The LendingClub collapsed 17 percent on Wednesday after the Federal Trade Commission (FTC) claimed that the online lender had "deceived" customers about its fee structure.
LendingClub shares fell to $ 2.69 immediately after Wednesday's announcement. The stock fell more than 50 percent last year, losing 80 percent of its value since the company's IPO at the end of 2014.
LendingClub's website and promotional materials told users that there would be no hidden fees. But when users got their loans, they were often for a smaller amount than what they had requested online, according to the FTC. That's because LendingClub would take over part of the loan after the banks cleared the money before handing it over to the applicant, according to the FTC.
The FTC also said the LendingClub had mistakenly informed potential borrowers that their loans were successfully covered by investors, despite the fact that the applicants still had to undergo several rounds of approval. LendingClub congratulated users on their upcoming funding when they actually knew that many of the applicants would never get a loan, the agency claimed.
"This case illustrates how important it is for consumers to get true-to-life information from lenders, including online marketplace lenders," said Reilly Dolan, deputy director of the FTC Consumer Protection Bureau, in the statement. "Halting such behavior will help consumers make sound credit decisions."
The LendingClub called the allegations "legally and objectively unjustified" and said in a statement that "he opposed the claims and wanted to work towards a speedy resolution of the matter in federal court."
The complaint was filed with the US District Court filed for the Northern District of California, San Francisco.