President Donald Trump’s Consumer Financial Protection Bureau dismissed a case against a community-focused financial lending company on Friday.
SoLo Funds is a peer-to-peer financial lending platform, boasting over 2 million downloads of its app on its website. In May 2024, former President Joe Biden’s CFPB sued the company, alleging it was deceiving borrowers and illegally extracting fees.
The app feature in question allows users to give a “tip” to the lender or a “donation” to SoLo. Biden’s CFPB argued that the feature represented a shadowy way to make users pay interest on loans.
“The CFPB is suing SoLo for using digital trickery to hide interest and fees on its online loans,” Former CFPB Director Rohit Chopra said in a May press release. “SoLo has had repeated run-ins with state regulators, and we are putting a stop to their fake tipping scheme.”
SoLo Funds denied any wrongdoing. Thousands of loans have been funded without the borrower offering a tip to the lender, and hundreds of thousands have been funded with no donation to SoLo.
An analysis from the CFPB found that the average tip offered on a $100 loan was $10.40 and the average donation was $6.20.
The legal battle that ensued over the lawsuit, along with the negative publicity it drew, had a major impact on SoLo’s operations. It laid off 30% of its workforce to stave off bankruptcy, and the over $3 million in legal costs pushed the company to reallocate resources.
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SoLo boasts that it is the largest black-owned financial technology company, an attribute that won it the support of some congressional Democrats. Rep. Jonathan Jackson (D-IL) vouched for the company in a September letter.
“While SoLo Funds’ business model is different from other lending platforms that state or federal regulators may have encountered, their ability to provide financial access to undercapitalized Americans is far-reaching and important. I hope you will work with the SoLo Funds team to find fair, meaningful regulation that allows for them to operate in a robust way across the country so that innovation across this field can continue,” he wrote.
