Commitments and Contingencies

Operating Lease Commitments

Total facilities rental expense for the third quarter and first nine months of 2017 was $4.0 million and $11.7 million, respectively. Total facilities rental expense for the third quarter and first nine months of 2016 was $3.7 million and $10.5 million, respectively. Minimum lease payments for the third quarter and first nine months of 2017 were $4.0 million and $11.0 million, respectively. Minimum lease payments for the third quarter and first nine months of 2016 were $3.4 million and $8.3 million, respectively. As of September 30, 2017, the Company pledged $0.8 million of cash and $5.5 million in letters of credit as security deposits in connection with its lease agreements.

The Company’s future minimum payments under non-cancelable operating leases in excess of one year and anticipated sublease income as of September 30, 2017, were as follows:



	Operating Leases		Subleases		Net
2017	$	4,081	$	75	$	4,006
2018	16,389		310		16,079
2019	16,626		39		16,587
2020	17,557		—		17,557
2021	17,844		—		17,844
Thereafter	46,163		—		46,163
Total	$	118,660	$	424	$	118,236

Loan Purchase Obligation

Under the Company’s loan account program with WebBank, which serves as the Company’s primary issuing bank, WebBank retains ownership of the loans it originates that are facilitated through LendingClub’s marketplace for two business days after origination. As part of this arrangement, the Company is committed to purchase the loans at par plus accrued interest, at the conclusion of the two business days. As of September 30, 2017 and December 31, 2016, the Company was committed to purchase loans with an outstanding principal balance of $122.3 million and $32.2 million at par, respectively.

Loan Repurchase Obligations

The Company is generally required to repurchase loans, notes or certificates in events of verified identity theft. The Company may also repurchase certain loans, notes or certificates in connection with certain customer accommodations. In connection with facilitating the ability of the Company and other investors to access securitization markets, the Company has agreed to repurchase loans if representations and warranties made with respect to such loans are breached. The Company believes such provisions are customary and consistent with institutional loan and securitization market standards.

In addition to and distinct from the repurchase obligations described in the preceding paragraph, the Company performs certain administrative functions for a variety of retail and institutional investors, including executing, without discretion, loan investments as directed by the investor. To the extent loans do not meet the investor’s investment criteria at the time of issuance, or are transferred to the investor as a result of a system error by the Company, the Company repurchases such loans, notes or certificates at par. As a result of the loan repurchase obligations described above, the Company repurchased $1.7 million in loans, notes and certificates during the first nine months of 2017.

Purchase Commitments

As required by applicable regulations, the Company is obligated to purchase loans resulting from direct mail marketing efforts if such loans are not otherwise invested in by investors on the platform. The Company was not required to purchase any such loans during the first nine months of 2017. Additionally, loans in the process of being facilitated through the Company’s platform and originated by the Company’s issuing bank partner at September 30, 2017, were substantially funded in October 2017. As of the date of this report, no loans remained without investor commitments and the Company was not required to purchase any of these loans.

In addition, if neither Springstone nor the Company can arrange for other investors to invest in or purchase loans that Springstone facilitates and that are originated by an issuing bank partner but do not meet the credit criteria for

purchase by the issuing bank partner (Pool B loans), Springstone and the Company are contractually committed to purchase these loans. As of September 30, 2017, the Company had a $9.0 million deposit in a bank account to secure potential future purchases of these loans, if necessary. The funds are recorded as restricted cash on the Company’s consolidated balance sheets. During the first nine months of 2017, the Company was required to purchase $22.2 million of Pool B loans. Pool B loans are held on the Company’s balance sheet and have an outstanding principal balance and fair value of $18.8 million and $17.7 million as of September 30, 2017, respectively. The Company believes it will be required to purchase additional Pool B loans in the remainder of 2017 as it seeks to arrange for other investors to invest in or purchase these loans.

Credit Support Agreements

In connection with a significant platform purchase agreement, the Company entered into a credit support agreement with a third-party whole loan investor that required the Company to reimburse the investor for credit losses in excess of a specified percentage of the original principal balance of whole loans acquired by the investor during a 12-month period. During the first nine months of 2017, the Company paid the investor $13.0 million under this agreement, which terminated in October 2017. As of September 30, 2017, the Company had no accrued liabilities for future expected payments to the investor.

The Company is also subject to a credit support agreement with Cirrix Capital (Investment Fund). The credit support agreement requires the Company to pledge and restrict cash in support of its contingent obligation to reimburse the Investment Fund for net credit losses on loans underlying the Investment Fund’s certificates that are in excess of a specified, aggregate net loss threshold. On April 14, 2017, the credit support agreement was terminated effective December 31, 2016. However, the Company remains subject to the credit support agreement for credit losses on loans underlying the Investment Fund’s certificates that were issued on or prior to December 31, 2016. The Company pledged and restricted cash in the amount of $2.2 million and $3.4 million as of September 30, 2017 and December 31, 2016, respectively, to support this contingent obligation. The Company’s maximum exposure to loss under this credit support agreement was limited to $6.0 million as of September 30, 2017.

Legal

The Company is subject to various claims arising in the ordinary course of business, and is party to a large number of legal proceedings that constitute ordinary, routine litigation matters incidental to its business. The majority of these claims and proceedings relate to alleged commercial disputes, alleged consumer complaints, and alleged state or federal law and regulatory violations. The Company accrues for costs related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and if it is possible to estimate the loss, the Company reviews and evaluates its litigation and regulatory matters on a quarterly basis in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate of the probable losses or a range of possible losses, if such estimates can be made. Except as otherwise specifically noted below, at this time, the Company does not believe that it is possible to estimate the reasonably possible losses or a range of reasonably possible losses related to the matters described below.

Securities Class Actions. During the year ended December 31, 2016, several putative class action lawsuits alleging violations of federal securities laws were filed in California Superior Court, naming as defendants the Company, current and former directors, certain officers, and the underwriters in the December 2014 initial public offering (the IPO). All of these actions were consolidated into a single action (Consolidated State Court Action), entitled In re LendingClub Corporation Shareholder Litigation, No. CIV537300. In August 2016, plaintiffs filed an amended complaint alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Securities Act) based on allegedly false and misleading statements in the IPO registration statement and prospectus. The Company filed a demurrer requesting the Court dismiss certain of the claims alleged in the amended complaint, which was granted in part in the fourth quarter of 2016. The plaintiffs then filed a Second Amended Consolidated Complaint which the Company responded to with a new demurrer seeking to dismiss certain claims. The Court granted in part and denied in part this new demurrer. The Plaintiffs then amended their complaint again to comply with this Order. In April 2017 the plaintiffs filed their motion for class certification, which the Company opposed. The motion was granted in part in a June 2017 Order. The Court has now set the trial date for October 2018. Discovery is continuing. The Company intends to vigorously defend against the claims.

In May 2016, two related putative securities class actions (entitled Evellard v. LendingClub Corporation, et al., No. 16-CV-2627-WHA, and Wertz v. LendingClub Corporation, et al., No. 16-CV-2670-WHA) were filed in the United States District Court for the Northern District of California, naming as defendants the Company and certain of its officers and directors. In August 2016, the two actions were consolidated into a single action. The Company moved to dismiss the amended complaint filed in the fourth quarter of 2016. The Court held a hearing on this motion in the first quarter of 2017 and ultimately granted in part and denied in part the motion. The plaintiffs thereafter amended their complaint consistent with the May 2017 Order and the parties have now begun discovery. In September 2017 the plaintiffs filed their motion for class certification, which the Company opposed. The motion was granted in an October 2017 Order. In that Order, the Court also granted a motion by the plaintiffs in the Consolidated State Court Action to intervene in the federal action. All parties (including the intervening state court plaintiffs) have been ordered to participate in a mediation on November 28, 2017. The Company will participate in the mediation in good faith. The Company is prepared to vigorously defend against the claims; however, the parties in the mediation may determine that it is appropriate to settle these matters at the time of mediation or shortly thereafter. The Company cannot make any reasonable estimate as to whether the matters may settle in connection with the mediation or, if the matters do settle, the possible range of any settlement. Any settlement may be covered in whole or in part by insurance. However, any settlement may have a significant and negative impact on the Company’s results of operations for the period in which the matter settles. In the event the matters do not settle, the federal matter is set for trial in September 2018. In the event the matter proceeds to trial, the Company will continue to vigorously defend against the claims.

The Company is self-insured for the deductible amount under its director and officers’ liability insurance policy for these matters. The Company exceeded the deductible in 2016 and is currently being reimbursed by insurance carriers for costs related to the litigations and investigations.

Given these considerations it is possible that an adverse outcome in these cases could have a material effect on the Company’s financial position and results of operations. However, based on information currently known by the Company’s management and the existence of the insurance, reasonably possible or probable losses or range of losses cannot be estimated.

Derivative Lawsuits. In May 2016 and August 2016, respectively, two putative shareholder derivative actions were filed (Avila v. Laplanche, et al., No. CIV538758 and Dua v. Laplanche, et al., CGC-16-553731) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. Both actions were voluntarily dismissed without prejudice. On December 14, 2016, a new putative shareholder derivative action was filed in the Delaware Court of Chancery (Steinberg, et al. v. Morris, et al., C.A. No. 12984-CB), against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. In addition, on August 18, 2017, another putative shareholder derivative action was filed in the Delaware Court of Chancery (Fink et. al. v. Laplanche, et. al., Case No. 2017-0600). Both of these actions are based on allegations similar to those in the securities class action litigation as described above. In September 2017, the Steinberg plaintiffs and Fink plaintiffs each filed motions to consolidate the two derivative suits and for the designation of lead plaintiff(s) and lead counsel. In October 2017, the Steinberg and Fink plaintiffs reached an agreement regarding consolidation and submitted a proposed consolidation order to the court. The court entered that order consolidating the cases, selecting the Steinberg plaintiffs as lead plaintiffs, and designating the Steinberg complaint as the operative complaint. The defendants intend to move to stay these matters in light of the other pending proceedings.

Federal Consumer Class Action. In April 2016, a putative class action lawsuit was filed in federal court in New York (Bethune v. LendingClub Corporation et al. (16 Civ. 2778)(NRB)), alleging that persons received loans, through the Company’s platform, that exceeded states’ usury limits in violation of state usury and consumer protection laws, and the federal RICO statute. The Company filed a motion to compel arbitration on an individual basis, which was granted in February 2017. The plaintiff filed an arbitration demand seeking relief on an individual basis. The parties have tentatively reached a settlement of this matter which is not material to the Company’s financial position or results of operations.

Regulatory Investigations. On May 9, 2016, following the announcement of the internal board review described more fully in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Board Review” contained in Part II, Item 7 of the Company’s Annual Report (referenced to herein as the “internal board review”), the Company received a grand jury subpoena from the U.S. Department of Justice (DOJ). The Company also received formal requests for information from the SEC and Federal Trade Commission (FTC). The Company continues cooperating with the DOJ, SEC, FTC and any other governmental or regulatory authorities or agencies. No assurance can be given as to the timing or outcome of these matters.

In addition to the foregoing, the Company is subject to, and may continue to be subject to legal proceedings and regulatory actions in the ordinary course of business, including inquiries by state regulatory bodies related to the Company’s marketplace lending model. These include inquiries from the California Department of Business Oversight and the New York Department of Financial Services. The Company is also in discussions with the Colorado Department of Law and the West Virginia Attorney General’s office to potentially resolve their concerns. Probable losses accrued are not material. No assurance can be given as to the timing or outcome of any of these matters.