N.Y. regulator subpoenas Lending Club over interest rates, fees - source
By Suzanne Barlyn
(Reuters) - New York state's financial regulator is investigating the business practices of Lending Club Corp LC.N including the interest rates it charges consumers and its relationships with banks, a person familiar with the matter said on Wednesday.
The New York Department of Financial Services (NYDFS) subpoenaed San-Francisco based Lending Club asking for information about loans it issued to New Yorkers since May 17, 2013, such as underwriting standards and how Lending Club verifies borrower information.
NYDFS also wants agreements that Lending Club has with banks, including Utah-based WebBank, the person said. Lending Club has until June 21 to respond.
The probe deepens the legal storm gathering around the online lender. New York's action is at least the second probe launched against Lending Club since its founder and chief executive Renaud Laplanche was ousted last week after an internal probe found the company had falsified documentation when selling a package of loans.
The U.S. Department of Justice launched an investigation into the events leading up to Laplanche’s departure. Lending Club also said this week that it was in contact with the U.S. Securities and Exchange Commission, although the reason for those communications was unclear.
The probe by New York's financial regulator, unrelated to Laplanche’s ouster, centers on its treatment of borrowers in New York. Lending Club said in a statement that it would cooperate fully with the investigation.
The regulator can determine whether a lender's interest rate practices comply with the state's usury laws, which cap interest rates at 16 percent. Lending Club charges interest rates as low as 5 percent and as high as 29 percent, according to the company's data.
Any ruling against Lending Club could have ripple effects across the online lending industry. That is because a loan deemed usurious becomes void, said David S. Rich, a New York business litigation lawyer. The lender, in such a case, generally forfeits the principal and interest, Rich said. Continued...