NEW YORK (Reuters) - A U.S. regulator sued online lender Lending Club Corp (LC.N) on Wednesday for allegedly overcharging consumers and misleading them on hidden fees.
The Federal Trade Commission said in a complaint filed in federal court in California that LendingClub deducted hidden fees from the loans it issued to borrowers, despite promising “no hidden fees.”
LendingClub also allegedly deducted payments automatically from consumers’ bank accounts even when they had paid off their loans, or had canceled automatic payments, according to the complaint. Some consumers were allegedly charged double payments, the complaint said.
LendingClub shares were down as much as 16 percent at $2.72 following the news.
The San Francisco-based start-up is one of the largest companies known as peer-to-peer lenders and runs a website where consumers can apply for loans that are either funded by individual investors or by institutions such as banks.
“We support the important role that the FTC plays in encouraging appropriate standards and best practices,” a spokesman for LendingClub said in a written statement. “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.”
LendingClub has been in recovery mode since May 2016, when it acknowledged issues, including the way it had sold loans to an investor, prompting the departure of its then chief executive.
Its shares have fallen more than 88 percent since its initial public offering in late 2014.
In the complaint, the FTC alleges that “hundreds or even thousands of dollars” in upfront fees were subtracted from the loans disbursed to consumers.
LendingClub was allegedly aware that many consumers did not know about these up-front fees, according to the complaint. The company listed “I didn’t receive the full loan amount” in training materials for its customer service representatives as one of the main complaints, the complaint alleges.
One of LendingClub’s largest investors, as well as its legal counsel, allegedly warned the online lender that these hidden fees could make it subject to law enforcement, according to the FTC complaint.
Reporting by Anna Irrera; Editing by Dan Grebler