US Office of Consumer Affairs orders fintech LendUp to halt new loans, pay fine

WASHINGTON, December 21 (Reuters) – (This article from December 21 corrects LendUp’s shutdown date from 2020 to 2022)

The United States Consumer Financial Protection Bureau (CFPB) ordered LendUp Loans to pay a penalty of $ 100,000, to stop issuing new loans and to stop collecting certain delinquent loans after repeated violations of deceptive marketing and other fair loan violations, the agency said on Tuesday.

The Oakland, Calif., Based lender, which provides financing to online consumers who have traditionally been overlooked by banks because they are considered too risky, accepted the order, the CFPB said.

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“We are closing the lending operations of this fintech for having repeatedly lied and deceived its clients,” said Rohit Chopra, director of the CFPB.

LendUp, which had caught the attention of major Silicon Valley investors, plans to end operations in early 2022, a spokesperson told Reuters.

Tuesday’s order comes after a CFPB trial in September 2021 alleging that LendUp continued to violate a 2016 order stemming from similar charges.

LendUp has misled consumers about the benefits of repeat borrowing; violated the 2016 CFPB ordinance; and failed to provide timely and accurate adverse action notices to clients, as required by fair loan laws, the agency added.

In 2017, PayPal Inc (PYPL.O) invested in LendUp as part of its efforts to gain an edge over competitors in the highly competitive digital payments market.

The agency said Alphabet Inc’s GV (GOOGL.O), formerly known as Google Ventures, along with other California-based venture capital giants Andreessen Horwitz and Kleiner Perkins, have stakes in LendUp.

The CFPB was created following the global financial crisis of 2007-2009 to crack down on predatory lenders. Progressives and advocates have long criticized short-term lenders for charging borrowers annualized interest rates that often reach several hundred percent.

Chopra, asked by Democratic President Joe Biden to help address lending inequalities, said his ambitious agenda includes increasing the agency’s focus on law enforcement on companies that violate repeatedly consumer credit laws, with particular emphasis on fintech and other tech companies.

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Report by Katanga Johnson in Washington; Editing by Dan Grebler and Jonathan Oatis

Our Standards: Thomson Reuters Trust Principles.


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