A Payday Predator Plots its Return
SoLo Funds plans to once again issue short-term loans in California, DC
Fintech lender SoLo Funds, a company that was shut down from doing business in Connecticut because its loans sometimes had interest rates of 4000% APR, has announced plans to return to doing business in both the District of Columbia and California.
Based on Connecticut’s analysis of loans facilitated in the state, the typical principal amount was $100, with an average ‘lender tip’ of $21 and an average ‘donation’ to Solo of $10 — equating to APRs that ranged from 43% to as much as 4,280%.
Here’s more on SoLo’s settlement with DC, where the Attorney General’s office found the lender charging in excess of 500% APR for short-term loans:
DC Attorney General Brian Schwalb noted that SoLo Funds used a lending model based on tips in order to hide the true cost of loans offered on the platform. Often, the interest rates on these loans would exceed 500% — far in excess of the rate cap in DC of 24%.
“Our office will not tolerate Fin-tech lenders resorting to new, deceptive practices that adversely impact vulnerable residents who are frequently ineligible for traditional loans,” said AG Schwalb. “SoLo sought to disguise exorbitant interest charges by deceptively calling them “tips” and “donations.” This settlement makes clear that we will take decisive legal action against predatory lending models in the District and nationwide, regardless of whether the predatory lender is a brick-and-mortar store or operates entirely online.”
And SoLo is already crowing about plans to return to California:
SoLo says the settlement it has reached with California will allow the company to soon resume offering loans to California customers. Presumably, those loans will be within the rate cap required by California statute.
“Today’s announcement builds upon the momentum of last week’s announcement that we will be resuming business in the District of Columbia,” said Kyle George, SoLo’s Head of Regulatory & Government Affairs. “It was a pleasure working with the consummate professionals at the California DFPI to identify a clear pathway for SoLo to serve our home state of California.”
“Builds upon the momentum” is an odd way of saying we were forced to refund customers because we broke the law and made our customers’ financial lives substantially more unpleasant.
The clear pathway to returning to business that SoLo is talking about means they will no longer be able to favor loans where borrowers offer tips and no longer be able to engage in practices that essentially require tips for loan approval.
In essence, it turns out that they must, in fact, comply with relevant state laws on interest rate caps.
Beware Credit Repair
The consumer protection attorneys at Finn Law Group have a story out on the dangers of credit repair.
Here’s the short story: Beware.
A bit longer: You really don’t need to pay for the services offered by companies claiming to be able to repair your credit.
Here’s more from Finn:
One significant issue involves the fallacy of rapid credit repair. Credit repair companies often market themselves with the promise of a quick credit score improvement. However, as Spears notes, genuine improvement is a time-bound process dependent on multiple factors such as a solid payment history, optimal credit utilization, and the length of credit history.
Spears specifically states, “There’s not a credit repair company that can make time go any faster.” This quote underscores the reality that improving credit scores is a gradual process, not one that can be accelerated artificially.
Don’t Pay for Credit Repair Upfront
Credit repair companies often have a complex fee structure that’s not fully disclosed upfront. This can lead to consumers incurring unexpected costs, adding to their financial strain. Spears adds that while the Credit Repair Organizations Act forbids companies from charging before rendering services, some companies either find a way around this or simply disregard the rule. That should be a red flag for consumers indicating that it might just be a scam.
Finn reminds us:
Unfortunately, these practices are not always easy to recognize. Therefore, consumers must approach such guarantees with skepticism and conduct thorough research before engaging with any credit repair company. It’s also advisable to consult with a reputable financial advisor or attorney, which can provide unbiased advice on effective and legitimate strategies for improving credit health.
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