Fintech
Fintech lender Solo Funds is being sued again by the government over its lending practices
The Consumer Financial Protection Bureau sued SoLo Fundsa fintech company that enables peer-to-peer lending, alleging that the company used “digital dark patterns” to deceive borrowers and illegally took commissions by advertising to consumers that there were no commissions.
“The CFPB is suing SoLo for using digital tricks to hide interest and fees on its 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 putting an end to their fake tipping scheme.”
The CFPB also alleges that the company misrepresented the cost of the loans, interfering with consumers’ ability to understand what they were agreeing to; collected on loans they shouldn’t have; and made false threats related to credit reporting. CFPB also said SoLo Fund’s business model did not include collateral.
“SoLo loan ads and disclosures advertise interest-free loans when, in fact, virtually all loans on the SoLo platform include a ‘tip’ that goes to the lender, a ‘donation’ from SoLo that goes to SoLo, or both, ” according to the CFPB.
Rodney Williams and Travis Holoway started SoLo Funds in 2018 to provide loans to underserved Americans, particularly those who are often targeted by predatory lending practices due to their lower-middle class status.
According to Crunchbase, the company has raised approximately $13 million in venture-backed funding. TechCrunch profiled the company in 2021 when 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 has reached 1 million registered users and over 1.3 million downloads.
Meanwhile, this new lawsuit adds to the recent problems that have plagued the company. Last year, the company settled several lawsuits with entities including the District of Columbia and the State of California alleged predatory lending practicesand the Connecticut Department of Banking regarding a 2022 temporary cease-and-desist order.
Then, in December 2023, SoLo Funds was in the news againthis time linked to the State of Maryland investigation.
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 mostly agreed on a path forward and said “the next morning we were blindsided with a lawsuit.”
SoLo Funds CEO Travis Holoway said in a statement that “minority innovators have been challenged to create new models to address financial inequities in our communities.” And now that the company is doing so, “regulators appear to be driven by press releases when they should be motivated by true consumer protection and promoting fair solutions.”
The CFPB said it is suing to change SoLo Fund’s practices, for refunds to customers and for monetary 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 compensation to consumers, disgorgement of ill-gotten gains and damages, and the imposition of civil monetary penalties.”