Robbins LLP: LendingClub Corporation (LC) Misled Shareholders According to a Recently Filed Class Action
Robbins LLP announces that a class action complaint was filed against LendingClub Corporation (NYSE: LC) in the Superior Court of the State of California, County of San Mateo. The plaintiff brings the complaint on behalf of all individuals who purchased LendingClub stock in connection with the company’s December 11, 2014 initial public offering (“IPO”), for alleged violations of the Securities Act of 1933 by LendingClub’s officers and directors. LendingClub is an online marketplace for connecting borrowers and investors in the United States.
LendingClub Accused of Issuing Loans in Violation of Usury Laws
According to the complaint, on December 11, 2014, LendingClub conducted its IPO, selling 66.7 million shares. The company’s Registration Statement touted its ability to provide its customers with “affordable credit” and emphasized its ability to quickly determine the appropriate interest rate to assign to a prospective borrower. The Registration Statement also stressed LendingClub’s ability to provide attractive return, tied directly to the interest rates on the securitized loans. Importantly, it disclosed a limited risk related to state usury laws. These statements were allegedly misleading because the company failed to disclose that: i) it had an unsustainable business model dependent on its ability to issue loans with usurious rates; ii) its loan investors would not be able to enforce the high rates because they were illegal; iii) without the usurious rates, the loans generated through LendingClub’s marketplace would not be attractive to investors because they had a high credit risk; and iv) a substantial portion of LendingClub’s loans were issued with rates in excess of those allowed by applicable state usury laws.
On May 22, 2015, the Second Circuit affirmed that LendingClub’s business model was not valid because loans sold by banks to non-bank, third parties (such as LendingClub and its investors) are not exempt from state usury laws that limit interest rates. The Second Circuit further explained that if state usury laws applied to third-party purchasers of debt (including investors who buy LendingClub’s notes and certificates from WebBank, LendingClub’s primary issuing bank), loans with interest rates exceeding the limits of a borrower may not be fully collectable or potentially collectable at all. At a conference on December 2, 2015, a LendingClub official acknowledged that in a worst-case scenario, if the Second Circuit ruling were applied to the company, 12.5% of its loans would be in excess of the state limit, potentially causing it to lose a portion of the loans. LendingClub stock closed at $8.45 per share on February 25, 2016, a more than 43% decline from the IPO price.
LendingClub Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.