(Bloomberg) — The Consumer Financial Protection Bureau and peer-to-peer lending platform SoLo Funds agreed to put an end to the agency’s lawsuit against the company amid a broader halt to enforcement actions, according to court filings.
The CFPB’s case against the Los Angeles-based fintech firm has been ongoing since May 2024. While SoLo Funds brands itself as a third-party platform that connects borrowers to lenders with no mandatory fees or interest, the total costs of some loans serviced by SoLo Funds carry an equivalent annual percentage rate of over 1,000%, according to the CFPB’s complaint.
SoLo Funds is the first of many enforcement proceedings that the watchdog appears to be planning to stop. Just this month, the CFPB canceled contracts with all expert witnesses in existing enforcement litigation as it purges more than $100 million in contracts across the agency.
The CFPB had originally asked for the case against SoLo Funds to be stayed while the agency reviewed all of its enforcement actions. But SoLo Funds objected and the judge overseeing the case, Judge Gary R. Klausner of the US District Court for the Central District of California, denied the request in an early February ruling.
That month, Trump administration officials began disabling the CFPB, which was created by Senator Elizabeth Warren in the wake of the 2008 financial crisis to protect consumers. The administration fired the agency’s director and dozens of other employees, in addition to closing its Washington headquarters. However, the plan to dismiss most of the CFPB’s more than 1,500 workers was recently put on hold.
The moves to shut down the CFPB were spearheaded by Elon Musk, as well as Russell Vought, who heads the White House’s Office of Management and Budget.
SoLo’s business model reached almost 2 million users earlier last year, nabbed a spot on CNBC’s 2023 Disruptor List and received financial support from the venture fund of tennis superstar Serena Williams. But several lawsuits plus internal turmoil and claims of suspicious business practices have raised questions about the company. The CFPB’s complaint against SoLo claims that the platform harms consumers by hiding a “no donation” option, placing it deep within the settings section of the mobile app.
The regulatory actions filed against SoLo Funds came as no surprise to a number of former employees, who described the founders as being more concerned with growth and raising money than improving the product itself, Bloomberg News previously reported. Former employees added that the founders often prematurely introduced new features into the app and inflated key business metrics to investors. On Oct. 16, a class action lawsuit was filed against the company alleging that SoLo Funds’ lending practices are “unlawful and deceptive.”
–With assistance from Evan Weinberger.
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