Home Payday loans app CFPB closes online lender LendUp

CFPB closes online lender LendUp


Dive brief:

  • The Consumer Financial Protection Bureau (CFPB) “close loan operations” of the online lender To lend “For having lied and illegally deceived his clients on several occasions”, the director of the office, Rohit Chopra, said in a statement Tuesday.
  • To lend agreed to pay the office a penalty of $ 100,000 as part of a regulation that also prohibits the fintech collect on its loans, make new ones or sell consumer data.
  • the fintech, in an emailed statement to American Banker, said it did not accept responsibility for its settlement and is “pleased to have fully resolved its dispute with the CFPB. “

Dive overview:

LendUp, in a statement, said it “expects to complete the liquidation of its operations in early 2022”. The shutdown does not affect Ahead Financials, the parent company of digital bank LendUp launched last year.

LendUp has stopped making loans this summer – a point fintech highlighted on Tuesday, pointing to an Axios report from August revealing a letter the company sent to shareholders in which CEO Anu Shultes said payday loans “are no longer acceptable solutions for critical stakeholders in our business and the community at large.”

LendUp had marketed itself as an alternative to payday loans, promising that regular borrowers with a solid repayment history could access larger loans in the future at lower rates.

However, the company charged around 140,000 customers similar or higher rates on renewed loans under the “LendUp Ladder” program, even after paying off loans on time or taking free classes on the company’s website. , said the CFPB. The bureau launched a coercive measure at LendUp in 2016 to stop misleading customers through its advertising.

Tuesday’s deal settles a lawsuit brought by CFPB against LendUp in September, claiming that fintech violated that 2016 order. The lawsuit claims LendUp reduced the maximum loan amount for borrowers and failed to notify borrowers in a timely manner when their loan applications have been denied.

The settlement, which is awaiting approval by the United States District Court for the Northern District of California, proposes affected consumers to receive $ 40.5 million in return fees.

The CFPB, however, said it would work to reimburse consumers through the bureau’s financial penalty fund. LendUp could avoid paying the $ 40.5 million in restitution if it pays the $ 100,000 fine and the office does not uncover false financial statements on the part of the company.

The September lawsuit would not be the office’s first against LendUp. The regulator and fintech also settled a case last year alleging that LendUp violated the law on military loans as part of its credit extensions to more than 1,200 borrowers.