The Attorney General of the District of Columbia today announced an agreement with SoLo Funds, a fintech company that facilitates peer-to-peer lending, to settle a lawsuit alleging that SoLo Funds engaged in predatory lending practices.
The alleged practices include Los Angeles-based SoLo Fund not telling clients “the true cost of the loans on its platform” and that it “allowed loans at more than 500% APR on average – much higher than the districts.” 24% usurious ceilingsaid the written release from the Attorney General’s office.
In addition, the OAG company advertised “affordable and flexible loans with no interest and no fees”, but then required borrowers to “pay a percentage of the loan as a ‘gratuity’ to the lenders” and “lured borrowers to pay a percentage of the loan to the company as a ‘donation’.’ The OAG’s office also alleges that “SoLo attracted lenders to its platform by advertising that they could “earn money back quickly.” [their] extra money’, but “in reality, for a high percentage of the loans offered by SoLo, the borrowers did not repay the loans on time or at all – which SoLo also did not disclose.”
“Our office will not tolerate fintech lenders resorting to new, deceptive practices that negatively impact vulnerable residents who are often ineligible for traditional lending,” Attorney General Brian Schwalb said in a written statement. “SoLo tried to disguise exorbitant interest charges by deceptively calling them ‘tips’ and ‘donations’. This settlement makes it clear that we will take decisive legal action against predatory lending models in the district and across the country, whether the predatory lender is a brick-and-mortar store or operates entirely online.”
SoLo Funds has agreed to make certain changes to its practices regarding tips and donations and to provide “honest disclosures” to both borrowers and lenders. The settlement also includes paying $30,000 to repay District of Columbia borrowers for the tips and donations paid to get their loans and a payment to the district.
The attorney general’s office also said it is “the first state-level enforcement agency to reach a settlement with SoLo over the use of tips and donations to circumvent usury restrictions.”
In May 2022, the state of Connecticut gave SoLo Funds a temporary strike order for a similar violation of state rules regarding tips and donations, as well as “for failing to disclose the tips and not having lending and collection licenses in the state.”
Meanwhile, the District of Columbia settlement follows an agreement with the California Department of Financial Protection & Innovation announced this week that SoLo Funds can resume operations in the state of California.
“SoLo has created a community funding model that is groundbreaking and innovative – as evidenced by our recent inclusion on the 2023 CNBC Disruptor 50 list,” said Rodney Williams, co-founder and president of SoLo via email. “As a result, we are not easy to classify into traditional frameworks. Our recent settlements in DC and CA are the result of discussions with each jurisdiction’s departments, and we appreciate their receptiveness to innovative ideas around a more inclusive financial system. SoLo is now looking to the future and we are excited to resume operations in the District of Columbia and the state of California.”
In February, australiabusinessblog.com reported that SoLo Funds had acquired more than 1 million registered users and more than 1.3 million downloads, making it “the largest and first Black-owned personal finance platform” to do so, Williams said at the time.
As of 2020, SoLo Funds has processed more than 800,000 loans, according to the company. It also raised more than $13 million in venture capital from companies including Serena Ventures and ACME Capital.