LendingClub (LC) customers were tricked into signing up for loans with phony promises of "no hidden fees," the Federal Trade Commission said Wednesday in filing a lawsuit against the peer-to-peer lending company.
In reality, LendingClub deducted hundreds or even thousands of dollars in undisclosed up-front fees from the loans, while ignoring warnings that its prominent "no hidden fees" claims could make the company a target for an enforcement action, according to the FTC.
The FTC also alleged LendingClub double-charged consumers in some months and occasionally continued charging customers after they had canceled automatic payments.
LendingClub's stock had tanked by as much as 17 percent on Wednesday afternoon on news of the FTC lawsuit. It closed down 15 percent, or 49 cents, to $2.77.
The FTC charges are the latest setback for the company whoseafter an internal probe showed workers knowingly sold loans to an investor that did not meet the criteria of backers.
LendingClub disputed the FTC's allegations, saying in a statement that it intends to "oppose the claims and work towards an early resolution of the matter in federal court."
In a blog post on its site, LendingClub added that "several" of the FTC's claims "are based on matters and policies that we had already previously improved as part of the normal course of business. We fundamentally disagree with the FTC's complaint that LendingClub does not properly disclose the origination fees it charges to borrowers."