contact delinquent borrowers and collect these payments. This is why you need to be aware of your rights regarding how debt collectors may treat you.

Finally, you will be sued. LendingClub loans are unsecured, which means they will need a court judgment to get their funds from you. Then they can garnish your wages or go directly into your accounts and take the money you owe. You may be able to work things out through a payment plan, settlement, or refinancing with a cheaper lender, but you want to avoid defaulting on a LendingClub loan at all costs.

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Options for avoiding a debt lawsuit

Settling the debt

If you've defaulted on a LendingClub loan, one of the best choices is to settle. This is common because lenders will often look to settle if you have not paid on your debt. They would rather get something than nothing. Despite this, you will need to have enough to pay for the settlement, which is usually around 30% of the total amount. Although you can try, LendingClub still does not have to agree.

Refinancing the debt

It is possible to refinance the debt with another lender. The only way this may not work out is if your credit score is damaged and very low due to the missed payments. You most likely will not get better terms on this loan in this case. If this is what your situation is, you may be able to work out a payment plan instead.

Your rights under the FDCPA

The Federal Debt Collection Practices Act governs how debt collectors may treat consumers. For example, debt collectors must identify themselves in every communication. They cannot state that they are a law firm or law enforcement agency if they are not. Debt collectors may not misrepresent themselves either, nor publish your name or address, or use legal action when they do not have the right.

The only person that the debt collector may share your information with is your attorneys and your spouse. They may also not send you mail that includes information indicating you are in debt. Debt collectors must also let you know your rights to dispute your debt, and send you this information, along with a verification of your debt. This is in addition to providing contact information for the creditor from whom the debt originates. This must be done within 30 days of receiving the request for this information.

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You should also know that debt collectors may only call you between the hours of 8 a.m. and 9 p.m. They cannot harass you, or attempt to contact you at work if your employer has stated it is not allowed. This also means that they may not use abusive or profane language.

If you as a debt collector to stop contacting you, they must listen. This is called a cease and desist letter. Any communications after are not allowed except to let you know that you are being sued. Additionally, they may not contact you if you are represented by an attorney. Should any of these rights be violated, you have the right to sue debt collectors in state or federal court.

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How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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