LendingClub Bank: The Online Lender the FTC Says Charged Borrowers Fees It Promised Were Not There

LendingClub Bank, the online personal loan lender that built one of the first peer-to-peer lending platforms in the United States, agreed to pay $18 million to settle Federal Trade Commission charges that it misled borrowers about the costs and disbursement terms of its personal loans — specifically that it told borrowers they would receive the full loan amount they applied for while simultaneously charging origination fees that reduced the amount actually deposited in their accounts.DOCUMENTED

The FTC's complaint also alleged that LendingClub charged some borrowers monthly fees that were not disclosed in the loan agreement, and that it failed to promptly issue promised refunds to consumers who cancelled their applications before funding. Together, the practices described in the complaint amounted to a pattern of misrepresentation about the true cost and terms of its loan products — misrepresentations that the FTC alleged were material to consumers' decisions to borrow through LendingClub.

What LendingClub Told Borrowers

LendingClub marketed its personal loans with emphasis on transparency and simplicity — themes consistent with the company's founding pitch as a technology-driven alternative to traditional bank lending that would offer borrowers better terms and a clearer understanding of what they were paying. In the FTC's account, the reality did not match the marketing: the company made affirmative representations to applicants that they would receive the full amount of their loan, and that there were no additional fees beyond the stated interest rate — while in practice charging origination fees that were deducted from the loan disbursement.DOCUMENTED

The origination fee deduction from loan disbursements is not inherently illegal — it is a common practice in personal lending. The FTC's case turned on the gap between what LendingClub told borrowers and what it actually did: when a borrower is affirmatively told they will receive the full amount of a $10,000 loan and then receives $9,200 because an $800 origination fee was taken off the top, the gap between the representation and the reality is a material deception. The consumer planning their finances around a $10,000 disbursement receives meaningfully less than what they were promised, with no advance warning to adjust their plans.REVIEWED

The Monthly Fee Problem

Beyond the origination fee issue, the FTC's complaint identified a separate category of misrepresentation: monthly fees charged to some borrowers that did not appear in the loan agreements those borrowers signed. A fee that is not disclosed in the agreement is not a term the borrower consented to — charging it anyway constitutes an unauthorized billing that falls squarely within the FTC's unfair and deceptive practices authority. The FTC Act prohibits companies from charging consumers for products or services without their knowledge and consent, and a fee that is absent from the contract but appears on the billing statement is exactly the kind of charge the agency pursues under this standard.REVIEWED

Monthly fees of even modest size compound significantly over the term of a personal loan. A borrower who takes a 36-month personal loan and is charged an undisclosed $10 per month fee accumulates $360 in charges they never agreed to pay. Across hundreds of thousands of borrowers, the aggregate of such charges becomes the basis for a substantial government claim — even when the individual harm to each borrower is modest in isolation. The FTC's capacity to aggregate individual harms across large consumer populations is one of the tools that makes it effective at addressing practices that each consumer might not have the resources or information to challenge independently.

A transparency-branded lender that deducts fees from loan disbursements after telling borrowers there are no fees has built its reputation on a claim it did not keep.

The Refund Problem

The third element of the FTC's case concerned consumers who cancelled their loan applications before the loans were funded. These consumers were entitled to prompt refunds of any fees or payments they had made during the application process. The FTC's complaint alleged that LendingClub failed to issue these refunds promptly — leaving consumers waiting for money they were entitled to receive while the company retained it. Delayed refunds impose real costs on consumers who may have needed that money to complete an alternative financing arrangement while waiting for LendingClub's promised return.REVIEWED

Refund delay is a recurring element of FTC complaints against financial service companies, reflecting the agency's consistent position that a company's obligation to return money to consumers does not end when the consumer cancels — it begins at that point. Companies that treat refund processing as a low-priority back-office function, or that retain consumer funds during periods of delay in ways that benefit the company's own cash position, face the same unfairness analysis as companies that fail to provide refunds at all.

LendingClub's History and Context

LendingClub was founded as a peer-to-peer lending marketplace, matching individual investors with individual borrowers seeking personal loans. Over time, the company evolved its business model — eventually acquiring Radius Bank in 2021 and converting to a bank holding company structure, which gave it access to deposits as a funding source but also made it subject to the banking regulatory framework. The personal lending business remained central to its operations, and the FTC's complaint covered practices in that business during a period when the company was managing the transition between business models.REVIEWED

The $18 million settlement covered both monetary relief for affected consumers and ongoing behavioral requirements: LendingClub is required to clearly and prominently disclose any fees before consumers apply for a loan, to accurately represent what borrowers will receive in disbursements, and to promptly process refunds for cancelled applications. These requirements effectively mandate the transparency that the company's marketing had long implied was already present in its lending process. For the fintech lending sector broadly, the case reinforces that transparency claims used in marketing create legal obligations — and that the FTC will measure the reality of a company's practices against the promises it makes to consumers in its advertising.

Have documents relevant to this story? Reach us through our tips channel.