CFPB dismisses lawsuit against lending platform SoLo Funds

The Consumer Financial Protection Bureau dismissed its pending lawsuit against SoLo Funds, a peer-to-peer lending company, on Friday.

The case was dismissed with prejudice, a permanent dismissal that cannot be brought back into court at a later time, according to a filing submitted to California’s Central District Court.

The CFPB originally filed a lawsuit against SoLo Funds in May 2024, alleging that the online platform was “deceiving borrowers about the total cost of loans.”

SoLo Funds, a Los Angeles-based, Black-owned fintech company, runs a lending platform on which members make small peer-to-peer loans ranging from $20 to $575. The company operates as a marketplace, where it manages transactions and enables each user to access deposit accounts.

The agency alleged in the lawsuit’s initial press release that “while SoLo’s advertisements and loan disclosures market no-interest loans, virtually all borrowers pay ‘tips’ to the investor lenders, ‘donations’ to SoLo, or both.” These fees equate to an equivalent annual percentage rate of more than 36%, according to the CFPB.

According to SoLo Funds, 99% of its loans include a tip to the lender (a fellow user of the platform) and 80% include a donation to SoLo Funds itself to maintain the platform. The average tip is 10.4% of the loan, and the average donation is 6.2%. For example, on a $100 loan, the typical customer will pay a one-time $17 in donation and tip.

“As a disruptive fintech leader and a certified benefit corporation, SoLo is proud to have over 2 million users that have injected $1 billion into working-class communities via its peer-to-peer community finance platform and we look forward to continuing this critical work now that this costly litigation is behind us,” SoLo CEO Travis Holoway said in a press release.

In a post shared Sunday on X, acting CFPB Director Russell Vought said in relation to the case against SoLo Funds that the CFPB “was wrong and we dismissed the case. More to come, but the weaponization of ‘consumer protection’ must end.”

Some consumer watchdog organizations see the dismissal as a negative consequence of recent CFPB overhauls.

“We are now seeing what it means for the Trump administration to destroy the Consumer Financial Protection Bureau,” said Lauren Saunders, associate director at the National Consumer Law Center. “It is letting off scot-free a deceptive company that claimed 0% APR for payday loans of 400% APR or higher, with interest disguised in fake ‘tips’ and ‘donations’ that virtually everyone was forced to pay. States now have to pick up the pieces. No state should tolerate a company flagrantly deceiving borrowers and ignoring state rate caps and licensing laws. Several states have already run SoLo Funds out of town, and all of the others should as well.”

In 2023, SoLo Funds entered settlement agreements with regulators in California, Connecticut, Pennsylvania and the District of Columbia. California’s case against SoLo alleged that the company used misleading disclosures and advertising and failed to obtain a required state license.

Connecticut’s settlement required the fintech to refund to consumers all tips, donations and fees, and the District of Columbia’s settlement required the same. Pennsylvania’s settlement had SoLo “modify its business practices in Pennsylvania, pay partial restitution, civil penalties, and costs, and cease all collection efforts.”

SoLo also entered into consent decrees with the states of Maryland and Massachusetts over state licensing requirements in late 2023 and 2024.