A LendingClub Corp. unit will pay $700,000 to compensate about 3,200 borrowers allegedly misled by promises of interest-free loans for dental work.
People who signed up for Springstone Financial’s deferred-interest loan product at dental offices were led to believe it was interest-free, the Consumer Financial Protection Bureau said Wednesday in a statement. In reality, interest accrued from the start and was charged if the balance wasn’t fully paid before a promotional period ended.
“In some cases, dental office staff told consumers that the deferred-interest product was a ‘no-interest’ loan and failed to mention they would have to pay 22.98 percent interest” once the promotion ended, the CFPB said.
LendingClub, which operates a U.S. online marketplace that matches borrowers with investors who want to fund them, bought Springstone in April 2014 to expand in medical and education financing.
“We terminated this product shortly after the acquisition of Springstone and replaced it with a more transparent and responsible, true no-interest product,” LendingClub Chief Executive Officer Renaud Laplanche said in a separate statement. “We appreciate the CFPB’s assistance in arriving at a fair outcome for Springstone customers while raising the bar on consumer protection.”
The settlement is covered by indemnification provisions from the takeover and won’t result in a financial charge, San Francisco-based LendingClub said.