WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today filed a lawsuit in federal district court accusing LendUp Loans, LLC of violating a 2016 consent order and deceiving tens of thousands of borrowers. In 2016, the Bureau ordered LendUp to pay $1.83 million in consumer redress and a $1.8 million civil penalty and to stop misleading consumers with false claims about the cost of loans and the benefits of repeated borrowing. In today’s complaint, the CFPB alleges that, in violation of the 2016 order, LendUp has continued with much of the same illegal and deceptive marketing. The CFPB also alleges that LendUp illegally failed to provide timely and accurate notices to consumers whose loan applications were denied.
“LendUp lures consumers with false promises that repeat borrowing would allow them to ‘climb the LendUp Ladder’ and unlock lower interest rates. For tens of thousands of borrowers, the LendUp Ladder was a lie,” said CFPB Acting Director Dave Uejio. “Not only did LendUp structure its business around wholesale deception and keeping borrowers in cycles of debt, the company doubled down after getting caught the first time. We will not tolerate this illegal scheme or allow this company to continue preying on vulnerable consumers.”
LendUp Loans, LLC, headquartered in Oakland, California, offers single-payment and installment loans to consumers and pitches itself as an alternative to payday lenders. A central component of LendUp’s marketing and brand identity is the “LendUp Ladder.” LendUp told consumers that by repaying loans on time and taking free courses offered through its website, consumers would move up the “LendUp Ladder” and, in turn, receive lower interest rates on future loans and access to larger loan amounts.
According to the CFPB’s complaint, LendUp was not telling consumers the truth. The CFPB’s investigation found that 140,000 repeat borrowers were charged the same or higher interest rates for loans after moving up to a higher level on the LendUp Ladder. The investigation also found that many borrowers had their maximum loan size reduced, even after reaching the highest level on the ladder.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (CFPA), the CFPB has the authority to take action against companies and people that violate Federal consumer financial laws. The CFPB alleges that LendUp violated the CFPB’s 2016 consent order, the CFPA, the Equal Credit Opportunity Act (ECOA), and ECOA’s implementing regulation, Regulation B. Specifically, the CFPB alleges 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 consent order: The CFPB’s 2016 consent 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: Adverse-action notices inform consumers why they were denied credit, and 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 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 application as required by ECOA and Regulation B.
The CFPB is seeking an injunction, damages or restitution to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.
LendUp is also subject to a 2021 stipulated final judgment that resolved the CFPB’s claims that LendUp violated the Military Lending Act in connection with its extensions of credit.
A complaint is not a final finding or ruling that the defendant has violated the law.
The Consumer Financial Protection Bureau (CFPB) 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 www.consumerfinance.gov.