LendingClub (LC) Said FTC Allegations are Unwarranted
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Following an inquiry that began in May 2016, the U.S. Federal Trade Commission (FTC) brought an action against LendingClub (NYSE: LC) earlier today in the Northern District of California alleging that certain LendingClub practices do not, or in the past did not, comply with the requirements of the FTC and Gramm-Leach-Bliley Acts.
LendingClub is committed to delivering a superior customer experience, and appreciates and supports the important role the FTC plays in encouraging appropriate standards and best practices. However, LendingClub believes that the allegations in the FTC's complaint are legally and factually unwarranted. The company is disappointed that it was not possible to resolve this matter constructively with the agency's current leadership and intends to oppose the claims and work towards an early resolution of the matter in Federal Court. Additional information about the complaint and LendingClub's response are on its blog.
LendingClub has helped more than two million borrowers improve their financial lives since its foundation more than a decade ago. The company makes credit more affordable and accessible by facilitating fixed-rate personal loans that offer significantly lower interest rates and fees than are available through traditional sources of unsecured credit.
The company provides consumers with exceptional value and service. For example,
- On average, loans facilitated through LendingClub save borrowers with $10,000 in debt between $900 and $2,800 compared to financing through credit cards.1
- Researchers at the Philadelphia and Chicago Federal Reserve Banks used LendingClub data in 2017 and 2018 papers that highlighted how the company offers better prices and is broadening financial services to underserved borrowers, especially in areas where traditional banks are pulling out.
- LendingClub's commitment to outstanding consumer service is reflected in every available objective metric. The company:
- Was awarded an "A+" rating by The Better Business Bureau, its highest-available rating.
- Consistently receives a Net Promoter Score, which measures a customer's likelihood to recommend a brand, in the high 70s. This significantly surpasses traditional financial institutions.
- Is one of the most highly-rated, highly-reviewed lenders, with an average rating of 4.7 out of 5 stars across the top third party review sites.
The company has always been committed to transparency by:
- Keeping loan terms simple by only offering installment loans for 3 or 5 years, with fixed rates, fixed payments, and no prepayment penalties.
- Voluntarily registering in the CFPB's public Consumer Complaint Database. Over the last 4 years, with more than 2 million borrowers served, the CFPB has registered fewer than 15 complaints about LendingClub's origination fees. This is not surprising, because LendingClub has always disclosed its origination fees, and done so in multiple locations on its website as consumers explore whether to apply for a loan. The FTC's concern is that these multiple disclosures were not sufficiently prominent.
- Co-founding the Marketplace Lending Association to set a high bar for transparency and responsibility, including capping APRs on loans to all borrowers, just as Congress requires for military personnel.
- Co-creating the Small Business Borrowers' Bill of Rights with leading nonprofit organizations to establish the highest voluntary transparency standards in the industry, including clear disclosure of all upfront fees, including origination fees and APRs – neither of which are legally required nor common in small business lending.
- Establishing the Responsible Business Lending Coalition to help implement the Small Business Borrowers' Bill of Rights and to also gain Congressional approval for a Truth in Lending Act for small business borrowers.
The FTC's allegations cannot be reconciled with this longstanding record of consumer satisfaction. For a detailed look at LendingClub's disclosures and policies, please visit LendingClub's blog.
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