SoLo Funds under criticism by the CFPB despite saving over $40M in fees for underserved Americans

News provided by

May 22, 2024, 09:16 ET

The CFPB misrepresented SoLo Funds, one of the nation's most affordable subprime loan options according to a 2023 report on cash-poor Americans.

LOS ANGELES, May 22, 2024 /PRNewswire/ -- On Friday, May 17th, the CFPB announced its first action after its Supreme Court ruling, targeting the nation's largest consumer-facing black-led and owned fintech, SoLo Funds. SoLo Funds has been wrongly accused of misconduct regarding its voluntary tipping fee structure and peer-to-peer community finance model, despite tips going 100% to community members, being self-selected, and being significantly more affordable in terms of cost to Americans. This suit is the CFPB's first order against a company using an optional tipping fee structure despite its widespread use amongst more well-funded Silicon Valley-based companies.

As a new model, SoLo has diligently followed the rules, engaging with leading legal counsel and approaching regulators requesting collaboration since its inception. SoLo Funds has been voluntarily working with the CFPB for the last 18 months, attempting to work toward a regulatory framework that maintains its affordability for Americans. We had primarily agreed on a path forward last Thursday night, and unbeknownst to us, we were blindsided the next morning with a suit.

"This lawsuit feels selective. Our political leaders challenged minority innovators to create new models to address our communities' financial inequalities. That is precisely what we've created, but regulators have worked hard to stifle innovation and prevent underserved communities from accessing better financial products. It's important to note that this call for innovation has stemmed from a long history of predatory practices and products that have disproportionately impacted low- to middle-class communities. Ironically enough, regulators have provided clear licensing frameworks for the products that harm consumers most today, such as subprime credit cards and payday loans. The stifling of innovation has the opposite effect; it increases costs and limits access to capital. Regulating by enforcement only perpetuates this inequity. Today, we're experiencing the largest wealth gap in the history of modern America, and it's a direct reflection of traditional financial companies and the parties that protect their interests. Our regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions," said Travis Holoway, CEO of SoLo Funds.

As a small startup with under 100 employees, SoLo's impact on Americans has been profound. It has enabled over 1M loans, all 100% funded by similar community members. This has ultimately saved consumers an estimated $40M in fees compared to subprime credit cards. Founded by two best friends from Cleveland and Baltimore, SoLo is a community finance company powered by people. SoLo enables its members to borrow and lend to and from each other, fostering community and financial empowerment. Its lending members make returns via tips while its borrowing members gain transparent access to emergency loans with dignity at significantly less cost than the dominant market providers, subprime credit cards, and payday lenders.

SoLo was founded in 2018 by Travis Holoway and Rodney Williams. They had first-hand experience with the difficulties their families and loved ones had accessing short-term loans and yield-generating opportunities. The solution they designed now provides access to short-term capital and member tips at an unprecedented scale. They have achieved this milestone with limited venture funding. Despite the challenges, the company has been admired by its users for solving their real-world problems and giving them a level of autonomy that other financial institutions have failed to provide.

Moving forward, we ask for open-mindedness from political and regulatory leaders. We want to be managed with fairness and respect. We owe it to our fellow Americans to work together to address the inequities of our financial system in a way that protects and empowers them. America deserves viable alternatives to the traditional subprime credit solutions perpetuating our most significant wealth gap in history.

About SoLo Funds

SoLo is the leading finance platform focused on underserved communities. Members borrow on their own terms, and lend to make industry leading returns or a social impact. As the only Black-owned fintech Certified B Corp in the U.S. and Canada, SoLo has emerged as the new financial services leader on pace to deliver $1B back into underserved communities by Q1 '24. The financial system has failed our communities, excluding them from returns and access to short term cash. SoLo created something different, something more human. They went back to the basics, creating a community where people could support each other financially. SoLo calls this community finance.

Media contact
Brennan Nevada Johnson
[email protected]

SOURCE SoLo Funds