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LendingClub, Competitors Face Risks From Lawsuits: Moody's

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A proposed class-action lawsuit against LendingClub Corp. threatens investors in bonds backed by its loans and similar debt even if the plaintiff loses, Moody’s Investors Service said Thursday.

The suit, Bethune v. LendingClub, filed in federal court in New York on April 6, alleges that the online-lending company violated the state’s consumer usury laws. Moody’s said the case may prompt similar lawsuits, because it is unclear if loans made by "marketplace lenders," which raise money from investors and lend it to consumers or companies over the Internet, are exempt from state caps on interest rates. Investors that buy bonds backed by marketplace loans may suffer, the ratings company said.