The FTC filed a lawsuit this week against Lending Club, a peer-to-peer lending company that operates an online marketplace for personal loans. The lawsuit accuses Lending Club of luring consumers to its website with online advertisements promising “no hidden fees,” only to go ahead and deduct significant “up-front” origination fees from the loan proceeds. As a result, customers were surprised when the amount that actually showed up in their bank account was less than the “Loan Amount” they thought they had signed up for.
According to the FTC, this deception is made worse by the fact that Lending Club never adequately discloses the up-front fee to consumers during the entire online application process. The fee is only mentioned once—inside an explanatory “pop-up bubble” that only appears if the applicant happens to click or tap on a relatively small and inconspicuous icon. Because applicants are not required to click or tap on the icon in order to move forward with their loan application, many applicants never saw the disclosure at all.
“This 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 a statement. “Stopping this kind of conduct will help consumers make informed choices about loan offers.”
This case is a reminder of advertisers’ responsibility to ensure that advertisements are honest and forthcoming, especially in the ever-changing landscape of online advertising. Some key takeaways:
- If a disclosure is needed to prevent an online ad from being deceptive or unfair, it must be clear and conspicuous. This rule applies to all forms of online advertising, including paid blog posts or ads on social media platforms.
- The “clear and conspicuous” rule also applies across all devices and platforms that consumers may use to view the ad. Advertisers must therefore ensure that required disclosures function properly on all programs and devices.
- Putting necessary disclosures in hyperlinks or “pop-up bubbles” is strongly discouraged, particularly where the disclosure involves important information like additional costs or consumer safety. Where they are used, ensure the link is labeled accurately and that it functions properly regardless of device or platform.