The Consumer Financial Protection Bureau accuses online lender LendUp of violating a five-year consent order and deceiving thousands of borrowers about the cost of its installment loans.
The Oakland, Calif., Based company has distorted the benefits of repeat borrowing by saying some borrowers would have access to larger loans at lower rates, the CFPB said in a lawsuit filed Wednesday. The lawsuit also alleges that LendUp illegally failed to provide timely and accurate notices to consumers whose loan applications were denied.
“Not only has LendUp structured its business around massive deception and keeping borrowers in debt cycles, but the company has doubled after getting caught the first time,” said the acting director of CFPB, Dave Uejio, in a press release. “We will not tolerate this illegal scheme or allow this company to continue to prey on vulnerable consumers.”
The company did not immediately respond to requests for comment on Wednesday.
The lawsuit follows previous disputes between LendUp and its regulator. In 2016, the CFPB ordered LendUp to pay a fine of $ 1.8 million and an additional $ 1.8 million in consumer redress for misleading consumers about the benefits of borrowing from the business.
The lawsuit filed Wednesday concerns a claim in LendUp’s marketing materials that borrowers are offered larger loans at lower rates through a program called “LendUp Ladder.”
According to the CFPB, LendUp charged 140,000 recurring borrowers the same or higher interest rate even after consumers paid off their loans on time and took free classes offered on the Lender’s website. business. Many borrowers saw their maximum loan amounts reduced after participating in the program, CFPB said.
“LendUp lures consumers with false promises that repeated borrowing will allow them to ‘climb the LendUp ladder’ and unlock lower interest rates,” Uejio said. “For tens of thousands of borrowers, the LendUp Ladder was a lie.”
The CFPB is asking for an injunction, restitution to consumers, restitution of ill-gotten gains and a civil fine.
LendUp is also subject to a final judgment stipulated in 2021 which resolved the complaints filed Last year by the CFPB. The consumer office had alleged that LendUp violated the military loan law by granting loans at interest rates exceeding the federal rate cap for military borrowers.