The Consumer Financial Protection Bureau has filed a lawsuit against the online lender LendUp for allegedly making loans to service members that exceeded a federal cap on interest rates for military borrowers.
In a lawsuit filed Friday, the CFPB said that Oakland, Calif.,-based LendUp has originated more than 4,000 loans since 2016 to servicemembers that included charges, costs, and fees in its calculation of the annual percentage rate, pushing the effective rate above 36%.
It also alleged that LendUp forced borrowers to submit to arbitration for any disputes, and failed to include statements about the annual percentage rate in mandatory loan disclosures. The lawsuit was filed in the U.S. District Court for the Northern District of California.
The Military Lending Act requires lenders to keep that APR on loans to active-duty service members at 36% or below. It also requires certain mandatory disclosures of loan terms and prohibits clauses saying borrowers must resolve disputes through arbitration and not in the courts.
The CFPB is seeking damages, redress to consumers, disgorgement of ill-gotten gains and civil money penalties, though the bureau did not quantify any of those amounts.
LendUp stopped offering loans to service members in 2017, when it self-reported the issue to the CFPB, a spokesman said. LendUp said it refunded all interest and fees to service members and did not report any delinquent loans to credit bureaus.
This story has been updated to include a comment from LendUp.
