LendingClub, the online lender that was once a favorite of Wall Street investors, saw its stock hit a record low on Wednesday, April 25, after it faced allegations by regulators in the US that it was adding on hidden fees and charging borrowers even after they no longer had a loan with the company.
Bloomberg reported the Federal Trade Commission (FTC) contends the company’s behavior violated federal laws that protect consumers from deceptive and unfair practices. As a result of the FTC complaint, Bloomberg noted the online lender’s stock fell 14% to $2.80 a share, off 32 percent so far this year. Since its initial public offering, LendingClub’s stock has declined 80%.
“Many consumers are forced to pay overdraft fees, while other consumers are unable to pay other bills because they do not have access to the money that defendants improperly withdrew,” the FTC said in its lawsuit, which Bloomberg reported was filed in San Francisco.
The FTC contends LendingClub vowed not to slap borrowers with hidden fees even though it took hundreds of dollars — and in some cases thousands of dollars — in fees from the loans. The FTC said LendingClub also claimed investors backed their loans, even though it knew borrowers would never get a loan, which prevented them from borrowing from another lender.
Additionally, the FTC contends that LendingClub even withdrew double payments from consumers’ accounts and charged those that no longer owed any money on their 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 Consumer Protection unit. “Stopping this kind of conduct will help consumers make informed choices about loan offers.”
In response to the lawsuit, LendingClub told Bloomberg it was disappointed with the lawsuit. “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 company said. “The allegations cannot be reconciled with this longstanding record of consumer satisfaction that’s reflected in every available objective metric.”
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