On Friday, the CFPB announced it was suing mobile peer-to-peer lending platform SoLo Funds for multiple issues.
SoLo Funds targets minority and other underserved borrowers with short-term loans of up to $575. This is a challenging population to serve and a difficult niche to profit from.
The CFPB alleges that SoLo Funds has misrepresented the cost of its loans, tricked borrowers into a mandatory donation, threatened borrowers who don’t pay, and created a social credit score without safeguards.
I have been following SoLo Funds since they began and have chatted with the founders multiple times. I have also invested in dozens of loans on their platform. I believe they are trying to do the right thing but are operating a new model that has never passed regulatory muster before.
While some of these allegations are serious, I have sympathy for SoLo Funds. They serve borrowers who have few low-cost options, and while they have had regulatory challenges all the way through (several state actions are pending), the CEO said that this latest action from the CFPB was a surprise.
I believe that SoLo Funds does more good than harm, but it may be an uphill battle to prove that to the CFPB and other regulators.
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