Predatory Fintechs Score as Trump-Musk CFPB Caves on Lawsuit
By Christine Chen Zinner, AFR senior policy counsel, consumer financial justice
Today, the Consumer Financial Protection Bureau, which has been largely shut down by Elon Musk’s team and Acting Director Russell Vought, pulled the plug on a lawsuit against an online lender, SoLo Funds, that the agency had alleged was deceiving borrowers and imposing deceptive fees on more than half a million borrowers.
Last May, the CFPB sued SoLo Funds for deceiving borrowers and extracting unlawful fees. Solo Funds is an online lender that purported to offer an alternative to high-cost, predatory loans by advertising zero interest loans (0% APR loans) but the CFPB alleged that almost everyone paid a fee or donation that the agency said amounted to “digital trickery to hide interest and fees.” The CFPB complaint identified unlawful SoLo practices such as misrepresenting the cost of loans, tricking borrowers into paying fees, trying to collect on loans that are void, and creating its own “social credit” score without making sure the data on consumers is accurate.
SoLo collected more than $21 million in donations and tips for 540,000 loans. Many of these loans were illegally collected under several state laws. The fintech also lied to customers about amounts that were due and even resorted to boilerplate form emails that threatened people with lasting credit damage to bully people into paying off disputed debts. The misconduct was so rampant that a number of state law enforcement agencies also sued SoLo, including in California, DC, Connecticut and Pennsylvania, for various violations that included deceptive marketing and advertising, violating usury limits, and unlawful collection of fees as tips and donations.
The Trump administration’s assault on the CFPB included freezing ongoing investigations and enforcement efforts. But as recently as February 6, a federal judge allowed the CFPB’ suit against SoLo to go forward despite the litigation freeze.
As part of its no-enforcement playbook, the Trump-Musk CFPB dropped its case against SoLo Funds earlier today. Instead of holding this fintech company accountable for lying to thousands of customers and tricking them into tips and other fees, the Trump-Musk CFPB voluntarily agreed to dismiss their previous enforcement against SoLo with prejudice.
Not only was the prior CFPB’s hard work and efforts to protect consumers dropped in one motion. Vought’s team even made it impossible for a future CFPB to pick up the case where it was left off. It is worse than a do-nothing CFPB. The Trump-Musk crowd has sided with the powerful fintech predators and not the people who have been cheated and scammed and is sending a clear message that fintech predators have a green light to rip off their customers.
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