Consumer complaint received 2018-06-20
Product: Checking or savings account — Other banking product or service
Issue: Closing an account — Can't close your account
Company: Lending Club Corp (LA)

Note : You have my permission to publish this complaint after removing my name, email address, identifying information, and account number. 

Summary : Ive been trying for 7 months to close my Lending Club retirement account # XXXX and am finding it to be nearly impossible. ( Lending Club 's site says : All loans are made by XXXX, which was organized under the laws of the State of Utah in XX/XX/XXXX and operates under federal banking law. ) To my knowledge, they disclosed absolutely nothing about this when they accepted my money, but, once I decided that I didnt trust them and I wanted my money back, at that point I learned that it would take 3 to 5 years to withdraw my funds. Plus, shortly after I notified them I was in the process of closing the account, they implemented a {$100.00} annual fee for maintaining my account. It is impossible to avoid this fee, because they refuse to close the account. They also warn that failure to pay the fee will result in notifying the IRS that my entire account has been " distributed '' to me into a new " taxable '' account, against my will. 

Their hidden fees have been a problem for them in the past, such as when the FTC sued them for hidden fees ( see https : XXXX ). Now, they are basically holding my retirement funds hostage, and eating up as much of them as they possibly can, ensuring I suffer a loss on this investment. 

All I want is to get my money out of that company immediately and have them roll it over into another bank 's hands, where I can put it into a safer retirement investment, like a bank CD or mutual fund. 

Details : The initial investment was {$2500.00} in a XXXX XXXX IRA opened XX/XX/XXXX. For my part, this is a retirement savings vehicle. Lending Club loans out my retirement money in small increments ( {$25.00} per borrower ) to numerous of their borrowers. I only get paid back if their borrowers pay them back. 

In XX/XX/XXXX, I funded this with a {$2100.00} XXXX XXXX from a failed bank in Louisiana, XXXX XXXX, plus a year XX/XX/XXXX IRA contribution of {$320.00}, to meet the Lending Clubs investor minimum of {$2500.00}. 

I tracked my progress closely because Lending Club was a newish and unfamiliar company to me, and this is a fairly novel way to invest. I started noticing irregularities in the info they were reporting to me, right away. 

I deployed automated investing on XX/XX/XXXX. The 1st payment due to me was due XX/XX/XXXX. But when I checked on XX/XX/XXXX, that XX/XX/XXXX due date had disappeared. Now I was shown only a XX/XX/XXXX note date, which was not yet paid, and yet the summary page still said no past due accounts. There was something weird about that. What happened to the XX/XX/XXXX due date between XX/XX/XXXX and XX/XX/XXXX? Barely two months into my experience with Lending Club, I started to sense that they were not being upfront with investors about past due accounts. 

I checked again on XX/XX/XXXX, and could then see a XX/XX/XXXX and XX/XX/XXXX due date, with both showing payments received for prior months. So presumably my missing XX/XX/XXXX due date had made a reappearance ( now due one month later, on XX/XX/XXXX ). They had decided they could show me the note again, now that it was paid, but whether it had been paid timely or paid late was information that was being withheld. 

I checked again on XX/XX/XXXX, and there was no XX/XX/XXXX due date showing any more. Why? How could the due date have changed? Why would this disappear from my portfolio again? Did that mean it was late again? XX/XX/XXXX would be past the grace period on that note. So, they just weren't going to show it to me? There was a XX/XX/XXXX and a XX/XX/XXXX due date, both showing fully paid. There was also some squirrelly stuff like a long list of payments made in amounts under one dollar, with the status shown for those as current. There were 20 due dates in the last 10 days of XXXX. 

As of XX/XX/XXXX, there were 52 payments under {$1.00}, all showing current. Only 5 accounts had paid {$23.00} to {$25.00}. This didnt make much sense to me since my lending increment was set to {$25.00} ; why would a bunch of accounts be considered current with payments of XXXX or XXXX cents each? Several due dates in the recent past also showed current despite no payments being made. At this time I made minor adjustments to the auto-allocations ( 2 % more B-grade, 2 % less G-grade ) due to the Lending Clubs vague XX/XX/XXXX email about how they were adjusting their expected returns, and how that would impact auto-investing ( in plain English : they expected borrowers to pay even later, and pay back less money, than previously assumed, so they were reducing their optimism about expected performance - meaning all my investments already made were going to do worse than they had projected at the time I made the investments ). 

Also, at this point I decided that it was hopeless trying to understand the current and past-due info being provided by Lending Club, primarily because of their lack of transparency. 

As of XX/XX/XXXX, my adjusted account value was {$2600.00}, with the Lending Club system showing me a frankly unbelievable 10.31 % increase ( as compared to Lending Clubs stated historical returns of 3.44-8.53 % for my investment strategy ). Doing my own math, I estimated I had actually earned only 6.29 % over the past 50 weeks, based on the adjusted account value versus my opening contribution. So again, at the one year mark, I experienced deep misgivings that Lending Club was telling me one thing, and doing another. My money had grown from {$2500.00} to just {$2600.00}. Thats an increase of {$150.00}, which represents 6.29 % of the {$2500.00} investment. Why would Lending Club try to tell me that 6.29 % was really 10.31 %? It made no sense. It was too good to be true, because, well, it wasnt true. 

On XX/XX/XXXX, I inquired about closing my Lending Club investment account. I made this decision because I felt that this would never be a good investment vehicle, and the longer I waited, the more I was going to lose. Their reply indicated that I could immediately transfer out only {$53.00} of my balance, subject to a {$50.00} fee by XXXX ( whatever that is ), meaning I could get less than 4 dollars out of them at the moment that I wanted to end my relationship with them. Lending Club indicated I would need to pause automated investing so that cash could accumulate, rather than being reinvested into additional loans, and that once all my cash was out of the notes in which it was invested, only at that point could I get access to all of my money. They also mentioned other options something about selling off my portfolio to other investors, at a loss but my research into that option revealed that this is only for sophisticated investors and involves considerable effort and loss of funds. I did some research online and found that the cash accumulation process should be expected to take 3 to 5 years to be complete. Lending Club also suggested that I could withdraw a little at a time, such as by making 5 transfers of {$500.00} each, a little at a time as cash accumulated over the years with each transfer out, of course, being subjected to a separate fee. I asked Lending Club to show me exactly when and how all this was disclosed to new investors like myself, and their answer was that I should review their 200-page prospectus and other information posted online. They declined to point out any specific reference to any actual disclosure they might claim they made. Reviewing that prospectus once again today, I do not see any clear disclosures that reveal that it is impossible to transfer your money out of Lending Club, or that they will fee you {$50.00} for such transfers, or anything about any annual fee, which I only learned of recently, as detailed below. 

On XX/XX/XXXX, they notified me that because my balance is under {$10000.00}, Ill also be subjected to a {$100.00} annual fee going forward. This fee is basically for nothing, just for having the account. They describe as " for maintaining the retirement status '' of the account, or some such bogus description meaning nothing more than having my account on the books ( specifically, they claim this new fee is just " to ensure that your investment maintains its tax-advantaged status '' ). Soon I would discover that this is actually more like " protection money. '' That {$100.00} annual fee means that if takes 5 years to liquidate this investment, their actual termination fee is not {$50.00}, but {$550.00}. Im certain this is first notification or disclosure Ive ever had of any {$100.00} annual fee. 

Their latest XX/XX/XXXX email threatens that if this fee is not paid every year going forward, then in addition to their substantial late fees, they will terminate the " retirement account status '' of my account, convert it to a taxable account ( one from which, Im sure, I still wouldnt be able to access any money ), and that this will subject me to significant IRS tax penalties for taking this ( forced ) distribution of the retirement funds. I am certain this was never disclosed to me until this email. This is what makes the fee " protection money. '' They demand to eat away at my accumulated cash, and if I fail to pay up, they'll arbitrarily decide to make changes to my account, and they'll lie to the IRS and say that I withdrew all my money and should therefore be taxed on it. This is absurd. 

As of today, XX/XX/XXXX, my adjusted net annualized return is supposedly down to 5.03 %, my account value is {$2800.00}, and my adjusted account value ( after subtracting {$98.00} for past-due notes ) is supposedly {$2700.00}, with available cash at {$820.00}. They claim payments made total {$2700.00}. In other words - I gave them {$2500.00}, and they've been paid in full and more, they've been paid {$2700.00}, and yet they still think I only have access to {$820.00}. Some 10 % of my notes have been charged-off, while another 3.35 % are either late or in default. 

Desired resolution : Lending Club should continue to waive all annual fees until my account is closed. They should send me a check for the full {$2700.00} ( roughly ) due to me, or, failing that, stop charging newly invented fees under the threat of revocation of retirement status on the account. 


+++++++++++++++++++++++++++++++++++++++++++++++++++++++ From Lending Clubs website : How LendingClub is regulated The regulatory framework for LendingClub is well established and has been in place since XXXX. On the investor side, we've registered the offering of Notes with the Securities and Exchange Commission and we file annual, quarterly, and other reports with the SEC. Review our prospectus or view our SEC reports at www.sec.gov. 

All loans are made by XXXX, which was organized under the laws of the State of Utah in XX/XX/XXXX and operates under federal banking law. XXXX is an FDIC-insured bank that is subject to consumer lending regulations, including the Truth in Lending Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act. 
Source : https : XXXX +++++++++++++++++++++++++++++++++++++++++++++++++++++++ Email I sent XX/XX/XXXX, requesting to close account : Searched the website, don't see any info on this. I invested in Lending Club in an IRA.I am considering closing that account by transferring it directly to another institution. Please advise, what fees, if any, would be applied by Lending Club and XXXX? How do I know what my actual available balance is, at any given time? If you need a form specific to your institution, please forward it to me.Thank you [ my name ] +++++++++++++++++++++++++++++++++++++++++++++++++++++++ Their reply, XX/XX/XXXX : Hi [ my name ], Thank you for getting in touch with us!

Before you can close your LendingClub account, you'll need to liquidate your portfolio and withdraw all available cash. You can pause Automated Investing so that your cash will accumulate for withdrawal rather than be reinvested. 

I see that you currently have {$53.00} in available cash for withdrawal. Your available cash is located in the middle of the Account Summary page when logging in. You may withdraw available cash for free from LendingClub to XXXX by clicking on the Transfer tab at the top of the page and then selecting " Withdraw Funds ''. However, you won't be able to withdraw any funds currently invested in Notes.

It may be possible for you to liquidate your portfolio prior to maturity by listing them for sale on the secondary trading platform. Once a Note is sold, you'll receive the sales proceeds in your available cash for withdrawal. If you'd like any assistance with this, please feel free to reach out to us at XXXX. 

Once your portfolio has been fully liquidated, please contact your new custodian for the next steps. Your new custodian will need to initiate the outgoing transfer on your behalf. As a quick note, STRATA charges a {$50.00} account termination fee. For more information on their fees, please contact them directly at XXXX. 

I'll be happy to provide you with the next steps in the account closure process once you have completed the above. Let me know if you have any questions! 

Here to help, XXXX LendingClub Investor Services | XXXX Phone XXXX | Fax XXXX XXXX +++++++++++++++++++++++++++++++++++++++++++++++++++++++ My reply to that, XX/XX/XXXX : Reading a little more about this online ( not your site, but other sources ), is it true that it would actually take 3 to 5 years to liquidate my account? For instance if I pause or stop automated investing, and let cash accumulate, then what I am actually doing is waiting for all outstanding notes to be paid, before I'm able to roll it over to an outside institution, into another IRA? Does that seem pretty insane, or is it just me? I wonder where and how all that is disclosed to your new investors. Thanks, [ my name ] +++++++++++++++++++++++++++++++++++++++++++++++++++++++ Their reply, XX/XX/XXXX : Hi [ my name ], Thank you for your reply!

Your Notes will mature at 36 or 60 months from the date the Notes were issued. It is possible for a portfolio to liquidate sooner in the event a loan is paid off early or charges-off.

As borrowers their monthly payments, you'll receive your pro rata share of principal and interest for withdrawal to STRATA. You do not have to wait for all Notes to mature before doing a partial outgoing transfer to a new custodian. Any funds held in cash with STRATA can be transferred out at any time. As a quick note, STRATA charges a {$25.00} fee for each outgoing transfer to a new custodian. 

Additionally, we try our best to provide transparent information so that our investors can make an informed decision. If you'd like to learn more about liquidity, please feel free to explore our Education Center, Statistics, or Prospectus filed with the SEC. 

To discuss this in further detail, please feel free to give us a call at XXXX or I'll be happy to schedule a call with you at your convenience. 

I hope this clarifies! Let me know how else I can help. 

Best Regards, XXXX LendingClub Investor Services | XXXX Phone XXXX | Fax XXXX XXXX +++++++++++++++++++++++++++++++++++++++++++++++++++++++ Surprise fee notification email sent to me XX/XX/XXXX : Dear [ my name ], Thank you for investing with LendingClub. In order to facilitate your investment in LendingClub Notes through an IRA, XXXX partners with an IRA custodian, XXXX Trust Company ( STRATA ) formerly XXXX XXXX XXXX XXXX , XXXX. XXXX charges an annual account fee of {$100.00} to ensure that your investment maintains its tax-advantaged status. 

When you first opened your account, LendingClub paid your annual account fee. Per the terms and conditions of your IRA account, LendingClub will continue to cover this annual account fee if your IRA maintains a minimum invested balance of {$10000.00}. For additional terms and conditions, see below.1 Our records indicate that your account currently does not meet this minimum threshold. To avoid paying the {$100.00} fee, may we suggest you consider making your annual IRA contribution to this account by XX/XX/XXXX. 

If you have questions or want to discuss other options, please contact us by email at XXXX or by phone at XXXX from 7am - 5pm PT, Monday - Friday. As always, our dedicated LendingClub IRA team is here to help. 

Best regards, The LendingClub Team +++++++++++++++++++++++++++++++++++++++++++++++++++++++ Second email sent to me regarding their hidden fee, on XX/XX/XXXX : Notice : Upcoming annual account fee for your LendingClub IRA This is another courtesy notice regarding your LendingClub IRA account Dear [ my name ], Thank you for investing with LendingClub. In order to facilitate your investment in LendingClub Notes through an IRA, LendingClub partners with an IRA custodian, XXXX XXXX XXXX ( formerly Self XXXX XXXX XXXX , XXXX ). STRATA charges an annual account fee of {$100.00} on your account opening anniversary, which covers their services to ensure that your investment maintains its tax-advantaged status. 

Our records indicate that your account currently does not meet the minimum threshold as outlined in the terms and conditions,1 so you can expect to receive an invoice from XXXX on the first week of XXXX. To avoid paying the {$100.00} fee, may we suggest you consider making your annual IRA contribution to this account by XX/XX/XXXX. 

Notice : LendingClub will deduct {$100.00} from your available cash to pay annual fee The default setting for paying the annual fee is to use the available cash in your IRA. LendingClub will deduct the {$100.00} from your account on XX/XX/XXXX. This ensures you aren't subject to any late fees. If you wish to pay via credit card or check, please contact us by XX/XX/XXXX. 

Potential Tax Implications Please note that STRATA assesses a {$15.00} late fee each month ( up to {$30.00} ) 2 until payment has been received in full. If full payment ( annual fee plus any applicable late fees ) is not received by XX/XX/XXXX, XXXX will resign as your IRA custodian and your funds will be transferred into a standard LendingClub taxable account in your name. The value of those transferred holdings will be reported as a distribution, which could result in a tax penalty.3 If you have questions or want to discuss other options, please contact us by email at XXXX or by phone at XXXX from 7am - 5pm PT, Monday - Friday. As always, our dedicated XXXX IRA team is here to help. 

Best regards, The XXXX XXXX +++++++++++++++++++++++++++++++++++++++++++++++++++++++