CFPB Shutters Lending by VC-Backed Fintech for Violating Agency Order

Google Ventures, Andreessen Horwitz, Kleiner Perkins, and other prominent venture capital firms invested in LendUp

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced that LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans, as well as to pay a penalty, to resolve a September 2021 lawsuit alleging that it continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. The lawsuit also accuses LendUp of violating fair lending regulations.

“LendUp was backed by some of the biggest names in venture capital,” said CFPB Director Rohit Chopra. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.”

LendUp has been subject to multiple enforcement actions by the CFPB. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing from the company, the CFPB sued LendUp in 2020 for allegedly violating the Military Lending Act and obtained a judgment against LendUp in that action. In September 2021, the CFPB filed this third action alleging that LendUp:

• Deceived consumers about the benefits of repeat borrowing: LendUp misrepresented the benefits of repeatedly borrowing from the company by advertising that borrowers who climbed the LendUp Ladder would gain access to larger loans at lower rates when, in fact, that was not true for tens of thousands of consumers.
   
• Violated the CFPB’s 2016 order: The CFPB’s 2016 order prohibits LendUp from misrepresenting the benefits of borrowing from the company. LendUp’s continued misrepresentations about the LendUp Ladder violate this order.

• Failed to provide timely and accurate adverse-action notices required by fair lending laws: Adverse-action notices inform consumers why they were denied credit. Timely and accurate notices are vital to maintain a transparent underwriting process and protect consumers against credit discrimination. LendUp failed to provide adverse-action notices within the 30 days required by the Equal Credit Opportunity Act (ECOA) for over 7,400 loan applicants. LendUp also issued over 71,800 adverse-action notices that failed to accurately describe the main reasons why LendUp denied the applications as required by ECOA and Regulation B.

• Read today’s proposed stipulated final judgment and order.
• Read the September 2021 complaint filed against LendUp Loans.
• Read the announcement of the 2016 enforcement action and consent order that the CFPB alleges LendUp has since violated.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.