| Entities | |
| Topics and Issues | CFPB Enforcement (1) Credit scores (42) |
In May 2024, the CFPB announced that it filed suit against
the online lending platform SoLo Funds for deceiving borrowers about the total cost of loans. The CFPB alleges that SoLo markets itself as a consumer-friendly alternative to high-cost, short-term loans. Despite advertising zero-interest loans or 0% APR loans, SoLo’s use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.” The CFPB 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.
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SoLo uses a proprietary credit scoring tool to determine a consumer’s credit score – commonly referred to by the company as a “social score.” To compose the social score, SoLo relies on third parties to, among other things, scrape personal and financial information from borrowers’ mobile phones, social media, and bank accounts.
While SoLo claims fees paid to lenders and the company are voluntary, the CFPB alleges that is not the case. When consumers reach the part of the application that asks them to pay a fee to SoLo, consumers only see options for what percentage to give—none of the options is zero. SoLo also informs prospective lenders of the fee they will receive from a consumer to fund a loan. The result is that consumers who do not pay a fee to lenders are unlikely to get their loans funded. In fact, as of December 31, 2022, only 0.5% of funded loans did not include a fee paid to the lender by the borrower.
From approximately March 2018 through December 2022, borrowers took out more than 540,000 loans on SoLo’s platform in nearly all fifty states. In that time, SoLo received more than $8 million in “donations” and lenders received almost $13 million in “tips” through the SoLo platform. As of May 2024, SoLo represents on its website that its platform has brokered more than 1 million loans.
The CFPB posted information about the litigation to its enforcement page, including a copy of the complaint.
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