“Tipping” and “donating” have taken on a new meaning in high-interest online lending.
Earlier this month, California, Connecticut, and the District of Columbia snagged SoLo Funds, Inc., an online lending platform, for deceiving consumers about the true cost of the loans it facilitated. According to the states and DC, the fintech required borrowers to pay a percentage of the loans as a “tip” to lenders on the platform. In addition, before receiving a loan, SoLo Funds prompted borrowers to pay a “donation” to the platform for providing the service.
According to the allegations, Solo Funds’ business model deceived consumers and facilitated unlicensed lending of loans that exceeded the jurisdictions’ maximum interest rates.
California’s financial regulator, the Department of Financial Protection and Innovation, first began investigating SoLo in early 2021. According to the findings in California’s consent order: “Pop-up messaging in the Platform urged Borrowers to offer the maximum tip amount…(up to 12% of the loan amount)…to have their loan request fulfilled.”
DC’s attorney general said that the SoLo platform, based upon a model in which individual consumers lend money to other individual consumers, facilitated loans with over 500% APR on average—far exceeding the District’s 24% usury cap.
Among other things, Connecticut’s consent order requires SoLo Funds to pay a $100,000 civil penalty and to reimburse Connecticut borrowers for all fees they paid. Those fees included “tips,” “donations,” late fees, admin fees, and other charges. Similarly, under California and DC’s consent orders, SoLo Funds will refund borrowers for the so-called “donations” paid to the platform, pay civil penalties, and change its business practices.
Hat “tip” to NCLC for this news.