Connecticut Banking Commissioner Issues Cease and Desist Order to Fintech Lender Solo Funds

Commissioner alleges some loans carried APRs in excess of 4000%

The Connecticut Banking Commissioner issued a "cease and desist" order to fintech lender Solo Funds in response to multiple alleged violations of Connecticut law.

The order alleges that some Solo Funds loans carry "tips" that act as fees and that make the effective interest rates on the loans range from 43% to over 4000%. Additionally, the Commission found that 100% of Solo loans carried at least some amount of tip.

In fact, the order notes:

“Respondent has represented to the Department that ‘Borrowers may opt to include a Lender Tip or a SoLo Donation, but neither is required to submit the Loan request nor to receive a Loan.’

Nevertheless, 100% of the loans to Connecticut residents originated on the Platform from June 2018 to August 2021 either contained a Lender Tip or a SoLo Tip. In addition, Respondent recommends that consumers ‘Tip’ to receive a loan.”

Based on Connecticut’s analysis of loans facilitated in the state, the typical principal amount was $100, with an average ‘lender tip’ of $21 and an average ‘donation’ to Solo of $10 — equating to APRs that ranged from 43% to as much as 4,280%.

In spite of the high APRs, Solo funds was issuing Truth in Lending Act (TILA) disclosures indicating a 0% APR. From the order:

“Furthermore, even though all loans originated via the Platform to Connecticut consumers contained an APR between approximately 43% and 4280%, Respondent provided Loan Disclosures to the Connecticut consumers stating that the loans had APRs of 0%, likely misleading Connecticut consumers as to the loan’s APR, a material term of the loan.

Through such Loan Disclosures, Respondent provided wholly inaccurate information to Connecticut consumers and caused loan transactions to appear more advantageous than they truly were.”

The order essentially means Solo may not operate in Connecticut, effective immediately. If Solo can address some of the concerns raised by the Banking Commission, it is possible the order could be lifted.

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