If your finances are tight, don’t assume FinTech is your friend

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Breaking a general rule, I will speak from personal experience. While looking for equipment for personal and professional use, I noticed that one site offered some form of financing focused on FinTech. I filled out the form, sent in additional information, and poof there was an offer to pay for the item over two years.

Looking at the details, however, it became apparent that the terms were pretty stiff. Not that the fintech company has made it too clear. Instead, he focused on the monthly payment (which couldn’t be paid earlier to save money) and the usefulness of developing a business credit history with Dun & Bradstreet.

A little quality time with a calculator showed the terms resulted in an annual rate of 25%. Which was ridiculously high. I declined the kind offer and walked away with what had already been growing mistrust of fintech.

“Help the unbanked,” they say. “Offer credit alternatives to those who have used payday loans. “

But while fintech is a vast tech space, some of those engaged in the space look a lot like predatory non-tech financial firms from the outside.

See a statement released today by the Consumer Financial Protection Bureau titled “CFPB Shutters Lending by VC-Backed Fintech for Violating Agency Order”.

Today, the Consumer Financial Protection Bureau (CFPB) announced that LendUp Loans has agreed to stop making new loans and collect some outstanding loans, as well as paying a penalty, to resolve a September 2021 lawsuit alleging that he continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. The lawsuit also accuses LendUp of breaking fair lending rules.

The CFPB alleged in 2016 that LendUp “has not given consumers the option of taking credit and giving them access to cheaper loans, as it has told consumers it will.”

The company had positioned itself as an alternative to payday loans, a type of short-term credit that tends towards usurious rates. It still describes itself as having been “founded with one clear and simple goal: to provide anyone with a path to better financial health.”

Although now under the frequently asked questions, in response to “Are you still ready?” Reads: “LendUp has made the business decision to stop lending and no longer handles loans.” You can continue to access a series of online training courses and / or visit our resources page for additional services.

“LendUp was backed by some of the biggest names in venture capital,” CFPB Director Rohit Chopra said today in the agency’s statement. The list included Google Ventures, Andreessen Horwitz, Kleiner Perkins, PayPal Holdings and QED Investors. “We are closing the lending operations of this fintech for having repeatedly lied and deceived its customers.”

Strong language and note that an agreement reached today between the company and the agency includes the following wording: “Defendant [LendUp] neither admits nor denies the allegations contained in the complaint, except as specified in this ordinance. For the purposes of this Order, the defendant admits the facts necessary to establish the jurisdiction of the Court over him and the subject-matter of this action. So the company is not saying it did something illegal.

But it is an example of the controversial and troubled use of fintech. Earlier this year, Congress repealed the so-called “real lender rule” that was created under the Trump administration by the Office of the Comptroller of the Currency, one of the regulators with power over banks.

The rule allowed non-bank lenders – often online fintech companies – to partner with banks that were willing to charge their names at triple-digit interest rates on loans and have their name appear. the bank on the loan documents. But critics noted that it was the non-bank lender who made the loan and only used the bank – often referred to as the rental bank – to keep it away from liability. And to afford those huge interest rates that can and have shattered people.

“In recent years, new fintechs have emerged that are partnering with banks to offer responsible small dollar lending at affordable rates,” Sen. Sherrod Brown (D-Ohio) said during a Senate hearing on 28. April 2021 on the subject, even if some of the agreements between fintechs and rental banks have allowed loans at unaffordable rates.

Not all consumer-focused fintech companies are like this. But there are those who target the desperate. People should be wary and the government should do more to stop these kinds of practices, whether they are committed by someone behind a physical barrier in a payday loan office or by high tech masters using computers to doing business and making obscene amounts of money. paste.

[Update: 22-Dec-2021 12:05 p.m. — I had reached out to LendUp and just received a response three minutes ago: “LendUp Loans is pleased to have fully resolved its litigation with the CFPB. LendUp did not admit liability in the settlement agreement. As has previously been reported in the news, LendUp ceased originating loans in the summer. It expects to complete the wind-down of its operations in early 2022.”

Okay, then.]

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