LendingClub May Ask for Arbitration, Judge Says

By Chris Bruce

May 25 — A federal judge said LendingClub may try to compel a plaintiff to arbitrate his claims in a lawsuit alleging illegal interest rates ( Bethune v. LendingClub Corp., S.D.N.Y., No. 16-cv-02578, 5/24/16 ).

The ruling late May 24 by Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York doesn't mean plaintiff Ronald Bethune has to resolve his claims in arbitration, but it does allow LendingClub to file a motion to compel without delay.

Bethune's April lawsuit, a proposed class case, says LendingClub charged him interest at almost twice the rate allowed by New York law (76 BBD, 4/20/16).

This month, LendingClub said Bethune has already agreed to resolve disputes with LendingClub in arbitration, but Bethune's lawyers vowed to fight the motion, saying the arbitration clause is unenforceable (99 BBD, 5/23/16).

Buchwald May 24 asked the parties to submit a briefing schedule in the case, which is being closely watched because of a recent Consumer Financial Protection Bureau proposal to ban mandatory pre-dispute arbitration clauses that block class actions, as well as the potential for similar suits against other marketplace lenders.

Action Elsewhere

There was movement May 24 in a separate case that has a bearing on usury lawsuits against marketplace lenders. A brief by the U.S. Solicitor General said the U.S. Supreme Court should not review a May 2015 federal appeals court ruling that eases interest-rate challenges by consumers, even though the ruling was wrong (101 BBD, 5/25/16).

The appeals court ruling has been widely seen as opening the door for similar lawsuits against marketplace lenders.

In a May 25 note on the Solicitor General's brief, Isaac Boltansky of Compass Point Research & Trading said the justices likely will follow the government's recommendation and turn away the petition to review the appeals court ruling.

According to Boltansky, that would leave the appeals court decision in place and preserve “the cloud of uncertainty hovering over the marketplace lending industry’s operational construct.”

LendingClub has changed its business arrangements in an effort to minimize the risks associated with interest-rate lawsuits (40 BBD, 3/1/16).

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com