Dive Brief:
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The Consumer Financial Protection Bureau (CFPB) is suing online lender LendUp for allegedly violating the Military Lending Act (MLA) in connection with its extensions of credit, the agency announced Friday.
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The CFPB alleges that since October 2016, San Francisco-based LendUp made over 4,000 single-payment or installment loans to more than 1,200 covered borrowers in violation of the MLA, a federal law that caps interest rates at 36% for active-duty service members.
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The CFPB's complaint, which was filed in the U.S. District Court for the Northern District of California, seeks an injunction, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties.
Dive Insight:
The CFPB said LendUp's violations of the MLA include extending loans with a military annual percentage rate (MAPR) exceeding the MLA's cap, extending loans requiring borrowers to submit to arbitration and failing to make certain required loan disclosures, including a statement of the applicable MAPR.
LendUp stopped making MLA noncompliant loans in 2017 and no longer offers loans to active service members, a company spokesperson said in an email.
"In 2017, LendUp proactively self-reported issues to the CFPB that impacted less than half a percent of our service member transactions," the spokesperson said. "For impacted customers, LendUp refunded all interest and fees, whether or not mistakenly collected. Additionally, we removed all improperly made MLA loans from credit reporting that had delinquency."
The issue was fully remedied in 2017 and is not ongoing, the spokesperson said.
The California lender has run afoul of the CFPB before.
In 2016, the company was fined $3.63 million by the CFPB and $2.7 million by the California Department of Business Oversight over allegations it didn't help customers get cheaper loans and build credit as promised.
The penalty was one of the first major enforcement actions against a fintech company, according to Bloomberg.
LendUp, which said it has originated more than $2 billion in small-dollar loans and served more than 1 million customers since forming in 2012, announced last week it was moving into the digital banking space with the launch of Ahead Financials.
In partnership with Ohio-based Sutton Bank, the platform will offer Federal Deposit Insurance Corp.-insured accounts aimed at serving emerging middle-class consumers.
