US CFPB sues SoLo Funds for allegedly “deceiving borrowers about the total cost of loans”
The US Consumer Financial Protection Bureau (CFPB) is suing SoLo Funds, a peer-to-peer (P2P) lending platform, for allegedly “deceiving borrowers about the total cost of loans”.
CFPB sues SoLo Funds
The regulator alleges that the firm “advertised zero-cost loans but deployed digital dark patterns resulting in almost every borrower paying at least one fee”.
SoLo Funds has been operating its community finance platform since 2018. The fintech brokers loans between borrowers and lenders, enabling users to provide short-term personal loans to other users.
Announcing the lawsuit, the CFPB writes: “SoLo requests consumers pay fees to lenders and to SoLo, which the company refers to as ‘tips’ and ‘donations,’ respectively. SoLo services and collects on loans brokered through its platform.”
While SoLo Funds claims that these fees are voluntary, the regulator alleges that when consumers “reach the part of the application that asks them to pay a fee to SoLo, consumers only see options for what percentage to give—none of the options is zero”.
The CFPB continues: “SoLo also informs prospective lenders of the fee they will receive from a consumer to fund a loan. The result is that consumers who do not pay a fee to lenders are unlikely to get their loans funded. In fact, as of December 31, 2022, only 0.5% of funded loans did not include a fee paid to the lender by the borrower.”
The CFPB also accuses the fintech of “making false threats and collecting money consumers do not owe” and “creating a ‘social credit’ score without safeguards”.
The regulator says it is seeking “injunctions against SoLo to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty”.
“The CFPB is suing SoLo for using digital trickery to hide interest and fees on its online loans,” comments Rohit Chopra, director of the CFPB. “SoLo has had repeated run-ins with state regulators, and we are putting a stop to their fake tipping scheme.”
In a statement provided to TechCrunch, SoLo Funds claims to have been “blindsided” by the lawsuit having been voluntarily working with the CFPB on a regulatory framework for the last 18 months, with CEO Travis Holoway stating that “regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions”.
