The Consumer Financial Protection Bureau has filed a lawsuit against online lending platform SoLo Funds for allegedly deceiving borrowers about the total cost of loans.
The CFPB, in a lawsuit filed in U.S. District Court for the Central District of California, claimed that the Los Angeles fintech, despite advertising zero-interest loans, uses “dark patterns” that “ensures that almost every borrower pays a fee in the form of a ‘tip’ or ‘donation.’”
The bureaus is seeking, among other things, injunctions against SoLo to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains and a civil money penalty.
“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.”
SoLo, which brokers loans between consumers and investors, facilitates loans between $20 and $575. SoLo services and collects on loans brokered through its platform.
The CFPB alleged that consumers who do not pay a fee to lenders are unlikely to get their loans funded. As of Dec. 31, 2022, 0.5% of funded loans did not include a fee paid by the borrower to the lender.
The bureau claimed that, from March 2018 to December 2022, SoLo received more than $8 million in “donations” and lenders received almost $13 million in “tips” through the SoLo platform.