The Consumer Financial Protection Bureau is suing LendUp Loans, LLC, for allegedly violating a 2016 consent order and committing deceptive acts against consumers.
The Oakland, Calif.-based LendUp was ordered to pay $1.83 million in consumer redress and a $1.8 million civil penalty five years ago over deceptive marketing claims. The CFPB’s current suit alleges that LendUp continued to use “much of the same illegal and deceptive marketing,” the bureau said in a press release. It also alleges that LendUp, which offers single-payment and installment loans, didn’t provide timely and accurate notices to consumers whose loan applications were denied, as it was required to do by law.
At the heart of both the suit and the consent order is LendUp’s use of the “LendUp Ladder” in marketing and branding. According to the suit, the company told consumers that, by repaying loans on time and taking free courses offered through its website, they could receive lower interest rates on future loans and access to larger loan amounts.
Instead 140,000 repeat borrowers were charged the same or higher interest rates for loans after moving up to a higher level on the LendUp Ladder, the bureau said. Many borrowers also had their maximum loan size reduced, even after reaching the highest level on the ladder, according to a CFPB investigation.
In addition to the 2016 consent order, LendUp also violated the Dodd-Frank Act’s prohibition against deceptive acts or practices, the Equal Credit Opportunity Act and ECOA’s Regulation B, which requires lenders to provide accurate adverse-action notices to consumers within 30 days of being denied credit. Since October 2016, LendUp failed to send notices within that window to more than 7,400 loan applicants; it also sent more than 71,800 inaccurate adverse-action notices, according to the complaint.
“LendUp lures consumers with false promises that repeat borrowing would allow them to ‘climb the LendUp Ladder’ and unlock lower interest rates. For tens of thousands of borrowers, the LendUp Ladder was a lie,” said CFPB Acting Director Dave Uejio. “Not only did LendUp structure its business around wholesale deception and keeping borrowers in cycles of debt, the company doubled down after getting caught the first time. We will not tolerate this illegal scheme or allow this company to continue preying on vulnerable consumers.”
Earlier this year, LendUp was also subject to a stipulated final judgement from the CFPB over violations of the Military Lending Act. The CFPB alleged the company made loans with a Military Annual Percentage Rate exceeding the MLA’s 36 percent cap; extended loans that required borrowers to submit to arbitration, prohibited by the MLA, and failed to make certain required loan disclosures.