New Government Lawsuit Alleges SoLo Funds Deceived Borrowers
The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against SoLo Funds, an online lending platform, over its lending practices.
According to the CFPB, SoLo Funds used deceptive tactics to ensure almost every borrower paid hidden fees despite advertising zero-cost loans.
Misleading Tactics and Hidden Fees
SoLo Funds markets itself as a consumer-friendly alternative to high-cost, short-term loans.
However, the CFPB alleges that SoLo’s practice of requesting borrowers pay “tips” and “donations” hides the actual cost of their loans.
The lawsuit alleges that from March 2018 through December 2022, SoLo received more than $8 million in “donations”, and lenders received almost $13 million in “tips” through the SoLo platform.
The CFPB is seeking to stop SoLo’s deceptive practices, demand refunds for customers, and impose financial penalties.
“The CFPB is suing SoLo for using digital trickery to hide interest and fees on its online loans,” CFPB Director Rohit Chopra said in a press release. “SoLo has had repeated run-ins with state regulators, and we are putting a stop to their fake tipping scheme.”
Repeated Regulatory Issues
SoLo Funds was founded in 2018 by Rodney Williams and Travis Holoway as a community-based financial solution for their communities.
It raised around $13 million in venture-backed funding, attracted high-profile investors like Serena Ventures and Techstars, and is the only Black-owned financial services Certified B Corp in US & Canada.
Despite its accolades, the company’s legal troubles have overshadowed its operations and mission to serve underserved communities.
Last year, the company settled lawsuits with the District of Columbia and the State of California for alleged predatory lending practices.
SoLo Funds also recently settled with the Connecticut Department of Banking following a cease-and-desist order in 2022.
SoLo Fund’s Response
The company’s CEO, Travis Holoway, responded that SoLo Funds had been working towards a regulatory framework with the CFPB and was surprised by the sudden lawsuit.
“Minority innovators were challenged to create new models to address our communities’ financial inequalities,” Holoway told TechCrunch.
He says that now that they are doing that, “regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”
Image credit: Solo Funds
