Author Topic: Email - Changes to Grace Period Interest Accrual  (Read 2138 times)

jheizer

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Email - Changes to Grace Period Interest Accrual
« on: February 24, 2017, 01:24:39 PM »
Since some times we all get them at different times:

Quote
Dear Investor,
 
As you know, we continually revisit our processes and procedures to optimize the performance of our marketplace.
 
Starting today, Feb 24, 2017, we are eliminating the grace period interest waiver in order to better align borrower payment incentives as we seek to deliver solid returns to our investors. Please see details below and don't hesitate to let us know if you have any questions.
 
   Lending Club historically offered borrowers a 15-day "grace period" in which they could make payments after their due date without penalty. Historically, if borrowers made a payment within the first 15 days after their due date: 1) they would not accrue a late fee for paying their amount due late; and 2) any interest accrued during grace period would be waived.
   Under the new policy, if a borrower pays between 1-15 days past their due date, they will still receive the benefit of not accruing a late fee, but they will now have to pay the additional accrued interest as a result of their late payment. This will have the effect of additional interest being accrued over the life of the loan due to the incremental higher principal balance throughout the life of the loan. Any additional interest accrued over the life of the loan ultimately has the effect of increasing the loan maturity by one month.
   New policy will be applied on all payments going forward for all loans as of February 24, 2017.
 
We believe this policy is beneficial for both borrowers and investors.
 
As always, thank you for your business, and feel free to reach out to investing@lendingclub.com or (888) 596-3159 M-F 7am-5pm PT with any questions.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

jz451

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #1 on: February 24, 2017, 02:28:28 PM »
I received it about an hour ago. I think it's a good idea, just like a credit card the clock is still ticking until the borrower decides to pay. It might have an added benefit of more loans paying on time if people know they have to pay more for paying late vs spending money elsewhere.

fliphusker

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #2 on: February 24, 2017, 02:35:14 PM »
Just talked to LC, (still trying to get the screwed up FICO data that is missing from some notes resolved), and they said that the interest will come to us investors, not to LC.
Score one for the little guys!
Will be running out scooping up those IGP notes on FOLIO.<----------Sarcasm!

anabio

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #3 on: February 24, 2017, 03:05:46 PM »
It might have an added benefit of more loans paying on time if people know they have to pay more for paying late

I always thought that was what late fees were for. One of my pet peeves with LC is that they almost never apply a late fee (which we would get), but they sometimes apply a hefty extra fee (that generally wipes out the interest that month)  to us retail lenders supposedly to help pay for the extra expense in collecting late payments. I have a few borrowers who are continually one month behind in payments and although LC often dings me for that extra fee they have never charged the  borrower a late fee.

A year or so ago I called LC asking about one of these loans. They said they would research it and get back to me. Their answer eventually was that the loan was being serviced in accordance with their guidelines...I neglected to ask exactly what guidelines would allow them to charge ME for a borrowers late payment and not charge the borrower.

My response to this latest email would be to ask LC if they are so in tune with our needs why don't they charge a late fee whenever they dock us lenders for a late payment.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

fliphusker

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #4 on: February 24, 2017, 03:10:55 PM »
It might have an added benefit of more loans paying on time if people know they have to pay more for paying late

I always thought that was what late fees were for. One of my pet peeves with LC is that they almost never apply a late fee (which we would get), but they sometimes apply a hefty extra fee (that generally wipes out the interest that month)  to us retail lenders supposedly to help pay for the extra expense in collecting late payments. I have a few borrowers who are continually one month behind in payments and although LC often dings me for that extra fee they have never charged the  borrower a late fee.

A year or so ago I called LC asking about one of these loans. They said they would research it and get back to me. Their answer eventually was that the loan was being serviced in accordance with their guidelines...I neglected to ask exactly what guidelines would allow them to charge ME for a borrowers late payment and not charge the borrower.

My response to this latest email would be to ask LC if they are so in tune with our needs why don't they charge a late fee whenever they dock us lenders for a late payment.

It states in the fees that late fees come out of investors.  Plus it was here in a thread, I believe years ago. 

jz451

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #5 on: February 24, 2017, 03:11:35 PM »
At least for me I sell everything once it is IGP so I wouldn't know what happens when my loans are late. I'm not surprised if a late fee isn't charged if they can't even call some people or leave a message when a borrower misses a payment.
It might have an added benefit of more loans paying on time if people know they have to pay more for paying late

I always thought that was what late fees were for. One of my pet peeves with LC is that they almost never apply a late fee (which we would get), but they sometimes apply a hefty extra fee (that generally wipes out the interest that month)  to us retail lenders supposedly to help pay for the extra expense in collecting late payments. I have a few borrowers who are continually one month behind in payments and although LC often dings me for that extra fee they have never charged the  borrower a late fee.

A year or so ago I called LC asking about one of these loans. They said they would research it and get back to me. Their answer eventually was that the loan was being serviced in accordance with their guidelines...I neglected to ask exactly what guidelines would allow them to charge ME for a borrowers late payment and not charge the borrower.

My response to this latest email would be to ask LC if they are so in tune with our needs why don't they charge a late fee whenever they dock us lenders for a late payment.

anabio

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #6 on: February 24, 2017, 04:18:13 PM »
It states in the fees that late fees come out of investors.  Plus it was here in a thread, I believe years ago.

Is it possible you are thinking about collection fees?...which  do come out of investors. Late fees come from the borrower and go to the investor. Please see a part of my detail screen below. It says "late fees received" and is a positive $3.16. Methinks that if late fee came out of investors that amount would be negative.

Note my collection fees (that I have paid) is -$34.76 but late fees collected because of those late collections is only +$3.16. By rights whenever LC charges a collection fee they should also charge a late fee which I would get (but that's only my logic thinking ;))
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

anabio

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Re: Email - Changes to Grace Period Interest Accrual
« Reply #7 on: February 24, 2017, 07:35:08 PM »
Is it possible you are thinking about collection fees?...which  do come out of investors.

PS...those collection fees are not small either. They are more than a hundred dollars on the whole loan payment.

Example of a note LC charged both collection charge AND late fee.
Loan 26689294. Payments for 9/15 2016.
My note is for $100 of a $10,000 total loan.
LC normally charges me around .03. investor fee.
Sept fee was $1.15 (normal .03 and $1.12 for collection.) Late fee was .16
extrapolating my collection fee over the entire loan gives me:
100*1.12 = $112 collection fee charged that month for that loan...not chicken feed, right?
Note: the late fee (extrapolated over entire loan payment) would be $16... on a payment of $318/month (about 5%).

Unfortunately the vast majority of the time LC charges a collection fee they do NOT charge a late fee to the borrower.

Example of a note LC charged a collection fee but NO late fee.
Loan 14849139. Payments for 1/15/2017.
My note is for $25 of a $35,000 total loan.
LC normally charges me around .01 investor fee.
Jan. fee was .15 (normal .01 and $.14 collection fee). NO LATE FEE charged
extrapolating my collection fee over the entire loan gives me:
1400*.14=$196 collection fee charged for the whole loan that month...again...not chicken feed, right, ESPECIALLY if they do this on multiple late payments for the same loan..which I have seen them do.

Now to LC's credit they quite frequently do NOT charge a collection fee when the note is late but those times they do they should charge a late fee also...which they do only a small percentage of the time they charge the collection fee.

If I am misinterpreting something let me know...but I think my logic is right.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money