BOSTON — An online lending company will pay $1.25 million to resolve allegations that it charged excessive interest rates to Massachusetts borrowers in violation of state law, Attorney General Maura Healey announced today.
The assurance of discontinuance, filed in Suffolk Superior Court, alleges that LendingClub Corporation made personal loans to Massachusetts residents at interest rates that exceeded the cap set by the state’s Small Loan Statute, which regulates the terms of personal loans of $6,000 or less.
“Small loan companies promise to give people a way to consolidate and pay down debt or cover personal expenses,” said AG Healey. “These lenders must follow the law so borrowers aren’t charged excessive and illegal interest rates.”
This settlement will resolve allegations that since 2011, LendingClub charged unlawful interest rates on small loans made to certain Massachusetts residents where, although the “face amount” of the loan was more than $6,000, the actual amount disbursed to the borrower was $6,000 or less due to upfront loan origination fees, which ranged from 1 percent to 6 percent of the total loan amount. Because the actual amount disbursed to the borrower was $6,000 or less, the AG’s Office alleges that LendingClub charged interest to borrowers in excess of the maximum permitted rate. The Small Loan Statute defines “small loans” as those where the amount disbursed to the borrower is $6,000 or less, regardless of the loan’s “face amount” and sets an interest rate cap for such loans.
Under the terms of this settlement, LendingClub will pay a total of $1.25 million to the Commonwealth and cease making small loans in Massachusetts with interest rates above the allowable rate cap.
LendingClub is the country’s largest online lending marketplace platform, connecting borrowers and investors, and allowing borrowers to obtain unsecured personal loans. LendingClub generates revenues through, among other things, transaction fees, loan servicing fees, and interest income.
This matter was handled by Assistant Attorney General M. Claire Masinton, and Deputy Chief Arwen Thoman, both of Attorney General Healey’s Insurance and Financial Services Division.