On May 4, the Connecticut Banking Commissioner issued a temporary order to cease and desist and order to make restitution against lead generator SoLo Funds Inc. (SoLo) for allegedly engaging in unfair, deceptive, and abusive acts and practices (UDAAPs) in violation of the Consumer Financial Protection Act of 2010, as well as for operating in Connecticut without a small loan company license or a consumer collection agency license.

The enforcement action states that SoLo advertised via its website and mobile application that it assists Connecticut consumers in receiving loans in amounts ranging from $50 to $500. The loans are initiated by a request from a consumer of a certain loan amount and include a proposed monetary tip. The action states that SoLo encourages customers to “offer: (i) a Lender Tip in an amount of up to 12% of the loan amount, and (ii) a SoLo Tip of up to 9% of the loan amount.” Various additional advertisements encouraged the borrower to tip. While SoLo states a tip is not required to receive a loan, “100% of the loans to Connecticut residents originated on the Platform from June 2018 to August 2021 either contained a Lender Tip or a SoLo Tip.”

Upon loan consummation, a lender is required to pay SoLo any tip given to SoLo on behalf of the consumer prior to the lender receiving any money from the borrower and regardless of whether the loan is paid back. On the loan’s due date, the total loan amount, including all tips, is withdrawn via debit entry from the borrower’s account by the lender.

The commissioner stated that tips made by consumers were incident to or conditions of the extension of credit and should be included in the annual percentage rate (APR) under Regulation Z. However, beginning in April 2021, SoLo issued loan disclosures and promissory notes without itemizing tips and did not provide any disclosures regarding such tips. The only loan amount disclosed was the principal loan amount. As such, “promissory notes to Connecticut borrowers failed to indicate any obligation of the borrower to pay tips on their loans and corresponding Loan Disclosures stated that only one payment, for the principal loan amount, was due at the end of the loan.” The commissioner concluded that this lack of disclosures violated the Consumer Financial Protection Act of 2010 regarding unfair, deceptive, and abusive practices.

In addition to ordering SoLo to cease and desist from providing borrowers with false and misleading information about its loans, SoLo also must repay any amounts received from Connecticut residents in connection with a loan, plus interest.

SoLo may request a hearing; otherwise, the allegations will be deemed admitted, and the order will remain in effect and become permanent.

Photo of Carlin McCrory Carlin McCrory

A seasoned regulatory and compliance attorney, Carlin brings extensive experience representing financial institutions, fintechs, lenders, payment processors, neobanks, virtual currency companies, and mortgage servicers.

Photo of Keith J. Barnett Keith J. Barnett

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts…

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts, state courts, and before arbitration and administrative law panels in the financial services industry.

Photo of Stefanie Jackman Stefanie Jackman

Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan’s practice focuses on financial services litigation and compliance counseling, as well as digital assets and blockchain technology. With a long track record of successful litigation results across the U.S., both bank and non-bank clients rely on him for comprehensive advice throughout their

Ethan’s practice focuses on financial services litigation and compliance counseling, as well as digital assets and blockchain technology. With a long track record of successful litigation results across the U.S., both bank and non-bank clients rely on him for comprehensive advice throughout their business cycle.