Northern Cali District: Just drop the consent decrees and make a deal already!
The Federal Trade Commission’s (FTC or Commission) suit against LendingClub Corp. was straightforward enough. Back in April 2018, the Commission slapped the company with violations of the FTC Act for deceptive and unfair practices. LendingClub, the Commission alleged, offered “unsecured personal loans” to consumers nationwide, advertising them as having “no hidden fees” but delivering disbursements that were hundreds and sometimes thousands less than the original loan amount.
The Commission also claimed that LendingClub would send false application confirmations to consumers who would never receive a loan and withdrew payments from consumers even after their loan had been paid off.
LendingClub moved to dismiss in June, claiming that its disclosures were not hidden, but were Truth in Lending Act compliant and discoverable on the website during the application process, rendering the Commission’s charges of deception baseless.
The parties wound up in front of the court on a motion to dismiss hearing on Sept. 13, 2018, and found themselves on the business end of some strong words from the bench.
The court called into question LendingClub’s rationale for its motion, reminding its counsel that tens of thousands of consumers had complained about the fees: “The inference to be drawn is that consumers aren’t understanding it,” the court said. “So, I’m to say as a matter of law, all those consumers are unreasonable?”
Far more interesting was the court’s rebuke of the Commission’s approach to the case. Despite the FTC’s accusations of a pattern of previous misconduct, the “no hidden fees” language had been scrubbed from LendingClub’s site, leaving the Commission’s complaint a bit thin in the opinion of the court.
The court urged the Commission to take a less conventional path in this case, avoid consent decrees, and settle.
“If you can get the same disclosures and relief, I don’t see how the public is being served by the delay,” the court maintained. “If they agree not to do it anymore in an enforceable way, then why are we here? That is not a good use of court resources. To me, it’s not rational, and it doesn’t make sense. I can’t conceive of why the case shouldn’t be resolved.”