SoLo Funds, a Los Angeles-based fintech startup, is facing a class action lawsuit filed on October 16, accusing the company of “unlawful and deceptive” lending practices.
As first reported by Bloomberg, the lawsuit alleges that SoLo misled users by disguising hidden fees as “tips” to lenders and “donations” to the company.
While these fees are technically optional, the suit claims they are difficult to avoid, making loans more expensive than advertised.
Deceptive Lending Practices Alleged in Lawsuit
SoLo Funds allows users to request small loans, up to $575, which are to be repaid within 35 days.
However, the lawsuit alleges that many borrowers end up paying substantial fees that mimic interest payments, despite the company’s promise of no mandatory charges.
This model has attracted legal attention from the Consumer Financial Protection Bureau (CFPB), which previously filed a complaint in May 2023, accusing SoLo of using “digital dark patterns” to obscure the “no donation” option deep within the app’s settings.
Regulators in Pennsylvania, California, Connecticut, and Washington DC have filed similar lawsuits, claiming that SoLo Funds’ lending practices violate consumer protection laws.
While the company has reached settlements with several states, it continues to face the CFPB’s unresolved legal challenge.
VC Success Overshadowed by Legal Troubles
Prior to its legal challenges, SoLo Funds enjoyed considerable success in the fintech space.
The company boasts nearly two million users and was featured on CNBC’s 2023 Disruptor List.
It has also raised significant capital, including backing from high-profile investors such as Serena Williams’ venture fund.
However, internal concerns, including employee complaints about the founders’ business practices and leadership style, have compounded SoLo’s troubles.
Feature Image Credit: MAC Venture Capital