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