HARRISBURG, PA — Attorney General Michelle Henry announced a settlement this week with SoLo Funds, Inc., a California-based lending platform accused of deceptive practices that misled borrowers into paying inflated interest rates on supposedly interest-free loans.
Deceptive Practices Uncovered
SoLo Funds markets itself as a community finance platform that connects individual lenders with borrowers seeking small-dollar loans with short repayment terms, typically 35 days or less. The platform claims that borrowers can voluntarily pay a “tip” to thank the lender and a “donation” for maintaining SoLo’s services. However, the Office of Attorney General alleged that these practices disguised the true cost of the loans, resulting in illegally high interest rates.
Attorney General Henry explained the broader impact: “This predatory lender used their tip and donation configuration to deceive consumers into paying outrageous and illegal interest rates on loans. This settlement puts a stop to the company’s manipulative conduct and their ongoing collection efforts, while providing relief to those who were tricked into the scheme.”
Key Terms of the Settlement
The settlement, formalized as an Assurance of Voluntary Compliance, requires SoLo Funds to overhaul its business practices to align with Pennsylvania law. Specific prohibitions include:
- Facilitating loans where the interest rate exceeds Pennsylvania’s legal limits.
- Issuing loan disclosures that state a $0 finance charge when tips and donations are involved.
- Advertising loans as “0% APR” with “no finance charge” when additional costs are included.
- Sending misleading collections notices suggesting delinquent accounts would be reported to credit agencies, despite not reporting such information.
Financial Penalties and Restitution
As part of the settlement, SoLo Funds will pay $158,000 in restitution, $25,000 in civil penalties, and $25,171.51 in investigation costs. Additionally, the company will cease all efforts to collect unpaid principal, tips, donations, and fees from loans involving Pennsylvania borrowers and lenders, amounting to over $530,000.
Implications for Borrowers
The implications of this settlement are significant for Pennsylvania consumers. It ensures that borrowers who were misled about the true costs of their loans will receive financial relief. Those eligible for restitution will be contacted with further instructions.
Broader Impact on Lending Practices
This case highlights the importance of transparency in lending practices. Misleading terms can trap vulnerable consumers in cycles of debt, especially when disguised as voluntary contributions. The settlement with SoLo Funds serves as a strong reminder to financial platforms that deceptive practices will face scrutiny and legal consequences.
By enforcing these regulations, Attorney General Henry’s office aims to protect consumers from unfair and deceptive financial practices, ensuring that lenders operate with integrity and transparency. As a result, Pennsylvanians can have greater confidence in the fairness of the financial products available to them.
This settlement marks a critical step in holding predatory lenders accountable and ensuring that all financial services comply with state laws designed to protect consumers.
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