Business ProfileforSoLo Funds, Inc.

Starting in 2018, SoLo operated a Platform available to consumers in California, as well as other states. The Platform claimed to allow consumers “to easily access and supply short-term funds for immediate needs.” In the Platform, individual consumers (“Borrowers”) in California could request loans in amounts up to $500 that were repayable through a single payment due no more than 15 days after the loan was made, despite all loans being 35- day term loans. In turn, other individual consumers (“Lenders”) in California and elsewhere could review Borrowers’ loan requests and decide whether to make the loans requested. SoLo’s Platform allowed Borrowers to request loans on terms agreed to between the Borrowers and Lenders, which the Lenders funded directly. 

SoLo did not investigate whether Lenders had a license under the CFL to make consumer loans, nor did it require Lenders to have a CFL license as a prerequisite to make loans on the Platform. To attract Borrowers to its Platform, SoLo made the following claims on SoLo’s social media accounts, listing in the Apple App Store, or within the Platform: 

1. that loans received through the Platform were “the most affordable loans in the market”; 

2. that loans received through the Platform carried no interest and always bore a 0% APR with no finance charge;

3. that, by using the Platform, Borrowers would receive “fast loans,” closed in “just a few hours,” with funds delivered “instantly”;

4. that Borrowers could receive loans through the Platform with “no approval process” and “no credit check”; 

5. that Borrowers have “have complete control over your [loan’s] terms. You set the loan amount, Lenders appreciation tip, and a payback date that works for you.”; 

6. that the Platform was “supported by . . . Visa, Kiva, and thousands of banking partners”; 

7. that over 30,000 individuals nationwide used its Platform to borrow money in 2020; and  

8. that the Platform’s loan “marketplace has provided hundreds of thousands of people with the access they need to put food on the table or pay off an unexpected expense.”

To receive a loan through the Platform, Borrowers posted a loan request that potential Lenders could view. The request contained the following proposed loan terms set by each requesting Borrower: the amount of money requested, which could be no more than $500; the number of days in which the Borrower would repay the loan, which must be 15 days or less; the purpose for which the Borrower would use the money received; and, the amount of tip that the Lender would receive from the Borrower for agreeing to fund the loan, which must be expressed as a percentage of the loan amount and could be no more than 12%. 

Pop-up messaging in the Platform urged Borrowers to offer the maximum tip amount to have their loan request fulfilled. One such pop-up claimed that Borrowers who offered the maximum tip amount were two times more likely to have their loan funded. Any Borrower or prospective Borrower new to the Platform must offer a tip or would be less likely to have their loan request fulfilled. Lenders on the Platform were also able to counteroffer a higher tip amount. About 25% of these higher counteroffers were accepted by Borrowers in exchange for receiving a loan, and about 75% were rejected by Borrowers as being more than the Borrower was willing to tip to receive the loan. 

Before receiving a loan, the Borrower was also presented with a pop-up prompting the Borrower to pay a donation to SoLo for providing the Platform. The donation was also expressed as a percentage of the loan amount and could be no more than 9%. When making a loan request, Borrowers could not dismiss the donation request prompt; the only way to disable the donation request pop-up was to toggle an unadvertised setting buried in the Platform’s general settings pane. Further, this setting had to be turned off each time the Borrower took out a loan. 

SoLo claims that Borrowers would have been able to retract previously-agreed upon tips and/or donations if Borrowers contacted SoLo’s general customer support in advance of the loan repayment date. Borrowers were never advised that they may renege on their prior commitment to make a tip or donation. Despite agreeing to pay tips and/or donations as part of the loan request process, SoLo did not include those amounts in the ultimate formal loan agreement generated in the Platform. Moreover, there was a period in which the loan agreement between the Borrower and the Lender was not presented or shown to the Borrower in advance of the Borrower consenting to the loan and receiving funding; it could only be viewed by Borrowers after consummation. The vast majority of Borrowers in California paid both a tip and a donation. 

When using the Platform to review loan requests, Lenders were able to see the following data about each Borrower or prospective Borrower: an avatar or picture of the Borrower or prospective Borrower, the Borrower or prospective Borrower’s “SoLo score,” which is meant to indicate that person’s ability to repay the loan and is based, in part, on the balance of and activity within that person’s linked bank account; the number of loans the Borrower had repaid on the Platform; the loan amount requested; the tip offered; the number of days in which the loan would be repaid; and the Borrower or prospective Borrower’s self-reported need for the loan requested, two examples of which SoLo advertised were for “car payment” or “co-pay.” 

SoLo sent reminder emails to Borrower who did not repay Lenders. If the Borrower ultimately repaid the loan after 35 days, the Borrower also paid the greater of $5.00 or 5% of the loan amount as a late fee. Many Borrowers paid off a loan and obtained a new loan from the platform on the same day. The latter loans for these Borrowers were generally at a higher principal amount than the previous loan. These Borrowers, on average, requested and received multiple loans. 

Commissioner’s Conclusions of Law

SoLo brokered consumer loans in California between April 1, 2018 and May 10, 2021 without the required license from the Commissioner. SoLo also provided substantial assistance to all the Lenders on its platform in making loans subject to the CFL without a license from the Commissioner. SoLo also provided substantial assistance to all the Lenders on its platform in making loans subject to the CFL without a license from the Commissioner. 

SoLo contends that at all times it was operating in good faith and with a reasonable interpretation of the law.

Penalty. The Commissioner imposes a penalty of $50,000.00

In response to these charges, the business provided the following statement “Despite the regulatory focus on fintechs, our financial system is dominated by traditional products which are the most significant culprits of predatory behavior,” Kyle George, SoLo’s head of regulatory and government affairs, said in a statement Tuesday. “The status quo does not work. If policymakers are sincere about protecting borrowers and effecting change, they must embrace new models. They cannot legislate by enforcement, suffocate innovation, and then wonder why nothing changes.”

SoLo did not admit to any wrongdoing in any of the three jurisdictions.