SAN FRANCISCO (CBS SF) – A San Francisco startup with millions of venture capital funds – hailed by many as an alternative to predatory payday loans – has agreed to pay millions in redress for overcharging consumers and using deceptive marketing tactics.
Financial technology firm LendUp, which touts itself as an “alternative to payday loan,” agreed this week to pay clients and regulators $ 6.3 million over allegations of widespread violations of payday laws. payday and installment loans.
While LendUp CEO Sasha Orloff did not respond to a CBS investigation in San Francisco, east coast public relations firm Glover Park Group vice president Sarah Craighill made a statement to the name of LendUp.
LendUp’s statement describes the recent regulatory actions as addressing “legacy issues that mostly date back to our early days as a company.” Craighill declined to say when corrective action was taken by LendUp and declined to comment on what products, policies or fees LendUp has changed since entering into agreements with California and federal regulators.
But the allegations against LendUp stem from actions as recent as June 2016, when it was found that LendUp had allowed customers to access loans that were authorized in California but banned in customers’ home states, according to the voluntary agreement between the United States. Consumer Financial Protection Bureau and LendUp.
While eighteen US states and the District of Columbia ban high-cost payday loans, California does not.
LendUp charges annual percentage rates of over 700% in some cases, according to a payday loan calculator on their website.
Some LendUp customers, as of March 2016, were illegally billed for fast-track financing fees, according to the agreement.
LendUp allegedly practiced deceptive marketing and advertising campaigns as well as unfairly perceived extension and default charges. LendUp also allegedly violated the Truth In Lending Act by failing to include annual percentage rate (APR) information in advertisements, providing inaccurate credit information in loan agreements, and providing inaccurate information to agencies. consumer information.
“We are a different company today,” LendUp maintains in its statement. “We take our commitment to operate in a transparent, compliant and socially responsible manner very seriously, which is why we have fully resolved the issues cited by our regulators, including the shutdown of certain services. We have also worked to reimburse all affected customers. “
Ventures that have supported LendUp in excess of $ 100 million since 2012 include Google Ventures, Andreessen Horowitz, Kleiner Perkins and many more.
This summer, Google announced that it was banning ads for payday loans. In a May blog post, Google Global Product Policy Director David Graff said, “Research has shown that these loans can lead to unaffordable payments and high default rates for users, we will put therefore update our policies globally to reflect this. “
California Department of Business Watch Commissioner Jan Lynn Owen says “the illegal charges have affected thousands of California borrowers and have shown LendUp’s continued failure to comply with California consumer protection laws.”
Owen said the settlement will help borrowers who have been wronged and ensure LendUp is held accountable.
LendUp prides itself on reducing borrowing costs, expanding access to credit and providing credit opportunities to customers. On its website, it states that, unlike traditional payday lenders, “we don’t have dangerous debt traps.”
But California law is already designed to protect consumers from payday debt traps.
By Hannah Albarazi – Follow her on Twitter: @hannahalbarazi.