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LendingClub on Wednesday was sued by a federal regulator for allegedly saying it would not charge customers “hidden fees” while actually doing so.
According to the Federal Trade Commission, LendingClub, one of the biggest names in the so-called peer-to-peer lending, lured customers with messages saying there are “no hidden fees,” but when funds arrive in customer accounts, they are hundreds or even thousands of dollars short of expectations.
In a statement, the company said the agency is “wrong.”
“We support the important role that the FTC plays in encouraging appropriate standards and best practices,” LendingClub said. “In this case, we believe the FTC is wrong, and are very disappointed that it was not possible to resolve this matter constructively with the agency’s current leadership.”
That’s a reference to the two holdovers, one from each party, who are currently commissioners. The Senate has yet to ratify President Trump’s slate of FTC commissioner nominees.
The company added: “In our decade-plus history we have helped more than 2 million people access low cost credit and have co-founded two associations that raised the bar for transparency. The FTC’s allegations cannot be reconciled with this longstanding record of consumer satisfaction that’s reflected in every available objective metric.”
The FTC alleges that LendingClub typically charges a 5% upfront fee that customers aren’t aware of. And per the FTC, the company is aware of this perception — because training materials indicate it’s one of the two main post-disbursement complaints.
Furthermore, according to the FTC, quarterly complaint reviews have proposed “highlighting [the] origination fee” to address complaint volumes, and internal compliance reviews “repeatedly cite the concealment of the fee as a significant problem for consumers.”
One of LendingClub’s largest investors, and its legal counsel, warned the company as well, the FTC says. The complaint doesn’t identify the investor.
The FTC said the only place the upfront fee is disclosed on this page is the unbolded itemization that appears sandwiched between more prominent, bolded paragraphs.
LendingClub shares tumbled 17% on Tuesday and have dropped 55% over the past year.