Fintech lender Solo Funds is being sued again by the government over its lending practices

The Consumer Financial Protection Bureau is suing SoLo Funds, a financial technology company that enables peer-to-peer lending, alleging that the company used “digital dark patterns” to deceive borrowers and illegally charged fees while advertising to consumers that it did not There were fees.

“The CFPB is suing SoLo for using digital deception to hide interest and fees on its online loans,” CFPB Director Rohit Chopra said in a May 17 news release announcing the lawsuit. “SoLo has had repeated run-ins with state regulators and we are ending its fake tipping scheme.”

The CFPB also alleges that the company misrepresented the cost of loans, interfered with consumers’ ability to understand what they were agreeing to; charged for loans they should not have received; and made false threats related to credit reports. CFPB also stated that SoLo Fund’s business model offered no safeguards.

“SoLo loan advertisements and disclosures promote interest-free loans when, in fact, virtually all loans on the SoLo platform include a ‘tip’ from the lender that goes to the lender, a ‘donation’ from SoLo that goes to SoLo, or both,” according to the CFPB.

Rodney Williams and Travis Holoway founded SoLo Funds in 2018 to provide loans to underserved Americans, especially those who are often targets of predatory lending practices due to their lower- to middle-class status.

The company raised about $13 million in venture-backed financing, according to Crunchbase. TechCrunch profiled the company in 2021 as it raised $10 million in Series A funding. Along the way, SoLo Funds attracted some high-profile investors, including Serena Ventures, founded by tennis legend Serena Williams; Endeavor Catalyst, Alumni Ventures and Techstars.

In 2023, SoLo Funds said it reached 1 million registered users and more than 1.3 million downloads.

Meanwhile, this new lawsuit adds to the recent problems that have affected the company. Last year, the company settled several lawsuits with entities, including the District of Columbia and the State of California, over alleged abusive lending practices, and the Connecticut Department of Banking regarding a 2022 temporary cease and desist 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 new CFPB lawsuit, SoLo Funds says in a statement to TechCrunch that it has been voluntarily working toward a regulatory framework with the CFPB for the past 18 months. He said that on May 16, both entities primarily agreed on a path forward and said that “the next morning we were caught off guard with a suit.”

SoLo Funds CEO Travis Holoway said in a statement that “minority innovators were challenged to create new models to address financial inequities in our communities.” And now that the company is doing that, “regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

The CFPB said it is suing to change the SoLo Fund’s practices, to obtain refunds to clients and financial penalties such as disgorgement, damages and possibly additional civil penalties. The Consumer Financial Protection Bureau aims to “prevent future violations, provide monetary relief in the form of redress to consumers, disgorgement of ill-gotten gains and damages, and the imposition of civil monetary penalties.”

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