Shareholder rights law firm Robbins Arroyo 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.
View this information on the law firm's Shareholder Rights Blog: www.robbinsarroyo.com/shareholders-rights-blog/lendingclub-corporation
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, DDonahue@robbinsarroyo.com,
or via the shareholder
information form on the firm's website.
Robbins Arroyo LLP is a nationally recognized leader in shareholder
rights law. The firm represents individual and institutional investors
in shareholder derivative and securities class action lawsuits, and has
helped its clients realize more than $1 billion of value for themselves
and the companies in which they have invested.
Attorney Advertising. Past results do not guarantee a similar outcome.
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