SAN FRANCISCO – A federal judge has approved a $125 million settlement of multiple class-action suits brought by the shareholders of LendingClub.
On March 16, U.S. District Judge William Alsup of the Northern District of California approved the settlement, which resulted from the San Francisco-based digital lender’s mediation efforts that began in November 2017. The lawsuits were filed after “numerous discrepancies, weaknesses, and improprieties” in the company’s business operations came to light.
Under the agreement, the company will pay $77.25 million while its insurance will cover the additional $47.75 million. The company’s portion will be paid from liquid assets of $650 million.
The settlement agreement establishes a gross settlement fund, the order said. Attorneys representing shareholders in the federal and state action plan to seek $16 million in attorney’s fees and $650,000 in litigation expenses. It is estimated that administration expenses may cost up to $1.25 million.
“The net settlement fund that remains after these deductions will then be distributed on a pro rata basis to class members who compete and timely submit a valid proof-of-claim and release form,” the court said.
Any remaining balance will be dividing among unauthorized claimants until the settlement funds drop below $5,000 at which point, the remainder will be donated to “Second Harvest Food Bank” or another nonprofit organization approved by the court.
LendingClub said in February that the settlement will have no “material impact” on the company’s 2018 business operations. The company runs an online peer-to-peer marketplace linking borrowers with lenders who fund the loans.
The customers are often looking to consolidate credit-card debt at a lower interest rate.
According to a report on its fourth-quarter numbers, the company’s revenues were up by 20 percent from last year to $156.5 million. The company also achieved 23 percent annual growth in originations to over $2.4 billion.
“We’re encouraged to have reached an agreement that will put this matter behind us and substantially reduces our financial risk going forward,” LendingClub CEO Scott Sanborn said in a statement last month.