LendingClub to pay $ 18 million to settle 3-year FTC dispute


Dive brief:

  • LendingClub last week agreed to pay $ 18 million to resolve a three-year battle with the Federal Trade Commission (FTC), which said the online lender made misleading statements to customers about the fees and whether they were approved for loans.
  • The FTC continued LendingClub in 2018, the borrowers alleging were charged origination fees of $ 1,000 or more, even though the company advertised “no hidden fees.” The regulator also alleged that the lender told customers they had been approved for loans when they weren’t and that they had withdrawn money from their bank accounts without consent.
  • Last summer, a federal judge granted LendingClub a stay pending a Supreme Court ruling on a related issue.

Dive overview:

Last week’s regulation prohibits LendingClub from making false statements to loan seekers and requires the company to disclose “clearly and conspicuously” the origination fee and the total amount borrowers will receive.

But a lot has changed since the dispute began in 2018. LendingClub bought Radius Bank last year, putting it on the path to oversight by different regulators. She also overhauled aspects of her business model, moving out of the peer-to-peer lending space in which she pioneered.

Other changes seem to be happening in regulation in general. In the Supreme Court case, Scott Tucker, a race car driver now in jail and a paid contractor, argued that the FTC had misinterpreted FTC law as giving it the power to bypass administrative processes and go directly to court for financial redress.

The Supreme Court, in an April ruling, unanimously sided with Tucker. But Judge Stephen Breyer, writing for the court, noted that the FTC could use another legal basis to seek restitution – a route that could take longer and give lenders more leverage.

“This is a heavy blow to the FTC’s enforcement powers and jeopardizes a significant number of more recent FTC orders for monetary relief,” lawyers for Manatt Phelps & Phillips wrote at the rest of the decision, according to American banker.

In the LendingClub dispute, a court previously found that the company falsely told claimants that their loans were “on the way” and “100% guaranteed,” although many would never get a loan. The FTC also alleged in its complaint that LendingClub removed double payments from customers’ accounts and charged those who canceled automatic payments or paid off their loans.

LendingClub did not admit any wrongdoing in the settlement and said it has set aside the amount of the penalty, which will be used to repair the customer.

“While we have never agreed with the FTC’s claims, we appreciate the important role the FTC plays in protecting consumers and are pleased to have reached an agreement that resolves the agency’s concerns.” , said Brandon Pace, executive director of LendingClub, in a press release. , according to American banker.

The FTC approved the settlement with a 4-0-1 vote. Newly installed President Lina Khan did not attend.

“Companies that profit by preying on consumers aren’t just harming the families they cheated on – they are also harming their rules-playing competitors,” Samuel Levine, acting director of the Privacy Office, said Thursday. consumers of the FTC, in a press release. “Loan Club skinned consumers looking for a loan online. “

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