The Consumer Financial Protection Bureau has filed a lawsuit against a California-based online lender alleging they violated federal law by charging too much interest on loans to active-duty service members and their dependents.
The CFPB accuses LendUp Loans, LLC, of Oakland, Calif., of charging in excess of 36 percent annual percentage rate, as well as other violations of the Military Lending Act. The allegations involved more than 4,000 loans made to more than 1,200 borrowers since October, 2016, according to the lawsuit, filed Dec. 4 in the U.S. District Court in the Northern District of California.
Bureau officials said the action is part of a broader sweep of investigations of a number of lenders that may be violating the Military Lending Act, a law passed in 2006 to protect military members and their dependents from predatory lenders. Among other things, that law limits the amount of interest that can be charged, to include fees, to 36 percent, based on the annual percentage rate calculation. It’s known as the Military APR.
Officials with LendUp could not be immediately reached for comment. The online lender’s fee examples listed on its website include a $100 loan with a fee of $17.60 for 30 days with a disclosed APR of 214 percent; or for 14 days with a disclosed APR of 459 percent.
Their $250 loan for seven days, at a cost of $44; translates into an APR of 918 percent.
The LendUp website bills its loans as an alternative to traditional payday loans, and offers several different types of loans. They offer single-payment loans and installment loans. Instead of requiring the borrowers to repay the full value of their loan with their next paycheck, LendUp offers up to 30 days for repayment, according to the website. “The added flexibility makes it much easier for you to repay these alternative loans without failing to meet other financial obligations,” the website states.
As of January, the company has issued more than $2 billion in more than 6.5 million loans since 2012, with an average loan value of about $300, according to a January Business Wire release. “Through our lending, education and savings programs, we’ve helped customers raise their credit profiles by hundreds of thousands of points cumulatively and saved them hundreds of millions of dollars in interest and fees from much higher cost products,” stated LendUp CEO Anu Shultes, in the January release.
CFPB alleges that in addition to violating the 36 percent APR cap, LendUp extended loans that require military borrowers to submit to arbitration, and failed to make certain required disclosures about the loans, including a statement of the applicable Military APR.
The lawsuit asks the court to require LendUp to pay damages, restitution and other monetary relief to consumers; to rescind consumer-credit agreements that were allegedly void from the beginning; and impose a civil money penalty on LendUp. It asks the court to require LendUp to permanently stop committing future violations, and to require the lender to correct inaccurate information to credit-reporting agencies about delinquent accounts or amounts of money owed under the consumer credit agreements that were allegedly void from the beginning.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.