The Consumer Financial Protection Bureau forced the payday loan company LendUp to stop making new loans and to stop collecting some outstanding loans as part of a resolution of a lawsuit alleging the company had surrendered to illegal and deceptive marketing practices, the regulator said tuesday.
“LendUp was backed by some of the biggest names in venture capital,” CFPB director Rohit Chopra said in a statement on Tuesday. “We are closing the lending operations of this fintech for having repeatedly lied and deceived its customers.”
In a tweet, Chopra called the company “the darling of the venture capital world”, naming Google Ventures GOOG
Andreessen Horowitz, Kleiner Perkins, Paypal Holdings PYPL
and QED Investors as equity or debt investors in the company.
LendUp agreed to stop lending as part of the settlement, although it did so without admitting or denying CFPB’s allegations that it misled consumers about the benefits of repeat borrowing, in violation of a 2016 order that banned him from making certain marketing claims.
The CFPB heeded the company’s promise that by paying off loans on time and taking free classes on its website, clients would benefit from lower interest rates on future loans and access to larger loan amounts.
LendUp told its investors in August it would stop making new loans given a hostile political environment for the payday lending industry. CEO Anu Shultes told shareholders that payday loans “are no longer acceptable solutions for 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 meant to be paid off in one installment before a customer’s next paycheck, and they often come with fees and rates. high interest. In June, Congress voted to overturn a Trump-era lending rule that would have allowed payday lenders to avoid state interest rate caps.