The CFPB has filed a lawsuit against Oakland, CA-based online lender LendUpLoans alleging that LendUp is in violation of a 2016 Consent Order that required the lender to pay over $3.5 million in consumer redress as well as civil penalties and to cease  misleading consumers with alleged false claims about the cost of loans and the benefits of repeat borrowing.

In the Complaint filed last week in the U.S. District Court for the Northern District of California, the CFPB accuses LendUp with continuing to engage in the same illegal and deceptive marketing that was the basis of the 2016 Consent Order as well as allegedly failing to provide timely and accurate notices to consumers whose loan applications were denied.  The Complaint alleges violations of the Consumer Financial Protection Act, the Equal Credit Opportunity Act (“ECOA”) and ECOA’s implementing regulation, Regulation B.  The CFPB  seeks an injunction, damages or restitution to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.

LendUp offers consumers single-payment and installment loans, marketing itself as an alternative to payday lenders, and using the brand identity “The LendUp Ladder.”  The company’s website tells consumers that the LendUp Ladder “incentivize[s] responsible actions and enable[s] borrowers to earn access to apply for larger loans at lower interest rates over time.”

The CFPB alleges that this statement is not only misleading, but patently false.  Its investigation found that 140,000 repeat borrowers were charged the same or higher interest rates for loans despite working their way up the levels of the LendUp Ladder. The investigation also found that many borrowers had their access to larger loans reduced, even after reaching the highest level of the LendUp Ladder.  In addition, the CFPB alleges that LendUp failed to provide timely adverse action notices on over 7,400 loan applications, and issued over 71,800 adverse action notices without accurately describing why the loan was denied, in violation of ECOA and Regulation B.

In a press release, Acting Director Dave Uejio accused LendUp of “structur[ing] its business around wholesale deception and keeping borrowers in cycles of debt,” adding that the Bureau “will not tolerate this illegal scheme or allow this company to continue preying on vulnerable consumers.”