The Consumer Financial Protection Bureau is accusing the online lender LendUp of violating a five-year-old consent order and deceiving thousands of borrowers about the cost of its installment loans.
The Oakland, California-based company misrepresented the benefits of repeat borrowing by claiming that certain borrowers would gain access to larger loans at lower rates, the CFPB said in a lawsuit filed Wednesday. The suit also alleges that LendUp illegally failed to provide timely and accurate notices to consumers whose loan applications were denied.
“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,” acting CFPB Director Dave Uejio said in a press release. “We will not tolerate this illegal scheme or allow this company to continue preying on vulnerable consumers.”
The CFPB, which sued LendUp on Wednesday, had previously had run-ins with the Oakland, California-based company.
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The company did not immediately respond Wednesday to requests for comment.
The lawsuit comes on the heels of previous run-ins between LendUp and its regulator. In 2016, the CFPB ordered LendUp to pay a $ 1.8 million penalty and another $ 1.8 million in consumer redress for misleading consumers about the benefits of borrowing from the company.
The lawsuit filed Wednesday involves a claim in LendUp marketing materials that borrowers would be offered larger loans at lower rates through a program called the “LendUp Ladder.”
LendUp charged 140,000 repeat borrowers the same interest rate or a higher one even after the consumers repaid their loans on time and took free courses offered through the company’s website, according to the CFPB. Many borrowers had their maximum loan size reduced after taking part in the program, the CFPB said.
“LendUp lures consumers with false promises that repeat borrowing would allow them to ‘climb the LendUp Ladder’ and unlock lower interest rates,” Uejio said. “For tens of thousands of borrowers, the LendUp Ladder was a lie.”
The CFPB is seeking an injunction, restitution to consumers, disgorgement of ill-gotten gains and a civil money penalty.
LendUp is also subject to a 2021 stipulated final judgment that resolved claims filed last year by the CFPB. The consumer bureau had alleged that LendUp violated the Military Lending Act by making loans at interest rates that exceeded the federal rate cap for military borrowers.