The Consumer Financial Protection Bureau has illegally accused Solo Funds, a fintech company that enables peer-to-peer lending, of using “digital dark patterns” to deceive borrowers and advertise to consumers that it is fee-free. The company is suing the company for charging fees.
“The CFPB is suing SoLo for using digital tricks to hide interest rates and fees on online loans,” CFPB Director Rohit Chopra said in a May 17 press release announcing the lawsuit. “SoLo has had repeated run-ins with state regulators, and we are trying to stop their bogus tipping system.”
The CFPB also alleges that the company misrepresented loan costs and prevented consumers from understanding what they were agreeing to. Recovered on a loan I shouldn't have had. Making false threats in connection with a credit report. The CFPB also said the solo funds' business model does not provide safeguards.
“Although SoLo’s advertisements and loan disclosures promote interest-free loans, in reality, virtually all loans on the SoLo platform include a lender’s “tip” sent to the lender and a SoLo “tip” sent to SoLo. donations,” or both. ” to the CFPB.
Rodney Williams and Travis Holloway provide loans to underserved Americans, especially those who are often targeted by predatory lending practices because of their lower-middle class status. To this end, he established a solo fund in 2018.
The company has raised about $13 million in venture-backed funding, according to Crunchbase. TechCrunch profiled the company in 2021 when it raised $10 million in Series A funding. Along the way, SoLo Funds has attracted some notable investors. Endeavor Catalyst, Alumni Ventures, Techstars.
SoLo Funds announced that it will have over 1 million registered users and 1.3 million downloads in 2023.
Meanwhile, the new lawsuit adds to recent problems plaguing the company. Last year, the company settled with multiple entities, including the District of Columbia and the state of California, over alleged predatory lending practices, and with the Connecticut Department of Banking over a 2022 moratorium order.
Then, in December 2023, SoLo Funds was in the news again, this time in connection with an investigation by the state of Maryland.
Regarding the CFPB's new lawsuit, SoLo Funds claims in a statement to TechCrunch that it has been voluntarily working towards a regulatory framework with the CFPB for the past 18 months. The newspaper said that on May 16, the two companies reached a major agreement on their future direction and were “blinded by the lawsuit the next morning.”
“Minority innovators are taking on the challenge of creating new models to address economic inequality in their communities,” Solo Funds CEO Travis Holloway said in a statement. Ta. And now that the company is doing so, “regulators appear to be driven by press releases, when they should be motivated by real consumer protection and fair solutions.”
The CFPB said it is suing for monetary penalties, including changes in Solo Fund's practices, refunds to customers, disgorgement and damages, and possibly additional civil penalties. The Consumer Financial Protection Bureau's purpose is to “prevent future violations, provide financial relief in the form of redress to consumers, deprive them of unjust enrichment and damages, and impose civil penalties.”