A class action brought by the Federal Trade Commission alleged that LendingClub deceived borrowers by advertising loans with “no hidden fees” while quietly deducting origination fees — sometimes exceeding $1,000 — from the loan proceeds consumers actually received. The case, filed in the U.S. District Court for the Northern District of California, San Francisco Division, resulted in an $18 million settlement announced in July 2021, with total refunds exceeding $17.6 million distributed to more than 60,000 affected consumers.
The LendingClub matter stands as one of the more instructive examples of how financial companies can technically disclose a fee while still making it nearly impossible for ordinary borrowers to find. According to the FTC’s complaint, LendingClub’s own compliance department warned internally that the company’s fee practices were “likely to mislead the consumer,” yet the advertising continued unchanged. Beyond the hidden fees, the FTC also charged LendingClub with falsely telling applicants they were “approved” for loans they would never receive and withdrawing double payments from consumer accounts.
Table of Contents
- How Did LendingClub Charge Origination Fees That Were Not Clearly Disclosed to Borrowers?
- What the FTC Investigation Revealed About LendingClub’s Internal Practices
- False Approval Notices and Double Payment Withdrawals
- How the $18 Million Settlement Was Distributed to Affected Consumers
- Ongoing Investigations and What Borrowers Should Watch For
- How This Case Changed Fee Disclosure Standards in Online Lending
- The Future of Fee Transparency in Consumer Lending
- Frequently Asked Questions
How Did LendingClub Charge Origination Fees That Were Not Clearly Disclosed to Borrowers?
The mechanics of LendingClub’s fee concealment were subtle but effective. On the company’s loan offer page, the origination fee was not displayed as a line item that borrowers could plainly see. Instead, it was accessible only through a small green-and-white hyperlinked question mark tooltip — a design element that most consumers would never think to click. Unless a borrower happened to hover over or tap that tiny icon, the fee remained invisible at the most critical decision-making moment. While LendingClub did include the origination fee in a “Truth in Lending Disclosure Statement” later in the application process, the FTC argued — and the court agreed — that this buried disclosure was insufficient.
Many consumers had no idea that an up-front fee would be subtracted from the loan amount they were promised. A borrower approved for a $10,000 personal loan, for example, might receive only $9,000 or less after an origination fee was deducted, yet the full $10,000 plus interest remained the amount they owed. The gap between what was advertised and what was delivered is what made the practice deceptive rather than merely inconvenient. The distinction matters for anyone evaluating personal loans today. A fee that appears in fine print buried deep in a disclosure document is not the same as a fee that is clearly and conspicuously presented before a borrower commits. The FTC’s position was that LendingClub’s marketing — particularly the “no hidden fees” language — created an expectation that directly contradicted the borrower’s actual experience.
What the FTC Investigation Revealed About LendingClub’s Internal Practices
The FTC’s April 2018 complaint painted a picture of a company that was aware of the problem and chose not to fix it. Internal communications showed that LendingClub’s compliance department had flagged the fee disclosure practices as misleading. That warning was not acted upon. The company continued running advertisements promising borrowers loans with no hidden fees while structuring its website in a way that made the origination fee difficult to discover before commitment.
This internal awareness is significant because it undercuts any defense that the fee concealment was accidental or the result of a design oversight. When a company’s own compliance team identifies a consumer protection risk and the company proceeds anyway, regulators and courts tend to view the conduct as willful rather than negligent. However, it is worth noting that LendingClub did not admit wrongdoing as part of the settlement — the company agreed to the terms and the monetary payment without a formal admission of liability, which is standard in FTC settlements. For consumers, the practical takeaway is straightforward: advertising language like “no hidden fees” or “no surprises” should be verified against the actual loan terms before signing. If a lender buries fee information behind tooltips or deep in disclosure documents, that is a warning sign regardless of what the marketing materials promise.
False Approval Notices and Double Payment Withdrawals
The origination fee issue was not the only deceptive practice the FTC identified. The agency also found that LendingClub told consumers they were “approved” for loans when they were not. The company sent communications stating that loans were “on the way” and “100% Backed,” even though it knew many of those applicants would never actually receive funding. For borrowers who were counting on those funds to consolidate debt, cover medical expenses, or handle emergencies, a false approval notice could cause real financial harm — particularly if they made spending decisions based on money they believed was coming.
Separately, the FTC charged that LendingClub withdrew double payments from some consumer bank accounts and imposed charges on borrowers who cancelled automatic payments or paid off their loans early. These unauthorized withdrawals led to overdraft fees for affected consumers, compounding the financial damage. A borrower who was already stretching to make a single monthly payment could be pushed into overdraft territory by an erroneous second withdrawal, triggering a cascade of bank fees on top of the loan costs. These additional charges illustrate why the case went beyond a simple fee disclosure dispute. The FTC’s complaint described a pattern of practices that, taken together, suggested LendingClub prioritized revenue extraction over transparent dealings with its customers.
How the $18 Million Settlement Was Distributed to Affected Consumers
LendingClub agreed to pay $18 million to resolve the FTC’s charges, with the settlement announced in July 2021. The terms barred LendingClub from making misrepresentations about its fees going forward and required the company to provide clear and conspicuous disclosure of any prepaid, up-front, or origination fees, as well as the total funds borrowers would actually receive after deductions. In August 2022, the FTC began distributing refunds, sending over $9.7 million to 61,990 consumers harmed by the hidden origination fees. By the time the distribution process was complete, total refunds exceeded $17.6 million paid to more than 60,000 consumers, averaging approximately $284 per person.
That average reflects the range of origination fees charged — some borrowers lost a few hundred dollars, while others were hit with fees exceeding $1,000. The refund amount per consumer may seem modest relative to the total settlement, but it is worth comparing this outcome to what borrowers would have recovered without FTC intervention: nothing. Most individual consumers would not have had the resources or legal standing to challenge a single origination fee in court. The FTC’s enforcement action aggregated tens of thousands of small harms into a case large enough to force meaningful change in LendingClub’s business practices and return money to people who had been overcharged.
Ongoing Investigations and What Borrowers Should Watch For
The FTC settlement addressed conduct that had already occurred, but the scrutiny of LendingClub has not ended entirely. Law firm Girard Gibbs LLP continues to investigate LendingClub’s hidden origination fee practices for potential additional class action claims. Whether those investigations result in new litigation will depend on whether evidence surfaces of fee practices that fall outside the scope of the FTC’s case or that occurred after the settlement’s effective date. Borrowers who used LendingClub and believe they were charged undisclosed origination fees should be aware that the FTC settlement covered a specific period and set of practices. If you took out a LendingClub loan and were surprised by fees deducted from your proceeds, it is worth checking whether you were included in the FTC’s refund distribution.
Consumers who received refund checks should also be cautious about the expiration dates on those checks — FTC refund checks typically must be cashed within a set window, and uncashed checks cannot be reissued after that period closes. A broader limitation applies here: the settlement’s requirement that LendingClub clearly disclose fees going forward applies only to LendingClub. Other online lenders may use similar tooltip-based disclosure methods or bury origination fees in dense documents. The FTC’s action set a precedent, but it did not create an industry-wide rule change. Borrowers should scrutinize any personal loan offer for origination fees, application fees, or prepayment penalties regardless of the lender.
How This Case Changed Fee Disclosure Standards in Online Lending
The LendingClub case became a reference point for regulators and compliance teams across the fintech industry. The FTC’s argument — that a fee disclosed only through a tiny clickable icon does not constitute clear and conspicuous disclosure — established a practical standard that goes beyond the letter of existing lending regulations.
After the settlement, several online lending platforms revised their loan offer pages to display origination fees more prominently, not because they were legally required to by the LendingClub order, but because they recognized the enforcement risk. For borrowers comparing loan offers today, the lesson is concrete: before accepting any personal loan, look for the total amount you will actually receive after all deductions, not just the amount you are approved to borrow. If that number is not clearly stated on the offer page itself, ask the lender directly and get the answer in writing before proceeding.
The Future of Fee Transparency in Consumer Lending
The LendingClub settlement fits into a broader regulatory push toward fee transparency that has accelerated since 2021. The FTC and the Consumer Financial Protection Bureau have both signaled increased scrutiny of what regulators now commonly call “junk fees” — charges that are hidden, unexpected, or disproportionate to the service provided. Online lenders, buy-now-pay-later platforms, and other fintech companies are operating in an environment where fee concealment carries growing legal and reputational risk.
For consumers, this trend is largely positive, but it does not eliminate the need for vigilance. Regulatory enforcement is reactive by nature — agencies investigate and act after consumers have already been harmed. The most effective protection remains reading the full terms of any financial product before committing, asking questions when fee structures are unclear, and reporting deceptive practices to the FTC at ReportFraud.ftc.gov when they occur.
Frequently Asked Questions
How much did LendingClub pay to settle the FTC charges?
LendingClub agreed to pay $18 million to settle the FTC’s charges, announced in July 2021. Total refunds to consumers exceeded $17.6 million distributed to over 60,000 affected borrowers.
How much did affected consumers receive in refunds?
The FTC distributed over $9.7 million to 61,990 consumers in August 2022, with total refunds exceeding $17.6 million. The average refund was approximately $284 per person, though individual amounts varied based on the origination fees each borrower was charged.
How did LendingClub hide the origination fees?
On the loan offer page, the origination fee was accessible only through a small green-and-white hyperlinked question mark tooltip. While the fee also appeared in a Truth in Lending Disclosure Statement during the application, many consumers did not realize an up-front fee would be deducted from their loan proceeds.
Did LendingClub admit wrongdoing?
No. As is standard in FTC settlements, LendingClub agreed to the settlement terms and payment without formally admitting liability. However, the settlement does bar the company from making misrepresentations and requires clear disclosure of fees going forward.
Are there still active investigations into LendingClub’s fee practices?
Yes. Law firm Girard Gibbs LLP continues to investigate LendingClub’s hidden origination fee practices for potential additional class action claims beyond the scope of the FTC settlement.
What should I do if I was charged hidden fees by an online lender?
File a complaint with the FTC at ReportFraud.ftc.gov, check whether any active settlements or investigations cover your situation, and consult with a consumer protection attorney if the amount involved is significant.