FTC Confirms it Charged Lending Club (LC) with Deceiving Consumers
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The Federal Trade Commission has charged the LendingClub Corporation (NYSE: LC) with falsely promising consumers they would receive a loan with “no hidden fees,” when, in actuality, the company deducted hundreds or even thousands of dollars in hidden up-front fees from the loans.
“This case demonstrates the importance to consumers of having truthful information from lenders, including online marketplace lenders,” said Reilly Dolan, acting director of the FTC’s Bureau of Consumer Protection. “Stopping this kind of conduct will help consumers make informed choices about loan offers.”
As stated in the FTC’s complaint, Lending Club recognized that its hidden fee was a significant problem for consumers, and an internal review noted that its claims about the fee and the amount consumers would receive “could be perceived as deceptive as it is likely to mislead the consumer.” An attorney for one of the company’s largest investors also warned the company that the “relative obscurity” of the up-front fee in light of the company’s prominent “no hidden fees” representation could make the company a target for a law enforcement action.
According to the FTC, Lending Club ignored these and other warnings and, over time, made its deceptive “no hidden fees” claim even more prominent.
The FTC also alleges that Lending Club falsely told loan applicants that “Investors Have Backed Your Loan” while knowing that many of them would never get a loan, a practice that delayed applicants from seeking loans elsewhere. In addition, in numerous instances, Lending Club has withdrawn double payments from consumers’ accounts and has continued to charge those who cancelled automatic payments or paid off their loans, which costs consumers overdraft fees and prevents them from making other payments. In addition, Lending Club failed to get consumers’ acknowledgment of its information-sharing policy as required by law.
The company is charged with violating the FTC Act and the Gramm-Leach-Bliley Act.
The Commission vote approving the complaint was 2-0. It was filed in the U.S. District Court for the Northern District of California, San Francisco Division.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
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