Fintech Lenders Facing Scrutiny in the States
SoLo funds reaches settlement in three states, other apps could soon see regulatory action
Charging a 500% APR on a short-term loan falls outside the bounds even in the most payday predator friendly states.
But when you disguise your fees as “tips” or “donations” and you couch your lending model in the world of fintech, you might get away with it.
SoLo Funds is one example of a venture capital funded fintech lender that offered short-term loans of up to $500 from the comfort of an app on your phone.
These loans, though, sometimes carried some pretty outrageous interest rates.
Now, SoLo has been penalized in three states — California, Connecticut, and DC — for offering loans with APRs as high as 511%.
“Connecticut, California, and DC have called out the Emperor’s New Clothes, taking important actions against SoLo Funds, which uses so-called ‘tips’ and ‘donations’ to conceal APRs that can reach 511% or higher,” said Lauren Saunders, associate director of the National Consumer Law Center (NCLC). “All three agencies appear to have effectively barred SoLo Funds from facilitating unlicensed fintech payday loans at rates that violate state rate caps.”
