Online Lending Platform was Offering Loans with Interest Rates Up To 645%
The Minnesota Department of Commerce has announced a settlement with online lending platform MoneyLion that will result in refunds to some borrowers as well as a fine paid by MoneyLion.
MoneyLion violated Minnesota state law by failing to be licensed by the state when it provided Minnesota-based consumers with certain loans with excessive annual interest rates of up to 645%. The settlement includes more than 700 loans issued to Minnesota consumers between November 7, 2016 and September 15, 2017. These loans ranged from $300 to $2,000 and MoneyLion charged interest rates from 9.79% to 645%.
The settlement requires MoneyLion to cancel or forgive certain loans and to refund $250 to certain Minnesota consumers. The settlement also imposes a $100,000 fine to the State of Minnesota.
“As this case shows, Minnesota consumers who borrow from online lenders have protections under state law,” said Minnesota Department of Commerce Commissioner Grace Arnold. “The Commerce Department works to ensure a fair marketplace for Minnesota consumers to do business.”
Consumer advocates continue to raise concerns about online lenders skirting state laws, such as in the case of MoneyLion.
Additionally, recent action by the Consumer Financial Protection Bureau (CFPB) effectively closed down online FinTech lender LendUp.
“LendUp was backed by some of the biggest names in venture capital,” said CFPB Director Rohit Chopra. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.”
As a result of the (CFPB) order, LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans, as well as to pay a penalty, to resolve a September 2021 lawsuit alleging that it continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order.
The Minnesota Department of Commerce offers the following tips to consumers as they consider loans in the online space:
- Check the license status in Minnesota. Consumers can verify a license by checking Commerce’s License Lookup: https://mn.gov/commerce/consumers/tips-tools/license-lookup.jsp. If you come across a lender who is not licensed in the state but is offering loans in Minnesota, contact the Minnesota Department of Commerce.
- Read the fine print. No matter who you borrow from, always get a statement that clearly explains the costs of the loan. If the lender is unwilling to provide you with the contract upfront, that’s a red flag. Be sure you know how much you will owe, when payments are due, how they will be collected and if you can afford repayment of the loan.
- Consider alternatives. Try to avoid payday or short-term loans, which tend to have high fees and high interest rates. Check options such as a loan from a local bank or credit union. If you are having trouble paying bills, contact your creditors to request an extension or negotiate repayment.
- Contact a local credit counseling service. Assistance is available from nonprofit groups for little or no cost to you. To find a service near you, check with the National Foundation for Credit Counseling.