The CFPB filed a consent order against online lender Flurish, Inc. (doing business as LendUp) for allegedly committing deceptive marketing and advertising practices by failing to “give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed to consumers it would,” according to a CFPB news release.
The CFPB also argued that LendUp committed unfair and deceptive practices related to its extension and default fees; violated TILA by containing inaccurate credit disclosures in loan contracts and failing to include the annual percentage rate (APR) within its advertisements; and failed to establish procedures regarding the accuracy and integrity of the information it furnished to consumer reporting agencies (CRAs).
“While the CFPB has used its UDAAP authority on many occasions, the consent order is noteworthy because it represents the CFPB’s first such action against an alternative lender. Although the CFPB touts support for innovation in the financial services industry, it announced its intention to treat start-ups ‘just like established companies,’ ” Morrison & Foerster LLP’s Steven Kaufmann and Crystal Kaldjob wrote in an article titled, “CFPB and California announce enforcement actions against online lender.”
The attorneys added that although the CFPB brought up claims under TILA and the Fair Credit Reporting Act, the CFPB’s “principal focus” was on LendUp’s marketing practices.
According to the consent order, LendUp “marketed its loan program with claims that it would build consumers’ credit, build consumers’ credit score, furnish information regularly to consumer reporting agencies and offer consumers access to ‘more money at better rates for longer periods of time’ than other options available to them.”
The consent order also stated that LendUp “advertised that consumers could obtain financial stability by taking out its payday loans, repaying them on time and completing financial-education courses, which would allow them to take out additional payday or installment loans through [LendUp] with more favorable terms.”
LendUp referred to this ability to move up as the “LendUp Ladder.”
LendUp advertised four loan levels, where it claimed that consumers could potentially borrower larger amounts of money at lower interest rates or repay over a longer period. LendUp’s website stated, “As you earn more points, you ascend in status from Silver, to Gold, to Platinum, to Prime.”
It was advertised that the higher levels would offer lower interest rates and longer repayment periods. It also was advertised that those who were eligible for Platinum- and Prime-level loans were eligible to have their credit information and payment history furnished to nationwide CRAs.
“Many of the benefits [LendUp] advertised as available to consumers who moved up the LendUp Ladder were, in fact, not available,” the consent order states. “Although it advertised all of its loans nationwide, from 2012 until 2015, [LendUp] did not offer any loans at the Platinum or Prime levels outside of California. In many states, [LendUp] still does not offer such loans. And at least until February 2014, [LendUp] did not furnish any information, about any loans to nation CRAs.”
LendUp will be required to pay $1.8 million to the CFPB’s Civil Penalty Fund as well as $1.83 million in redress to more than 50,000 consumers.