SoFi, one of the largets online lenders in the US, has settled a class action lawsuit regarding “hard credit” inquiries for potential borrowers. Under the terms of the agreement, SoFi will pay a $2.4 million fine which includes $625,000 in fees and $48,000 in cost reimbursements to the law firm that handled the case, according to a report in Law360.
Hard Credit checks may lower an individual’s credit score as it can be interpreted as applying for too much credit. While it may be necessary for certain personal financial transactions it is something that should be limited as much as possible. If a Hard Credit check occurs without your approval, it is something you can dispute. Hard Credit inquiries may stay on your credit report for several years. Alternatively Soft Credit reports do not impact your credit and may be done without your permission.
The lawsuit against SoFi included a class group of about 10,700 consumers. The Law360 report states the alleged infractions occurred between November of 2013 and August of 2014 in regards to applications for student loan refinancing. An individual named Shawn Heaton filed the case alleging SoFi stated their credit checks would not impact an individual’s credit score and thus violated consumer protection laws.
Under the agreement, SoFi did not admit to the allegations nor any wrongdoing.
SoFi has funded over $10 billion in loans to date. The online lender started by providing more affordable student loan financing and has since expanded into other types of lending.