The Consumer Financial Protection Bureau forced payday loan company LendUp to stop making new loans and stop collecting some outstanding loans as part of a resolution to a lawsuit alleging the company s was engaged in illegal and deceptive business practices, the regulator said on Tuesday.
“LendUp was backed by some of the biggest names in venture capital,” CFPB Director Rohit Chopra said in a statement Tuesday. “We are shutting down this fintech’s lending operations for repeatedly lying and illegally defrauding its customers.”
In a tweet, Chopra called the company “the darling of the venture capital world”, naming Google Ventures GOOG,
Andreessen Horowitz, Kleiner Perkins, Paypal Holdings PYPL,
and QED investors as equity or debt investors in the company.
LendUp agreed to stop making loans under the settlement, although it did so without admitting or denying CFPB allegations that it misled consumers about the benefits of repeat borrowing, in violation of a 2016 order that prohibited him from making certain marketing claims.
The CFPB took aim at the company’s promise that by repaying loans on time and taking free courses on its website, customers would benefit from lower interest rates on future loans and access to larger loan amounts.
LendUp told its investors in August that it would stop making new loans given a political environment hostile to the payday loan industry. CEO Anu Shultes told shareholders that payday loans “are no longer acceptable solutions for critical stakeholders in our business and the community at large,” according to a report from Axios.
Payday lenders typically offer short-term loans of $500 or less that are meant to be paid off in one installment before a customer’s next paycheck, and they often come with fees and interest rates. high interest. In June, Congress voted to overturn a Trump-era lending rule that would have allowed payday lenders to avoid state interest rate caps.