A proposed class-action lawsuit against LendingClub threatens investors in bonds backed by its loans and similar debt even if the plaintiff loses, Moody's Investors Service said Thursday.

The suit, Bethune v. LendingClub, filed in federal court in New York on April 6, alleges that the online-lending company violated the state's consumer usury laws. Moody's said the case may prompt similar lawsuits, because it is unclear if loans made by "marketplace lenders," which raise money from investors and lend it to consumers or companies over the Internet, are exempt from state caps on interest rates. Investors that buy bonds backed by marketplace loans may suffer, the ratings company said.

"Bethune is the first case we are aware of in which a plaintiff has filed against a consumer marketplace lender over the question of whether its loans are exempt from state usury limits," Moody's analyst Alan Birnbaum said in a report. "If the plaintiffs in such lawsuits prevail, borrowers could see the interest rates on their loans lowered or their loans deemed void or unenforceable." Such an outcome would disrupt cash flows to bondholders.

LendingClub spokesman Steve Swasey declined to comment.

Though LendingClub's loans haven't even made their way into a securitization that Moody's has rated, the case underscores the kinds of risks that upstart lenders may face, the bond grader said.

"Regardless of the outcome of the litigation, such lawsuits could distract platform operators in the nascent marketplace lending industry from their day-to-day operations," said Moody's analyst Jody Shenn. "The Bethune lawsuit, at the very least, is a potential distraction for LendingClub at a time when it is looking to expand into new credit products."

It also comes as the lender is trying to adjust its underwriting and pricing in response to what it has described as underperformance, said Shenn.

Ronald Bethune of Yonkers, N.Y., said in his lawsuit that LendingClub charged him a 29.97 percent interest rate on a $33,250 loan, nearly double New York's 16 percent limit for individual lending and high enough, he argued, to trigger a criminal usury violation, according to the complaint.

The case is Bethune v. LendingClub Corp., 16-cv-02578, U.S. District Court, Southern District of New York.

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