Order shuts down lending by firm after alleging illegal, deceptive marketing and more

A single-payment and installment consumer loan provider based in Oakland, Calif., is barred from providing any new loans or collecting on certain outstanding loans under provisions of an agreement made public Tuesday by the federal consumer financial protection agency.

The Consumer Financial Protection Bureau (CFPB) said Lendup Loans of Oakland had agreed to the prohibitions by the agency, along with payment of a $100,000 civil money penalty, to resolve a lawsuit filed in September alleging the firm had engaged in illegal and deceptive marketing, and violating a 2016 order by the agency. The penalty, the CFPB said, was determined based on the firm’s “demonstrated inability to pay.”

The lawsuit, the CFPB said, also accused LendUp of violating fair lending regulations.

According to the bureau, the firm offered single-payment and installment loans to consumers online and pitched itself as an alternative to payday lenders. The agency said LendUp attracted equity and debt investments from prominent venture capital (VC) investors, including Google Ventures, Andreessen Horwitz, Kleiner Perkins, PayPal Holdings, and QED Investors.

“A central component of LendUp’s marketing and brand identity was the ‘LendUp Ladder,’” the bureau said in a release. “LendUp told consumers that by repaying loans on time and taking free courses offered through its website, consumers would move up the ladder and, in turn, receive lower interest rates on future loans and access to larger loan amounts.”

The bureau said that, as alleged in its complaint, “tens of thousands” of LendUp’s customers failed to qualify for larger loan amounts as they scaled the “ladder,” and they continued to be offered similar or higher interest rates compared to previous loans.

Lendup Loans, the CFPB asserted, has been subject of numerous past actions by the agency. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing from the company, bureau said it sued LendUp in 2020 for allegedly violating the Military Lending Act, obtaining a judgment against LendUp in that action.

The CFPB said its proposed stipulated final judgment and order, if entered by the court, would (in addition to the CMP) 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 bureau said it will also work to provide redress to eligible harmed consumers from its Civil Penalty Fund.

CFPB Shutters Lending by VC-Backed Fintech for Violating Agency Order