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How to Beat a Lending Club Charge Off

Chloe Meltzer | March 11, 2024

Chloe Meltzer
Legal Expert
Chloe Meltzer, MA

Chloe Meltzer is an experienced content writer specializing in legal content creation. She holds a degree in English Literature from Arizona State University, complemented by a Master’s in Marketing from California Polytechnic State University-San Luis Obispo.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Your LendingClub loan will enter default status if you go 121 days or more without payment. At this point, LendingClub will prepare to charge-off the account and transfer it to collections. You can fight debt collectors in court and beat a LendingClub charge-off with SoloSuit's help.

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. If this is the case, your loan may have been charged-off by LendingClub.

In this article, we’ll explain everything you need to know about Lending Club charge-offs and how to react if that is the status of your loan with them.

Let’s jump right in.

What is the difference between a default and a charge-off?

First, let’s make sure we understand the basic meaning of a LendingClub default and charge-off, as listed on LendingClub’s website.

  • A LendingClub loan is considered late when no payment has been made on it for 16-120 days.
  • A LengClub default occurs when no payment has been made on a loan for more than 120 days (or roughly four months).
  • A LendingClub charge-off occurs when the company no longer expects further payments. Loans are generally charged-off within 30 days of the loan entering default status.

In other words, a LendingClub loan is late when no activity has been made on the account for 16-120 days. After 121 days, a LendingClub note will be transferred to default status and eventually charged-off within 30 days of entering default.

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 late payments altogether.

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What happens if you default on a LendingClub loan

The default rate of Lending Club is 6%, so you’re not alone if your loan has entered default. It’s best to avoid default on a LendingClub loan because you will be charged late fees for each payment. 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. Payment history is one of the biggest factors that affect your credit score, and late payments will usually remain on your score for up to seven years.

Once your loan has entered default status, LendingClub will prepare to charge it off, after which they may sell it to a debt collection agency to recoup their loss. At this point, debt collectors may start calling. It’s best not to ignore debt collectors, as they are well-versed in the game of debt collection and know how to work the system. Consider sending a Debt Validation Letter to force them to prove the debt’s validity or try to settle the debt for a percentage of the amount you owe.

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Use our Debt Validation Letter.

Out Debt Validation Letter is the best way to respond to a collection letter. Many debt collectors will simply give up after receiving it.

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Finally, if you ignore debt collection efforts, there is a good chance you will be sued. LendingClub loans are unsecured, which means they are not backed by assets, and debt collectors will need a court judgment to get funds from you. With a court-ordered judgment, collectors can garnish your wages, seize your property, or freeze your bank account.

If you’ve been sued for a LendingClub debt, 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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Avoid a debt lawsuit and beat a LendingClub charge-off

Establish a new payment plan

There is a good chance that LendingClub will allow you to change the terms of your loan by setting up a new payment plan that fits your needs. If you can prove you are experiencing financial hardship, most lenders will listen and accommodate. Reach out to LendingClub as soon as your account enters default to discuss a restructured payment option.

Negotiate a LendingClub debt settlement

If you've defaulted on a LendingClub loan, one of the best choices is to settle the debt. 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 at least 50% of the total debt amount.

SoloSettle, powered by SoloSuit, takes care of the debt settlement process for you. Our software sends a settlement offer and responds to any counter offers from LendingClub or collectors until an agreement is reached. Then, SoloSettle manages the settlement payment process for you so you can keep your personal financial information private from debt collectors.

Settle your debt for less with SoloSettle.

Check out this video to learn more about how a debt settlement can help you beat a LendingClub charge-off:

Refinance 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.

You have rights under the FDCPA

The Federal Debt Collection Practices Act (FDCPA) 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 in an attempt to collect on a debt.

If you ask 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 for up to $1,000 per FDCPA violation.

Respond to a LendingClub debt lawsuit

If you’ve been sued by a debt collector for a LendingClub debt, there is a good chance that the collector purchased your account at a discounted rate. They’re trying to get you to pay off the debt in full so they can make a huge profit.

When a LendingClub loan is charged-off and passed on to a collection agency, there is a good chance that some of the documentation doesn’t properly transfer. It’s also possible that the amount claimed by the collector is incorrect.

You can fight back against debt collectors in court by responding to the lawsuit with a written Answer. Follow these three steps when drafting your Answer.

  1. Respond to each claim against you.
  2. Assert your affirmative defenses.
  3. File the Answer before the court’s deadline, and send a copy to the opposing lawyer.

Now, let’s consider an example.

Example: Daniel is being sued by a debt collection agency that purchased his old debt with LendingClub after several months of missed payments. Daniel uses SoloSuit to respond to the debt lawsuit. In his Answer document, Daniel denies many of the claims, such as the debt amount and interest fees. He also lists his defenses, explaining that the debt collectors violated several FDCPA rules in their efforts to collect. This gave Daniel some time to work out a payment plan with the debt collectors. He knew he owed the debt, but he couldn't’ afford to pay it all off immediately. After some negotiating, he was able to work out a payment plan with the collection agency and get back on track financially.

SoloSuit can help you draft and file a customized Answer in all 50 states.

Check out this video to learn more about these three steps:

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SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

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