The Consumer Financial Protection Bureau files a lawsuit SoLo Fundsa financial technology company enabling peer-to-peer lending, alleging that the company used “digital dark patterns” to defraud borrowers and illegally charged fees by telling consumers there have been no fees.
“The CFPB is suing SoLo for using digital fraud to hide interest and fees on online loans,” CFPB Director Rohit Chopra said in a May 17 press release announcing the lawsuit. “SoLo has repeatedly had conflicts with state regulators and we are putting an end to their fraudulent tipping system.”
The CFPB also alleges that the company misrepresented the cost of the loans, making it difficult for consumers to grasp what they were agreeing to; collected from loans they shouldn’t have had; and made false threats related to credit reporting. The CFPB also found that the SoLo Fund business model didn’t provide safeguards.
“SoLo loan advertisements and information tout interest-free loans, when in fact virtually all loans on the SoLo platform include a lender ‘tip’ to the lender, a SoLo ‘donation’ to SoLo, or both,” he claims. to the CFPB.
Rodney Williams and Travis Holoway founded SoLo Funds in 2018 to offer loans to disadvantaged Americans, especially those that are often targeted by predatory lending practices attributable to their low-to-middle-class status.
According to Crunchbase, the company has raised roughly $13 million in enterprise capital funding. TechCrunch profiled the company in 2021 when it raised $10 million in Series A financing. Along the way, SoLo Funds attracted several high-profile investors, including Serena Ventures, founded by tennis legend Serena Williams; Endeavor Catalyst, alumni ventures and tech stars.
In 2023, SoLo Funds reported reaching 1 million registered users and over 1.3 million downloads.
Meanwhile, this latest lawsuit deepens recent problems plaguing the company. Last yr, the company reached settlements in several lawsuits with entities including the District of Columbia and the State of California over alleged predatory lending practices, and with the Connecticut Department of Banking for a temporary 2022 cease-and-desist order.
Then in December 2023 SoLo Funds was in the news againthis time related to an investigation by the state of Maryland.
Regarding the latest CFPB lawsuit, SoLo Funds says in a statement to TechCrunch that it has been voluntarily working with the CFPB on the regulatory framework for the past 18 months. It said that on May 16, the two entities had agreed in principle on the path forward and said that “the next morning we were surprised by the suit.”
SoLo Funds CEO Travis Holoway said in a statement that “minority innovators are challenged to create new models that address financial inequality in our communities.” And now that the company is doing so, “it appears that regulators are driven by press releases when they should be motivated by true consumer protection and empowerment of equitable solutions.”
The CFPB said it is filing suit searching for changes to SoLo Fund’s practices, refunds to customers and monetary penalties resembling disgorgement, compensatory damages and possibly additional civil penalties. The Consumer Financial Protection Bureau goals to “prevent future violations, provide monetary relief in the form of consumer redress, disbursement of ill-gotten gains and damages, and the imposition of civil monetary penalties.”