who rush online to find a quick-fix loan, here is a
warning for you: Watch out for hidden or unexpected
fees. They could add up to hundreds or thousands of
Federal Trade Commission has charged the LendingClub
with falsely promising consumers that they would receive
a loan with "no hidden fees." But the FTC
claims that LendingClub actually ended up deducting
sizable fees upfront from loan amounts that consumers
expecting a loan for a set amount to cover a major home
repair. So you borrow $10,000. But then only $9,500
shows up in your bank account.
strapped consumers are increasingly going online to shop
for unsecured personal loans. They could, for example,
be looking for a lower-cost way to consolidate credit
to the FTC’s complaint, one consumer applied for a
$30,000 loan in order to consolidate his credit card
debt at a lower interest rate. But after LendingClub
deducted a $1,200 upfront fee, the consumer "was
unable to pay off his credit card debt in full, leaving
him with more bills to pay than he had before."
consumer outlined in the FTC complaint reported that he
applied for a $15,000 loan to cover relocation expenses,
and was surprised to receive only $14,000 — an amount
insufficient to cover his relocation. A $1,000 upfront
fee was charged.
has denied wrongdoing.
this case, we believe the FTC is wrong, and are very
disappointed that it was not possible to resolve this
matter constructively with the agency’s current
leadership," LendingClub said in a statement.
said it has provided more than 2 million people access
to low-cost credit in more than a decade and promotes
transparency in the online lending industry.
FTC’s allegations cannot be reconciled with this
longstanding record of consumer satisfaction that’s
reflected in every available objective metric," the
some consumers, particularly those in a rush, might
easily be tripped up.
the loan options are many and they’re confusing,"
said Janet Raffel, senior manager of financial
capability at NeighborWorks America, a nonprofit
know that emergency expenses come up and we know that
income volatility is a reality," she said.
"Americans don’t have a lot in savings."
38 percent of households with incomes below $75,000 have
no money saved for an emergency, according to a recent
number jumps to 59 percent of those with incomes below
Raffel said consumers might want a second set of eyes,
such as a financial coach that can be found at the
NeighborWorks network, when considering applying for a
personal loan online.
would want to understand, for example, what fees are
involved and what kind of terms they might expect with a
loan based on their own credit score.
possible, talk to someone on the phone or through an
online chat at the lender’s site to better understand
essential to know what kind of questions to ask, too.
Like, is there an origination fee?
FTC alleges that the LendingClub deceived consumers by
promising "no hidden fees" and then charging
an upfront fee that "is not clearly and
case demonstrates the importance to consumers of having
truthful information from lenders, including online
marketplace lenders," said Reilly Dolan, acting
director of the FTC’s Bureau of Consumer Protection in
this kind of conduct will help consumers make informed
choices about loan offers."
must pay interest on the entire "loan amount,"
including the fee, even though they only obtain a
reduced amount, according to the FTC complaint.
"hidden fee leaves consumers paying interest on
principal that they never received," the FTC noted.
found online in early May for the LendingClub’s
personal loans at Quizzle.com stated: "No
prepayment penalty, no hidden fees." But click on
the line that says "Show Disclaimer." Then,
you’d see the fine print that indicates "the
origination fee ranges from 1 percent to 6 percent and
the average origination fee was 5.47 percent as of Q3
origination fee is deducted from the loan amount you’d
receive. The disclaimer information points out that a 1
percent origination fee on a $10,000 loan amounts to
$100. Meaning, you’d receive $9,900 in that example.
course, if the fee ended up being at the top end at 6
percent, the fee would add up to $600 and you’d
receive $9,400. But the example doesn’t list the math
that could get you to $600.
fine print also reads: "There is no down payment
and there is never a prepayment penalty."
FTC said consumers who found out about the upfront fee
frequently complain that they only discovered that fee
after the LendingClub disbursed their loan proceeds and
they suddenly noticed the amount was smaller than what
they were expecting to receive. The FTC said LendingClub’s
online application flow included some "buried
personal loans are available from different lenders
online, including other peer-to-peer lenders such as
Prosper and SoFi. As part of the peer-to-peer lending
platform, borrowers apply online for loans and
individual investors can open an account to set aside
money to back such loans.
lenders have changed the way people borrow and make
personal loans more accessible.
big-name lenders offer personal loans online as well.
Detroit-based Quicken Loans entered the personal loan
market in 2016 with RocketLoans, which offers unsecured
personal loans of $2,000 to $35,000.
consumers, rates and fees will vary based on their
creditworthiness. Many lenders practice risk-based
with fair-to-poor credit typically would be slapped with
higher origination fees and interest rates because they’re
seen as a bigger credit risk. Some lenders focus on
making personal loans to consumers with good to
all lenders charge an origination fee, but many personal
loan lenders charge that fee. So figure out how high
your fee would be in advance based on your
annual percentage rates on your interest rate for
for example, has an origination fee of 1 percent to 6
percent charged to each loan. The Quicken site notes:
"The fee will be deducted from the balance of the
loan before the funds are disbursed to the client."
also notes online: "Qualified clients using
RocketLoans will see loan options for a 36 or 60 month
term, and APR ranges from a minimum of 5.983 percent
(rate with autopay discount) to a maximum of 29.99
percent (rate without autopay discount)."
you understand there is an origination fee, some suggest
that a consumer who is trying to cover a specific cost
might want to request a bigger loan in order to get the
full amount you’d need.
in a financial jam isn’t easy. But the situation can
only grow more frustrating if you don’t take the time
to understand just what that quick-fix loan involves.———