A lawsuit filed on April 25th by the Federal Trade Commission (“FTC”) against LendingClub Corporation (“LendingClub”) shows how promotional language used in attracting online borrowers can get a company in legal trouble if misleading or inaccurate. The FTC’s complaint alleges that LendingClub promised “no hidden fees” in print and online advertising, yet deducted an up-front fee before disbursing loan funds to borrowers. The FTC’s lawsuit also examines in detail the various pop-up bubbles and other features that the online loan platform used in the application process to disclose fees, noting that a consumer was unlikely to learn of the existence of the fees based on how such pop-up bubbles and other features worked. The FTC further claims that the online loan platform misled loan applicants about loan approval through statements sent to the applicants, such as, “Hooray! Investors Have Backed Your Loan,” when it knew many of these applicants would never receive a loan.
Based on these allegations, the FTC claims that LendingClub engaged in unfair or deceptive acts or practices under the FTC Act. (The complaint makes other allegations that are not discussed in this brief article.)
The complaint demonstrates that language used in promoting and making online loans – from advertising such loans to the online loan application process – can come under regulatory scrutiny. Those offering online loans would be well-served to ensure that promotional statements accurately reflect the nature of such loans and the associated fees. Moreover, the online loan application process should be designed in a way that ensures a consumer can easily see what fees and charges apply, rather than putting such fee information under icons and other places that are unlikely to be noticed. The FTC’s complaint could portend more enforcement actions and lawsuits in this area in the future. Online loan platforms should take precautions to avoid getting caught in these regulatory or legal crosshairs.