The bottom line:
LendUp Loans has been shuttered by the CFPB - it will not originate any new loans, cannot collect on certain outstanding debt, and will be ordered to pay penalties for violating fair lending regulations and engaging in deceptive and illegal marketing. LendUp offered single-payment and installment loans as a payday lending alternative and, while LendUp is not publically traded, had equity and debt investments from prominent investors including Google Ventures, Paypal Holdings, Andreessen Horwitz (LYFT, HOOD, ABNB), GV (UBER, HOOD, DOCU), Kleiner Perkins Caufield & Byers (SNAP, SPOT, DASH).
The details:
A central component of LendUp’s marketing and brand identity was the “LendUp Ladder.” LendUp told consumers that by repaying loans on time and taking free courses offered through its website, consumers would move up the “LendUp Ladder” and, in turn, receive lower interest rates on future loans and access to larger loan amounts. As alleged in the complaint, in reality, as tens of thousands of LendUp’s customers climbed the “LendUp Ladder,” they failed to qualify for larger loan amounts and continued to be offered similar or higher interest rates compared to previous loans.
- Deceived consumers about the benefits of repeat borrowing: LendUp misrepresented the benefits of repeatedly borrowing from the company by advertising that borrowers who climbed the LendUp Ladder would gain access to larger loans at lower rates when, in fact, that was not true for tens of thousands of consumers.
- Violated a CFPB 2016 order: The CFPB’s 2016 order prohibits LendUp from misrepresenting the benefits of borrowing from the company. LendUp’s continued misrepresentations about the LendUp Ladder violate this order.
- Failed to provide timely and accurate adverse-action notices required by fair lending laws: Adverse-action notices inform consumers why they were denied credit. Timely and accurate notices are vital to maintain a transparent underwriting process and protect consumers against credit discrimination. LendUp failed to provide adverse-action notices within the 30 days required by the Equal Credit Opportunity Act (ECOA) for over 7,400 loan applicants. LendUp also issued over 71,800 adverse-action notices that failed to accurately describe the main reasons why LendUp denied the applications as required by ECOA and Regulation B.
To resolve these allegations, the CFPB filed a proposed stipulated final judgment and order that, if entered by the court, would prohibit LendUp from (1) making new loans; (2) collecting on outstanding loans to harmed consumers; (3) selling consumer information; and (4) making misrepresentations when providing loans or collecting debt or helping others that are doing so. The order would also impose a $100,000 civil money penalty based on LendUp’s demonstrated inability to pay.
The CFPB will work to provide redress to eligible harmed consumers from the Bureau’s Civil Penalty Fund.
(I’m NotAMouse on discord BTW…not sure how to change my name to match that here :))