Fintech
Fintech Nexus Newsletter (May 20, 2024): SoLo Funds Sued by CFPB for Defrauding Borrowers
The CFPB on Friday announced was suing peer-to-peer mobile lending platform SoLo Funds over multiple issues.
SoLo Funds targets minorities and other underserved borrowers with short-term loans of up to $575. This is a difficult population to serve and a difficult niche to profit from.
The CFPB alleges that SoLo Funds misrepresented the cost of its loans, deceived borrowers into making a mandatory donation, threatened borrowers who didn’t pay, and created an unsecured social credit score.
I have been following SoLo Funds since its inception and have chatted with the founders several times. I have also invested in dozens of loans on their platform. I believe they are trying to do the right thing, but they are using a new model that has never passed regulatory scrutiny before.
While some of these accusations are serious, I have sympathy for SoLo Funds. They serve borrowers who have few low-cost options, and while they have faced regulatory challenges along the way (several state actions are pending), the CEO said this latest CFPB action came as a surprise.
I believe SoLo Funds does more good than harm, but it may be an uphill battle to prove this to the CFPB and other regulators.
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Peter Renton is president and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and is the author and creator of the Individual fintech podcastthe first and longest running fintech interview series.