LendUp to Stop Making New Loans, Collecting on Certain Existing Loans, Under Settlement with CFPB

Three months after it was sued by the Consumer Financial Protection Bureau for violating a 2016 consent order for a number of alleged violations, LendUp Loans has agreed to stop making new loans and collecting on certain outstanding ones while also paying a fine of $100,000, the Bureau announced yesterday.

A copy of the proposed stipulated final judgment and order can be accessed by clicking here.

LendUp has been a frequent target of the CFPB in the past five years. Along with the lawsuit that was filed this past September, the company was also the subject of an enforcement action in 2016 and was sued by the CFPB in 2020 for allegedly violating the Military Lending Act.

In its most recent lawsuit against the company, the CFPB accused LendUp of misleading borrowers regarding the costs of its loans and benefits of repeated borrowing. LendUp offered a loyalty and rewards program for borrowers who repaid their loans on time and took free courses offered through its website. The rewards could then be applied earn lower interest rates on subsequent loans. But many borrowers who ascended through the program received the same or higher interest rates instead of lower rates.

In announcing the proposed settlement, the CFPB specifically mentioned that LendUp was backed by venture capital firms and that it was a fintech company, while also specifically identifying the names of the companies that had invested in LendUp.

“LendUp was backed by some of the biggest names in venture capital,” said CFPB Director Rohit Chopra, in a statement. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.”

Along with no longer originating new loans, the company will also stop collecting on loans that meet certain conditions, such as where the interest rate on a subsequent loan was the same or higher as other loans that had been taken out by the same borrower. LendUp is also prohibited from misrepresenting to consumers the benefits or costs of borrowing, violating federal law, selling or disclosing customer information or any of the loans in question.

The settlement references a $40 million judgment, but that will be suspended if LendUp violates certain terms of the agreement.

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