SoLo Funds complains about ‘tips’ and ‘donations’ features

Los Angeles-based fintech SoLo Funds has been hit by a proposed class action lawsuit alleging that the company misled consumers with false advertisements claiming that its loans have no interest and no hidden fees.

SoLo charged consumers interest and fees disguised as “tips” and “donations,” the newspaper said class action filed in federal court in California’s Central District last week by Danielle Cofield. The complaint stated that borrowers who receive loans are required to pay a gratuity fee, a donation fee, or both, resulting in exorbitant total credit costs that are not disclosed to consumers.

“SoLo entices consumers to apply for loans through its platform by falsely representing in its advertisements that a consumer could obtain financing at zero interest,” the lawsuit said.

During the loan application process, borrowers are asked to select a “tip fee” and are encouraged to pay larger amounts in tips to get the money. Additionally, borrowers are asked to add a “donation fee” that goes directly to SoLo. The complaint noted that borrowers are not given a way to opt out and move to the next page without selecting an amount to pay for the donation fee.

The lawsuit further alleges that SoLo obscures the method for opting out of paying the donation fee by labeling it in another part of its mobile application and fails to guide consumers on how to disable the donation fee option.

While the “consumer-friendly alternative to expensive short-term loans” platform provides those seeking loans with documents explaining the amounts they owe and the costs of the loans, SoLo does not provide clarity on the fees it will collect from borrowers. , the court document said.

The fintech issues loans ranging from $20 to $575, and borrowers can select a single repayment date at any time that is less than a month after the loan is funded.

Cofield, an Ohio resident who has been using the platform since 2021, alleged that SoLo Funds was trying to collect payment on a $500 loan that it never financed. The plaintiff seeks a class action certification to secure financial compensation for all affected class members, and to prevent the defendant from profiting from alleged unlawful practices and to prevent continued harm to class members. The plaintiff also sought class-wide damages and equitable relief.

SoLo did not immediately respond to a request for comment.

SoLo, one of the few Black-owned fintechs, was founded in 2018 by Rodney Williams and Travis Holoway in New York City. The company said in May that it had saved consumers a sum estimated $40 million in fees compared to subprime credit cards.

SoLo’s lending practices have been under scrutiny for some time. Several state regulators have fined SoLo for its tipping and donation features.

In July, Attorney General of Pennsylvania Michelle Henry reached a settlement with SoLo after allegations that the fintech violated state lending laws and engaged in unfair and deceptive practices. Under the settlement, SoLo was ordered to pay $158,000 in restitution, $25,000 in civil penalties and more than $25,000 in investigation costs. The company also had to adjust its business practices in the state and halt all collection efforts.

In May the Connecticut Banking Department found that labeling finance charges as “tips” violated state law, ordered reimbursement of all fees to Connecticut borrowers and imposed civil penalties. SoLo agreed to pay $100,000 to the state banking department, which issued a cease and desist order.

The settlement with regulators in Connecticut followed resolutions with regulators California and Washington DC SoLo had to pay $50,000 to California’s Department of Financial Protection and Innovation and $30,000 in restitution to the D.C. regulator.

SoLo has not admitted to any wrongdoing in any of the cases.

The fintech is also on the radar of the Consumer Financial Protection Bureau a case that has been ongoing since May. SoLo has indicated in a post-issuance statement from the CFPB complaint That it had been wrongly accused of misconduct “in relation to the voluntary structure of the tips and the peer-to-peer community funding model”, with the tips going to community members. The company also said it had been in discussions with the CFPB for more than 18 months and was close to reaching an agreement before the unexpected lawsuit.