Dive Brief:

• The Consumer Financial Protection Bureau (CFPB) is “shuttering the lending operations” of online lender LendUp “for repeatedly lying and illegally cheating its customers,” the bureau’s director, Rohit Chopra, said in a release Tuesday.
• LendUp agreed to pay the bureau a $100,000 penalty as part of a settlement that also prohibits the fintech from collecting on its loans, making new ones or selling consumer data.
• The fintech, in a statement emailed to American Banker, said it did not admit to liability in its settlement and is “pleased to have fully resolved its litigation with the CFPB.”

Dive Insight:

LendUp, in a statement, said it “expects to complete the wind-down of its operations in early 2022.” The closure does not affect Ahead Financials, the digital bank LendUp’s parent company launched last year.

LendUp stopped originating loans this summer — a point the fintech emphasized Tuesday, pointing to an Axios report from August revealing a letter the company sent to shareholders in which CEO Anu Shultes said payday loans "are no longer acceptable solutions to critical stakeholders in our business and the community at large."  

LendUp had trumpeted itself as an alternative to payday loans, touting a promise that repeat borrowers with a strong repayment history could gain access to larger loans in the future at lower rates.

However, the company charged roughly 140,000 customers similar or higher rates on repeat loans under the "LendUp Ladder" program, even after they repaid loans on time or took free courses through the company’s website, the CFPB said. The bureau issued LendUp an enforcement action in 2016 to stop misleading customers through its advertising.

Tuesday’s agreement settles a lawsuit the CFPB filed against LendUp in September, claiming the fintech violated that 2016 order. The lawsuit claimed LendUp reduced borrowers’ maximum loan amount and failed to notify borrowers in a timely manner when their loan applications were denied.

The settlement, which is pending approval from the U.S. District Court for the Northern District of California, proposes affected consumers be given $40.5 million in restitution fees. 

The CFPB, however, said it would work to repay consumers through the bureau’s civil money penalty fund. LendUp could avoid paying the $40.5 million in restitution if it pays the $100,000 fine and the bureau does not discover financial misrepresentation on the part of the company.

September’s lawsuit wouldn’t be the bureau’s first against LendUp. The regulator and the fintech have also settled a suit from last year alleging LendUp violated the Military Lending Act in connection with its extensions of credit to more than 1,200 borrowers.