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Consumers will get $18 million in remediation from LendingClub in a settlement with the Federal Trade Commission after the FTC sued the company for allegedly misleading consumers about loan fees and approvals.
The LendingClub settlement will also include an injunction requiring LendingClub to make full disclosures of the loan application and approval process, and that the company “clearly and conspicuously” disclose all loan fees to prospective borrowers upfront, as well as the total amount of money consumers will receive if their loan applications are approved, Law360 reports.
The fintech company was hit with the lawsuit in 2018, which alleged that the online lender engaged in deceptive and unfair trade practices.
According to the LendingClub lawsuit, the FTC said that LendingClub’s marketing — which stated there were no hidden fees with its loans — was false as the company did not clearly disclose hundreds to thousands of dollars in origination fees that would be deducted before borrowers received loan money, Law360 reports.
The claim also alleged that LendingClub deceived borrowers by telling them their applied-for loans were “on the way” and “100% backed” when their applications were still under review and would sometimes be rejected. The LendingClub claim also alleged that the company undertook improper bank account withdrawals and did not comply with privacy notice disclosure requirements.
A California federal judge overseeing the case previously encouraged the FTC to settle with LendingClub after learning that the company was no longer saying it had “no hidden fees” in its marketing. The courts also previously denied the company’s attempt to get the claim tossed out.
The FTC’s Bureau of Consumer Protection Acting Director Samuel Levine said that the LendingClub settlement would see the fintech company pay money for its alleged misconduct.
“Companies that profit by preying on consumers don’t just harm the families they cheated — they also harm their competitors that play by the rules,” Levine said.
“Moving forward, when it comes to misconduct in the financial services arena, the FTC will bring joint actions with state and federal partners to seek penalties that deter wrongdoing market-wide, before it can harm consumers.”
Despite reaching the settlement with the FTC, LendingClub did not have to — and does not — admit liability in the lawsuit.
“While we have never agreed with the FTC’s allegations, we appreciate the important role the FTC plays to protect consumers and are pleased to have reached an agreement that resolves the agency’s concerns,” LendingClub Chief Administrative Officer Brandon Pace told Law360.
“We look forward to continuing our mission to empower our members on their path to financial health.”
Have you ever been billed for fees that were hidden in a loan you took out? Let us know in the comments section!
The FTC is represented by its own Katharine Roller and Helen Clark.
LendingClub is represented by Diane M. Doolittle, Suong T. Nguyen, Margaret Shyr, David M. Grable, Michael T. Lifrak and Joseph C. Sarles of Quinn Emanuel Urquhart & Sullivan LLP; and by M. Sean Royall, Rachael A. Rezabek, Richard Cunningham and A. Karine Jakola of Kirkland & Ellis LLP.
The LendingClub False Advertising Lawsuit is Federal Trade Commission v. LendingClub Corp., Case No. 3:18-cv-02454, in the U.S. District Court for the Northern District of California.
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