Promises “No Hidden Fees” but Charges Fees Anyway
The Federal Trade Commission charges the Lending Club with falsely promising consumers “No Hidden Fees”with regard to its loans. In reality, the Lending Club deducts hundreds and sometimes 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.”
Astonishingly, the Lending Club recognizes its hidden fee practice is a significant problem for consumers. In fact, an internal company review reveals fee related claims to consumers may “be perceived as deceptive as it is likely to mislead the consumer.” Moreover, an attorney for one of the Lending Club’s largest investors warns against the “relative obscurity” of the up-front fee. The attorney’s comment is especially relevant in light of the company’s “no hidden fees” representation; it presents an opportunity for a law enforcement action. Despite the flagrant nature of the Lending Club’s practice, it makes its deceptive “no hidden fees” claim increasingly prominent.
More Egregious Behavior
Further complicating matters, the Lending Club falsely tells loan applicants that “Investors Have Backed Your Loan.” In reality, however, the Lending Club acknowledges that many of the applicants will never obtain a loan. The deceptive practice discourages applicants from seeking loans from the competition. Finally, and equally egregious, the Lending Club also utilizes the following deceptive practices. First, the company is infamous for withdrawing double payments from consumers’ accounts without providing appropriate credit. And secondly, the firm is know for continuing to charge consumers for paid off loans. In addition, the Lending Club fails to receive consumer acknowledgment surrounding its information-sharing policy, which is a legal requirement.
