The Consumer Financial Protection Bureau is suing SoLo Fundsa fintech company that enables peer-to-peer lending, alleging that the company used “digital dark patterns” to defraud borrowers and charged illegal fees while advertising to consumers that there were no fees.
“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 claims the company misrepresented the cost of the loans, interfering with consumers’ ability to understand what they were agreeing to. collected from loans they shouldn’t have. and made false threats related to credit reports. The CFPB also stated that SoLo Fund’s business model did not provide safeguards.
“SoLo’s ads and loan disclosures refer to interest-free loans when, in fact, almost all loans on the SoLo Platform involve a lender ‘tip’ going to the lender, a SoLo ‘donation’ going to SoLo, or both” , according to the CFPB.
Rodney Williams and Travis Holoway started SoLo Funds in 2018 to provide lending to underserved Americans, especially those who are often targeted by predatory lending practices because of their low to middle class status.
According to Crunchbase, the company has raised about $13 million in venture 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 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 over alleged predatory 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 againthis time related to research from the State of Maryland.
Regarding the CFPB’s new lawsuit, SoLo Funds claims in a statement to TechCrunch that it has been voluntarily working on a regulatory framework with the CFPB for the past 18 months. He said that on May 16, both entities primarily agreed to a way forward and said they “blindsided us the next morning with a suit.”
SoLo Funds CEO Travis Holloway said in a statement that “minority innovators have been challenged to create new models to address the economic disparities of our communities.” And now that the company is doing this, regulators seem to be driven by press releases, when they should be motivated by true consumer protection and the empowerment of equitable solutions.
The CFPB said it is suing to change SoLo Fund’s practices, for refunds to customers and for 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 consumer restitution, disgorgement of illegal gains and losses, and civil money penalties.”
