CFPB sues LendUp for allegedly violating military loan law

Dive brief:

  • The Consumer Financial Protection Bureau (CFPB) is suing online lender LendUp for allegedly violating military loan law (MLA) in connection with its credit extensions, the agency announced Friday.

  • The CFPB alleges that since October 2016, San Francisco-based LendUp has granted more than 4,000 single payment or installment loans to more than 1,200 covered borrowers in violation of the MLA, a federal law that caps interest rates at 36% for active service members. .

  • CFPB’s lawsuit, which was filed in U.S. District Court for the Northern District of California, seeks injunction, as well as damages, consumer remedies, restitution of ill-gotten gains and imposition of penalties pecuniary civilians.

Dive overview:

The CFPB said violations of the MLA by LendUp include granting loans with an annual military percentage rate (MAPR) exceeding the MLA cap, extending loans forcing borrowers to submit to arbitration and failure to make certain required loan disclosures, including a statement from the applicable MAPR.

LendUp stopped making non-MLA-compliant loans in 2017 and no longer offers loans to active members of the service, a company spokesperson said in an email.

“In 2017, LendUp proactively self-reported issues to CFPB that impacted less than half a percent of our member service transactions,” the spokesperson said. “For affected customers, LendUp reimbursed all interest and charges, whether or not they were received in error. Additionally, we removed any inappropriately issued MLA loans from the credit rating that were in arrears.”

The issue was fully resolved in 2017 and is not ongoing, the spokesperson said.

The Californian lender has already clashed with the CFPB.

In 2016, the company was fined $ 3.63 million by the CFPB and $ 2.7 million by the California Department of Business Supervision over allegations it failed to help clients get cheaper loans and increase credit as promised.

The sanction was one of the first major enforcement actions against a FinTech company, according to Bloomberg.

LendUp, which said it has generated more than $ 2 billion in small loans and served more than a million customers since its inception in 2012, announced last week that it has entered the digital banking space with the launch of Ahead Financials.

In partnership with Ohio-based Sutton Bank, the platform will offer accounts insured by the Federal Deposit Insurance Corp. aimed at serving emerging middle class consumers.

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