CFPB Sues SoLo Funds for Deceptive Loans

Some loans carry interest rates in excess of 1000% APR

An online lending platform is under fire from federal regulators for deceiving consumers into expensive loans and using aggressive and illegal debt collection tactics.

The Consumer Financial Protection Bureau (CFPB) filed a complaint against SoLo Funds claiming the online lending platform used deceptive tactics to induce borrowing and hid the true cost of loans on the platform.

“The CFPB is suing SoLo for using digital trickery to hide interest and fees on its online loans,” said CFPB Director Rohit Chopra. “SoLo has had repeated run-ins with state regulators, and we are putting a stop to their fake tipping scheme.”

While SoLo funds claims to broker loans from individual lenders to consumers via a lending marketplace at no cost and no interest, the CFPB's complaint suggests otherwise.

While SoLo claims fees paid to lenders and the company are voluntary, the CFPB alleges that is not the case. 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. 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.

SoLo funds has faced legal action in several states for similar deceptive practices. California, Connecticut, and the District of Columbia have all reached settlements with SoLo based on the company's practice of hiding the true cost of loans and charging interest rates up to and in excess of 1000% for some loans.

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