LendingClub accusations filed by FTC for hiding fees
Multiple allegations surround the company that connects borrowers to investors.
The Federal Trade Commission has filed a complaint against LendingClub, a peer-to-peer lender that calls itself “America’s largest online marketplace” for auto refinancing, personal loans, business loans and elective medical procedures.
The charges were levied on many fronts – ranging from charging customers hidden fees when they promised there would be none to falsely leading consumers to believe they were approved for a loan when, in fact, many would face rejection when their application was pushed through the final process.
Charges on four fronts levied against LendingClub
The LendingClub accusations focused on a primary complaint that the company deducted fees from loans it promised wouldn’t have them in the first place.
The FTC alleges that within LendingClub’s paid advertisements, it assured prospective borrowers that there were no hidden fees.
However, some customers learned their loans were reduced by hundreds or even thousands of dollars because LendingClub took up-front origination fees.
In fact, the formal complaint points out that one of LendingClub’s own investors cautioned the company against the upfront fee and stated that it could be accused in a UDAAP claim, which refers to unfair or deceptive acts and practices.
Another accusation outlined in the complaint accuses LendingClub of leading consumers to believe they had already been approved for a loan, even though the approval phase of the process hadn’t occurred yet. The FTC claims that LendingClub knew many applicants would be rejected in the final review.
The third charge revolves around LendingClub withdrawing money from customers’ bank accounts without their consent. The accusations state the company either withdrew double payments or withdrew funds even though many customers had paid off their loans.
The final complaint accuses LendingClub of failing to deliver privacy notices. The notices are required of financial institutions under FTC regulations; however, there’s some debate whether LendingClub could be considered a financial institution.
Two primary requests of the complaint ask that consumers be refunded any unauthorized withdrawal of funds and fees, as well as an order for LendingClub to prevent future violations.
LendingClub counters the accusations
LendingClub responded to the accusations on its company blog by stating its disclosures are “clear and transparent”. It maintains that origination fee disclosures are prominent throughout the loan application process.
It also said that of 2 million borrowers it’s serviced, it’s received complaints from less than 1% concerning origination fees.
LendingClub noted that most of the emails that sent approvals to consumers who were later rejected for loans were errors. The company said it learned of the error itself and corrected it once it was discovered.
The company also stated that there have only been 300 complaints concerning duplicate payments and most occurred when a customer mailed a payment in when an ACH debit was already scheduled. LendingClub said it refunded those excess payments.
LendingClub has helped to facilitate over $26 billion in loans since the company started in 2006.
To learn more about unsecured personal loans by LendingClub and other peer-to-peer lenders, go to our page, “Compare sites like LendingClub”.