LendingClub Corporation faces a proposed class action that alleges the online lender has run afoul of Pennsylvania law by charging on certain loans interest and fees that exceed six percent simple interest per year without a license to do so.
The 11-page lawsuit argues that LendingClub cannot lawfully charge, collect, contract for or receive most of the interest and fees that it demands because the company and its non-bank designees “do not have and have never had the license to do so.” The case alleges LendingClub partners with third-party loan-issuer WebBank, who as a bank is allowed to charge interest and fees at the rates alleged in the complaint, in an attempt to “circumvent” Pennsylvania’s Consumer Discount Company Act and Loan and Interest Protection Law.
According to the suit, LendingClub “cannot take advantage of the rights granted to banks once a loan is sold.” The lawsuit contends that WebBank is not the true issuer of the loans extended by LendingClub, meaning the loans are not made by a bank and the fees and interest consumers incur for the obligations “are never lawful.”
“The LendingClub/WebBank partnership is a subterfuge to evade Pennsylvania law,” the complaint alleges.
Given that LendingClub is not a bank, it cannot charge interest above the Loan and Interest Protection Law’s six-percent cap, the case says. Despite this, LendingClub “routinely” issues to Pennsylvania consumers loans with interest and fees that, in aggregate, exceed six percent simple interest per year, the suit claims.
Overall, LendingClub’s actions make loans more expensive for Pennsylvania borrowers, who face an increased risk of default and other consequences, the lawsuit says. According to the complaint, in the event a consumer defaults on a loan, LendingClub will sell the loan to a debt buyer and thereby turn a profit even when someone is unable to pay the high interest rates and fees the company charges.
The lawsuit looks to cover all persons who obtained a loan from LendingClub with a Westmoreland County, Pennsylvania address and paid interest and fees that aggregated in excess of six percent simple interest per year within the applicable statute of limitations period.
The complaint was initially filed in the Westmoreland County Court of Common Pleas on December 28, 2021 before being removed to Pennsylvania’s Western District Court on February 28, 2022.
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