SoLo Funds, a peer to peer lender, has settled allegations brought by the Attorney General of Pennsylvania.
In a public statement, the AG claimed that Solo Funds “deceptively led borrowers to belive they were receiving interest free loans.” Allegedly, the loans actually incorporated “outrageously inflated interest rates.”
Pennsylvania AG Michelle Henry stated:
“This predatory lender used their tip and donation configuration to deceive consumers into paying outrageous and illegal interest rates on loans. This settlement puts a stop to the company’s manipulative conduct and their ongoing collection efforts, while providing relief to those who were tricked into the scheme.”
As part of the settlement, SoLo is prohibited from engaging in enabling borrowing and lending located in Pennsylvania:
- Making or facilitating loans through its platform where the interest rate/finance charge of the loan exceeded that allowed under Pennsylvania’s Loan Interest Protection Law and Consumer Discount Company Act;
- Issuing loan disclosures stating a $0 finance charge for loans made on the SoLo platform where the borrower agreed to pay a tip and/or donation;
- Advertising that its loans are “0% APR” with “no finance charge” when the loans include a tip and/or donation; and
- Directing collections notices to consumers stating that delinquent accounts will be reported to Credit Reporting Agencies, when in fact, SoLo did not report account information to Credit Reporting Agencies.
SoLo was recently the target of an enforcement action by the Consumer Financial Protection Bureau (CFPB) as well. In May, the CFPB sued Solo, claiming the online lender deceived borrowers about the total cost of loans.
SoLo stated that it had been “wrongly accused of misconduct regarding its voluntary tipping fee structure and peer-to-peer community finance model, despite tips going 100% to community members, being self-selected, and being significantly more affordable in terms of cost to Americans.”
The company claimed that optional tipping is widely utilized by Silicon Valley-based firms.
SoLo added that it had been “voluntarily working with the CFPB for the last 18 months, attempting to work toward a regulatory framework that maintains its affordability for Americans.” The company said it believed they had come to an agreement and they were “blindsided” by the CFPB enforcement action.
SoLo reports that it funds a loan every minute, and 82% of its members come from underserved zip codes. The company’s investors include well-known VCs like Techstars, iHeartMedia, and more.