LendUp Loans, LLC
Documents in this case
Case summary
On September 8, 2021, the Bureau filed a lawsuit in the United States District Court for the Northern District of California against LendUp Loans, LLC. LendUp is an online lender offering single-payment and installment loans to consumers. The Bureau alleged that LendUp’s brand identity is tied to its marketing claims that, that through on-time payments and repeat borrowing, borrowers will accrue points and ascend the “LendUp Ladder,” gaining access to loans with more favorable interest rates or larger loan amounts as consumers reach higher Ladder levels. In 2016, the Bureau issued an administrative consent order against LendUp to address the Bureau’s finding that LendUp misled consumers about the benefits of its loans. That order prohibits LendUp from misrepresenting the benefits of borrowing from the company. In this action, the Bureau alleged that, though LendUp claimed that consumers who ascended the LendUp Ladder would gain access to lower interest rates and larger loans, many borrowers did not actually get those benefits. The Bureau alleged that LendUp’s marketing claims were deceptive under the Consumer Financial Protection Act of 2010 and violated the prohibitions of the Bureau’s 2016 order. The Bureau also alleged that LendUp failed to timely issue required adverse-action notices and failed to provide accurate denial reasons on its adverse-action notices to thousands of loan applicants, in violation of the Equal Credit Opportunity Act and Regulation B, and that these violations also constitute violations of the CFPA.
On December 21, 2021, the Bureau filed a proposed stipulated final judgment and order to settle the lawsuit, which the court entered on December 30, 2021. The order imposes an injunction, prohibiting LendUp from offering or providing consumer credit, or assisting others that are offering or providing consumer credit; from collecting on, selling, or assigning outstanding subject loans, or assisting others in doing so; from selling consumer information; and from making misrepresentations in the sale or collection of consumer debt, or assisting others in doing so. The order also imposes a $100,000 civil money penalty and requires the payment of $40,500,000 in consumer redress, to be suspended upon payment of the civil money penalty based on LendUp’s demonstrated inability to pay.
Complaint ()
PDF of this document (9 pages)
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Complaint Case No. 3:21-cv-6945
LANE C. POWELL, MI Bar No. P79432 Phone: 415-844-9784 Email: [email protected] MAXWELL S. PELTZ, CA Bar No. 183662 Phone: 415-633-1328 Email: [email protected] Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Fax: 703-642-4585
Attorneys for Plaintiff Consumer Financial Protection Bureau
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
Consumer Financial Protection Bureau, Plaintiff, v.
LendUp Loans, LLC, Defendant.
Case No. 3:21-cv-6945
COMPLAINT
The Consumer Financial Protection Bureau files this Complaint against LendUp Loans, LLC (LendUp) and alleges as follows. Introduction 1.
LendUp claimed to offer larger loans at lower rates to repeat borrowers who ascend its “LendUp Ladder.” But many borrowers who reached higher LendUp Ladder levels did not, in fact, receive these promised benefits. 2.
LendUp made these unfulfilled marketing claims despite a 2016 Bureau Consent Order prohibiting it from making misrepresentations about the benefits of borrowing from LendUp.
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Complaint Case No. 3:21-cv-6945
3.
The Bureau brings this action under § 1054 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5564, to address LendUp’s deceptive acts and practices as well as its consent-order violations in connection with its marketing of the LendUp Ladder and associated claims regarding the benefits of repeat borrowing. See 12 U.S.C. §§ 5531, 5536(a).
4.
The Bureau also brings this action to address LendUp’s failure to provide timely and accurate adverse-action notifications to loan applicants, in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691–1691f, and Regulation B, 12 C.F.R. § 1002.9(a)–(b).
Jurisdiction and Venue 5.
The Bureau brings this action under §§ 1031, 1036, and 1054 of the CFPA, 12 U.S.C. §§ 5531, 5536, 5564, and ECOA, 15 U.S.C. §§ 1691–1691f, and Regulation B, 12 C.F.R. § 1002.9(a)–(b).
6.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 7.
This Court has personal jurisdiction over LendUp and venue is proper in this district because LendUp is located, resides, and does business in this district. 12 U.S.C. § 5564(f).
Intradistrict Assignment 8.
Under the Local Rules of Practice in Civil Proceedings before the United States District Court for the Northern District of California, this action arises in the County of Alameda because a substantial part of the events or omissions giving rise to the claims occurred there. See Civil L.R. 3-2(c). Accordingly, this action should be assigned to the San Francisco or the Oakland Division of this Court. See Civil L.R. 3-2(d).
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Complaint Case No. 3:21-cv-6945
Parties 9.
The Bureau is an agency of the United States created by the CFPA and charged with regulating the offering and providing of consumer-financial products and services under federal consumer-financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority and may initiate civil actions in federal district court to address violations of “Federal consumer financial law.” 12 U.S.C. § 5564(a)–(b). 10.
LendUp is a limited-liability company headquartered in Oakland, California. LendUp offers and provides loans online to consumers primarily for personal, family, or household purposes. LendUp’s loans are “consumer financial product[s] or service[s],” and LendUp is a “covered person” under the CFPA. 12 U.S.C. § 5481(5)(A), (6)(A), (15)(A)(i). Facts 11.
Central to LendUp’s marketing and brand identity is the so-called “LendUp Ladder.” LendUp’s website explained: “Traditionally, payday lenders treat all their customers the same: Repeat borrowers with perfect repayment records are charged the same interest and fees as unproven first-time borrowers. We think that’s wrong. So we built the LendUp Ladder to incentivize responsible actions and enable borrowers to earn access to apply for larger loans at lower interest rates over time.”
12.
According to LendUp’s marketing, borrowers who repaid loans on time and took free courses offered through LendUp’s website would earn “points” that would allow them to “climb” to higher Ladder levels, where they could access lower interest rates and larger loan amounts. Under the tagline “Climb to a brighter financial future,” LendUp stated on its website, “Over time, you can earn points to climb the LendUp Ladder to apply for larger loans at lower rates. . . . Earning points is as simple as making on-time loan payments and taking our free financial education courses.”
13.
In fact, many repeat borrowers who ascended to higher Ladder levels did not receive lower interest rates; they received the same or higher rates compared to their previous loans.
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Complaint Case No. 3:21-cv-6945
(a) Between October 2016 and January 2020, LendUp extended over 340,000 single-payment loans to over 80,000 borrowers where LendUp charged the same interest rate as it had charged the borrower for an identical loan at a lower Ladder level.
(b) Between October 2016 and January 2020, LendUp extended over 30,000 single-payment loans to over 15,000 borrowers where LendUp charged the same interest rate on a larger loan compared to a loan of the same duration that it had extended to the borrower at a lower Ladder level. (c) Between October 2016 and January 2020, LendUp extended about 150,000 single-payment loans to over 30,000 borrowers where LendUp charged a higher interest rate than it had charged the borrower for an otherwise identical loan at a lower Ladder level.
(d) Between October 2016 and January 2020, LendUp extended over 30,000 single-payment loans to over 15,000 borrowers where LendUp charged a higher interest rate on a larger loan compared to a loan of the same duration that it had extended to the borrower at a lower Ladder level. 14.
And many borrowers did not in fact gain access to larger loans as they moved up the LendUp Ladder. LendUp offered “Silver,” “Gold,” “Platinum,” and “Prime” Ladder levels. (It did not, however, offer all Ladder levels in every state.) In some states, LendUp offered the same maximum-available loan amount at both the Silver and Gold Levels; a borrower who ascended from Silver to Gold could not access a larger loan. And in some states, Silver and Gold were the only available Ladder levels. 15.
In some instances, LendUp unilaterally reduced the maximum loan amount available to borrowers who had maintained their Ladder level. Between October 2016 and January 2020, over 10,000 repeat borrowers saw their maximum available loan amount decrease, despite having continued to accrue Ladder points. Many of these affected borrowers had reached the highest Ladder level, Prime. Case 3:21-cv-06945 Document 1 Filed 09/08/21 Page 4 of 9
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Complaint Case No. 3:21-cv-6945
16.
On September 27, 2016, the Bureau issued an administrative consent order against LendUp under the caption Flurish, Inc. d/b/a LendUp, 2016-CFPB-0023 (the 2016 Consent Order). The 2016 Consent Order went into effect on its issuance date and remains in effect. The 2016 Consent Order prohibited LendUp from “misrepresent[ing] . . . expressly or impliedly[,] [t]he benefits of borrowing from [LendUp], including access to and availability of loan products.”
17.
Since October 2016, LendUp has failed to provide timely and accurate adverseaction notices after declining credit applications. In over 7,400 instances, LendUp failed to provide adverse-action notices within 30 days after receiving a completed application. And in over 71,800 instances, LendUp’s adverse-action notices misstated the principle reasons why it declined the credit application.
Count I Violation of the CFPA (Deceiving Consumers Regarding Benefits of Repeat Borrowing) 18.
The Bureau realleges and incorporates by reference paragraphs 1–16. 19.
Section 1036(a)(1)(B) of the CFPA prohibits covered persons, such as LendUp, from engaging in deceptive acts or practices. 12 U.S.C. § 5536(a)(1)(B). An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances. Information is material to consumers if it is likely to affect a consumer’s conduct regarding the product or service. 20.
LendUp misrepresented the benefits of repeat borrowing from LendUp, including by claiming that borrowers who ascended the LendUp Ladder would gain access to larger loans at lower rates when, in fact, that was not true for tens of thousands of consumers. LendUp’s claims were likely to mislead consumers acting reasonably under the circumstances about the benefits of LendUp’s Ladder program to returning borrowers. And LendUp’s claims were material because they were likely to affect consumers’ decisions to borrow from LendUp in the first instance, take out subsequent loans from LendUp, and repay the loans. Case 3:21-cv-06945 Document 1 Filed 09/08/21 Page 5 of 9
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21.
LendUp therefore engaged in deceptive acts or practices that violated §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a); 5536(a)(1)(B). Count II Violation of the CFPA (Making Misrepresentations Prohibited by the 2016 Consent Order) 22.
The Bureau realleges and incorporates by reference paragraphs 1–16. 23.
Under § 1036(a)(1)(A) of the CFPA, it is unlawful for covered persons, such as LendUp, to “commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
24.
The 2016 Consent Order is an “order prescribed by the Bureau” and is therefore a “Federal consumer financial law.” 12 U.S.C. § 5481(14). 25.
The 2016 Consent Order prohibits LendUp from expressly or impliedly misrepresenting the benefits of borrowing from LendUp, including access to and availability of its loan products.
26.
Since the 2016 Consent Order took effect, LendUp has misrepresented the benefits of borrowing from LendUp, including by claiming that returning borrowers who climb the LendUp Ladder gain access to larger loans at lower interest rates when, in many instances, such claims were not true.
27.
LendUp’s misrepresentations violated the 2016 Consent Order and thereby violated a Federal consumer financial law. Accordingly, LendUp violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
Count III Violation of ECOA and Regulation B (Failing to Provide Timely and Accurate Adverse-Action Notifications) 28.
The Bureau realleges and incorporates by reference paragraphs 1–17. 29.
When a consumer applies for and is denied credit, ECOA and its implementing regulation, Regulation B, require creditors, such as LendUp, to explain the principal reasons Case 3:21-cv-06945 Document 1 Filed 09/08/21 Page 6 of 9
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why adverse action was taken, providing transparency about the underwriting process and helping to protect against potential credit discrimination. See 15 U.S.C. §§ 1691–1691f; 12 C.F.R. § 1002.9(a)–(b).
30.
ECOA and Regulation B require a creditor to notify an applicant of the action taken on the credit application within 30 days after receiving a completed application. 12 C.F.R. § 1002.9(a)(1).
31.
Since October 2016, LendUp has failed to provide notice of adverse action taken within 30 days of receiving a completed application on over 7,400 applications. 32.
ECOA and Regulation B also specify the content of an adverse-action notice. The creditor must provide either a statement of the specific reasons for the action taken or a disclosure of the applicant’s right to request a statement of specific reasons. 12 C.F.R. § 1002.9(a)(2)(i), (ii). Where the creditor provides a statement of the specific reasons for the action taken, those reasons “must be specific and indicate the principal reason(s) for the adverse action.” 12 C.F.R. § 1002.9(b)(2).
33.
Since October 2016, LendUp has issued over 71,800 adverse-action notices to credit applicants that failed to accurately describe the principal reasons why LendUp denied the application.
34.
LendUp thereby violated ECOA and Regulation B. 15 U.S.C. §§ 1691–1691f; 12 C.F.R. § 1002.9(a)–(b).
Count IV Violation of the CFPA (Violating Federal Consumer Financial Law) 35.
The Bureau realleges and incorporates by reference paragraphs 1–17. 36.
Under § 1036(a)(1)(A) of the CFPA, it is unlawful for covered persons, such as LendUp, to “commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
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37.
ECOA and Regulation B are “Federal consumer financial laws.” 12 U.S.C. § 5481(12)(D), (14).
38.
LendUp’s ECOA and Regulation B violations, described above in Count III, constitute violations of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A). Demand for Relief The Bureau requests that the Court:
a.
permanently enjoin LendUp from committing future violations of the CFPA, the Bureau’s 2016 Consent Order, ECOA, or any provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14); b.
grant additional injunctive relief as the Court deems just and proper; c.
order LendUp to pay damages, restitution, and other monetary relief to consumers;
d.
order LendUp to pay disgorgement or compensation for unjust enrichment; e.
impose on LendUp a civil money penalty; f.
award costs against LendUp; and g.
award additional relief as the Court deems just and proper.
Respectfully submitted,
Cara M. Petersen Acting Enforcement Director Jeffrey Paul Ehrlich Deputy Enforcement Director Kara K. Miller Assistant Deputy Enforcement Director
/s/ Lane C. Powell_____________ Lane C. Powell (MI Bar No. P79432) Maxwell S. Peltz (CA Bar No. 183662) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Case 3:21-cv-06945 Document 1 Filed 09/08/21 Page 8 of 9
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Case 3:21-cv-06945 Document1 Filed 09/08/21 Page 9 of 9
Complaint Case No. 3:21-cv-6945
Telephone (Powell): 415-844-9784 Telephone (Peltz): 415-633-1328 Fax: 703-642-4585 [email protected] [email protected]
Attorneys for the Consumer Financial Protection Bureau
Order ()
PDF of this document (19 pages)
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Stipulated Final Judgment and Order Case No. 3:21-cv-06945-JSC
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
Consumer Financial Protection Bureau, Plaintiff, v.
LendUp Loans, LLC, Defendant.
Case No. 3:21-cv-06945-JSC
[Proposed] Stipulated Final Judgment and Order
The Consumer Financial Protection Bureau (Bureau) commenced this civil action on September 8, 2021, to obtain injunctive and monetary relief and civil penalties from LendUp Loans, LLC (Defendant). The Complaint alleges violations of § 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A), as well as violations of the Bureau’s 2016 consent order, in connection with Defendant’s marketing of the LendUp Ladder and associated claims regarding the benefits of repeat borrowing. The Complaint also alleges violations of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691–1691f, and Regulation B, 12 C.F.R. § 1002.9(a)–(b). The Bureau and Defendant agree to the entry of this Stipulated Final Judgment and Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action.
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2.
Defendant neither admits nor denies the allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over it and the subject matter of this action.
3.
Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees. 4.
Entry of this Order is in the public interest. DEFINITIONS 5.
The following definitions apply to this Order: a.
“Affected Consumer” includes any borrower to whom Defendant extended a Subject Loan during the Relevant Period. b.
“APR” means annual percentage rate, or the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made, and is calculated as set forth in 12 C.F.R. § 1026.22(a)(1).
c. “Assisting Others” includes, but is not limited to: i. providing names of, or assisting in the generation of, potential customers; and ii. performing marketing, billing, payment, administrative, customer, or collection services of any kind. d. “Board” means Defendant’s duly elected and acting Board of Managers.
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e. “Defendant” means LendUp Loans, LLC, f/k/a Flurish, Inc., d/b/a LendUp, and its successors and assigns. f. “Effective Date” means the date on which the Order is entered by the Court.
g. “LendUp Ladder” means Defendant’s tiered borrower-incentive or loyalty program or system, which included some or all of the following levels: “Silver,” “Gold,” “Platinum,” and “Prime.” h. “Regional Director” means the Regional Director for the West Region for the Office of Supervision for the Consumer Financial Protection Bureau, or his or her delegate. i. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. j. “Relevant Period” includes the period from October 1, 2016, to when LendUp ceased originating loans. k. “Subject Loan” means a loan where Defendant: i. charged a borrower the same APR that Defendant charged that borrower for a loan of identical amount and duration extended to that borrower at a lower LendUp Ladder level; ii. charged a borrower the same APR that Defendant charged that borrower for a smaller loan of the same duration extended to that borrower at a lower LendUp Ladder level; iii. charged a borrower a higher APR than Defendant charged that borrower for a loan of identical amount and duration extended to that borrower at a lower LendUp Ladder level; Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 3 of 19
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iv. charged a borrower a higher APR than Defendant charged that borrower for a smaller loan of the same duration extended to that borrower at a lower LendUp Ladder level; or v. extended a loan to a borrower for the maximum loan amount that Defendant offered to that borrower at the time of the loan, and that amount was lower than an amount that Defendant had previously extended to that borrower. CONDUCT PROVISIONS I Prohibition on Lending Activities IT IS ORDERED that:
6.
Defendant, whether acting directly or indirectly, is permanently restrained from:
a. advertising, marketing, promoting, offering for sale, selling, or providing any extension of credit;
b. receiving any remuneration or other consideration from, or holding any ownership interest in, any person engaged in advertising, marketing, promoting, offering for sale, selling, or providing any extension of credit; and c. Assisting Others in (a) or (b).
Nothing in this Order shall be read as an exception to this Paragraph. II Prohibition on Collecting on, Selling, or Assigning Subject Loans IT IS FURTHER ORDERED that:
7.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 4 of 19
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Stipulated Final Judgment and Order Case No. 3:21-cv-06945-JSC
have actual notice of this Order, whether acting directly or indirectly, are permanently restrained from—and permanently restrained from Assisting Others in—attempting to enforce or collect on any Subject Loan, including but not limited to making any request for payment on any Subject Loan and initiating or maintaining any collection action on any Subject Loan. 8.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, are permanently restrained from—and permanently restrained from Assisting Others in—selling or assigning, or attempting to sell or assign, any Subject Loan. III Prohibition on Misrepresentations IT IS FURTHER ORDERED that:
9.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit, or the collection of consumer debt, may not misrepresent, and may not Assist Others in misrepresenting, expressly or impliedly, any fact material to consumers, including any material restrictions, limitations, or conditions of such credit or debt and the benefits or costs of borrowing. IV Prohibition on Violations of Federal Consumer Financial Law IT IS FURTHER ORDERED that:
10.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, may not Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 5 of 19
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violate §§ 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536, the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691–1691f, and Regulation B, 12 C.F.R. § 1002.9(a)–(b), or any other provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14).
V Customer Information IT IS FURTHER ORDERED that:
11.
Defendant and its officers, agents, servants, employees, and attorneys and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, may not: a. disclose, use, or benefit from customer information, including names, addresses, telephone numbers, email addresses, social security numbers, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that Defendant obtained before the Effective Date in connection with the offering or provision of credit;
b. attempt to sell, assign, or otherwise transfer any right to collect payment on any Subject Loan.
However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order.
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MONETARY PROVISIONS VI Order to Pay Redress IT IS FURTHER ORDERED that:
12.
A judgment for monetary relief is entered in favor of the Bureau and against Defendant in the amount of $40,500,000, for the purpose of providing redress to Affected Consumers in the amount of the finance charges paid in connection with Subject Loans; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 17 through 19 of Section VIII and Paragraphs 21 through 23 of Section IX and subject to Section VII of this Consent Order.
13.
With regard to any redress that Defendant pays under this Section, if Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant secures a tax deduction or tax credit with regard to any federal, state, or local tax, Defendant must: (a) immediately notify the Regional Director in writing, and (b) within ten (10) days of receiving the funds or monetary benefit, Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 12 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 12.
14.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or the Bureau’s agent according to applicable statutes and regulations to be used for redress for Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 7 of 19
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injured consumers, including, but not limited to, refund of moneys, restitution, damages or other monetary relief, and for any attendant expenses for the administration of any such redress.
15.
If the Bureau determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury as disgorgement. Defendant will have no right to challenge the Bureau’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by the Bureau. 16.
Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. VII Effect of Misrepresentation or Omission Regarding Financial Condition IT IS FURTHER ORDERED that:
17.
The suspension of the monetary judgment entered in Section VI of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant’s financial statements and supporting documents submitted to the Bureau on or about July 16, 2021, August 20, 2021, and November 29, 2021, which Defendant asserts are truthful, accurate, and complete, and which include: a. Defendant’s July 16, 2021 letter and its attachments, including Defendant’s Consolidated Balance Sheet for December 1, 2020, through May 31, 2021, submitted to the Bureau on or about July 16, 2021;
b. Defendant’s Consolidated Balance Sheet and Consolidated Profit & Loss Statement for May 1, 2020, through July 31, 2021, submitted to the Bureau on or about August 20, 2021; and Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 8 of 19
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c. Defendant’s Consolidated Balance Sheet and Consolidated Profit & Loss Statement for August 1, 2021, through October 31, 2021, submitted to the Bureau on or about November 29, 2021. 18.
If upon motion by the Bureau, the Court determines that Defendant has failed to disclose any material asset or that any of its financial statements contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section VI and without further adjudication, shall reinstate the monetary judgment, and the full judgment of $40,500,000 shall be immediately due and payable.
19.
If the Court terminates the suspension of the monetary judgment under this Section, the Bureau will be entitled to interest on the judgment, computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid. 20.
Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order.
VIII Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
21.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $100,000 to the Bureau. This penalty is based on Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 9 of 19
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Defendant’s limited ability to pay as attested to in its financial statements listed in Section VII above.
22.
Within 10 days of the Effective Date, Defendant must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 23.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
24.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendant may not: a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
IX Additional Monetary Provisions IT IS FURTHER ORDERED that:
25.
In the event of any default on Defendant’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 26.
Defendant relinquishes all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant.
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27.
Under 31 U.S.C. § 7701, Defendant, unless it already has done so, must furnish to the Bureau its taxpayer-identification number, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
28.
The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.
29.
The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-inpossession.
30.
Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendant must notify the Regional Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 11 of 19
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imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
COMPLIANCE PROVISIONS 31.
Defendant anticipates that it will file a certificate of dissolution within 90 days of the Effective Date of this Order and will have no successors or assigns. All continuing obligations under Paragraphs 32 through 49 of Sections X through XV shall be extinguished upon Defendant’s submission to the Bureau of a declaration under penalty of perjury that Defendant has dissolved with an attached authenticated certificate of dissolution, unless a determination is made by this Court that one or more persons is a successor or assign of Defendant subsequent to Defendant’s dissolution. With respect to Paragraphs 32 through 49 of Sections X through XV, Defendant must comply with applicable provisions of Paragraphs 32, 33, 36, 37, 39, 40, and 45 before Defendant may file a certificate of dissolution.
X Reporting Requirements 32.
Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 12 of 19
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filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 33.
Within 7 days of the Effective Date, Defendant must: a. designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with Defendant;
b. identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c. describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
34.
Defendant must report any change in the information required to be submitted under Paragraph 32 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 35.
Within 90 days of the Effective Date, and again one year after the Effective Date, Defendant must submit to the Regional Director an accurate written compliance progress report (Compliance Report) that has been approved by and sworn to under penalty of perjury by the Board, which, at a minimum: a. lists each applicable paragraph and subparagraph of this Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; and Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 13 of 19
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b. attaches a copy of each Order Acknowledgment obtained under Section XI, unless previously submitted to the Bureau. XI Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
36.
Within 7 days of the Effective Date, Defendant must submit to the Regional Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
37.
Within 30 days of the Effective Date, Defendant must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order. 38.
For 5 years from the Effective Date, Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VII, any future board members and executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
39.
Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 40.
Within 90 days of the Effective Date, Defendant must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 35 and 36 and a copy of all signed and dated statements acknowledging receipt of this Order under Paragraph 38. Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 14 of 19
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XII Recordkeeping IT IS FURTHER ORDERED that:
41.
Defendant must create, for at least 5 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request.
42.
Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer: a. copies of all sales scripts; training materials; advertisements; websites; and other marketing materials, including any such materials used by a third party on Defendant’s behalf; b. documents sufficient to demonstrate the experience of consumers on each materially different version of each website on which Defendant, whether acting directly or through any sole proprietorship, partnership, limited liability company, corporation, subsidiary, branch, division, affiliate, or other entity, advertises, promotes, markets, offers for sale, sells, or provides products or services; and c. for each Affected Consumer, the information specified in Paragraph 44.
Defendant must make these materials available to the Bureau upon the Bureau’s request.
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XIII Notices IT IS FURTHER ORDERED that:
43.
Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. LendUp Loans, LLC, Case No. 3:21-cv-06945-JSC,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]:
Regional Director, Bureau West Region Consumer Financial Protection Bureau 301 Howard Street, Suite 1200 San Francisco, CA 94105 XIV Cooperation with the Bureau IT IS FURTHER ORDERED that:
44.
Defendant must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer.
45.
Within 30 days of the Effective Date, for all loans originated by Defendant on or after February 1, 2020, Defendant must provide the following information in tab-delimited text files: a. unique loan identification number;
b. unique borrower identification number; c. borrower’s last name;
d. borrower’s first name;
e. borrower’s middle name;
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f. borrower’s address;
g. LendUp Ladder level at origination (e.g., Silver, Gold, Platinum, Prime);
h. borrower’s LendUp Ladder incentive-points total at origination; i. origination date;
j. whether the loan was a single-payment or installment loan; k. duration of loan at origination; l. scheduled payoff date at origination; m. principal amount at origination; n. finance charge at origination; o. APR at origination;
p. loan status (e.g., paid off, delinquent, etc.); q. whether the loan was modified; r. outstanding principal balance, if applicable; s. current payoff amount, if applicable; and t. date loan was paid off, if applicable. 46.
Defendant must provide additional information in its or its agents’ possession or control to assist the Bureau in determining the identity or location of, or the amount of the finance charge paid by, any consumer who may have obtained a loan from Defendant during the Relevant Period (including, but not limited to any of the information specified in Paragraph 44) within 14 days of receiving a written request from the Bureau. Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 17 of 19
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XV Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendant’s compliance with this Order, including the financial representations upon which the judgment of redress was suspended:
47.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents.
48.
Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present.
49.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
XVI 50.
Should Defendant seek to transfer or assign all or part of its operations that are subject to this Order, Defendant must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.
XVII Release 51.
The Bureau releases and discharges Defendant from all potential liability for violations of law that the Bureau has or might have asserted based on the practices described in the Complaint, to the extent such practices occurred Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 18 of 19
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XVIII Retention of Jurisdiction IT IS FURTHER ORDERED that:
52.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
IT IS SO ORDERED.
DATED this ___ day of _________, 20__.
_________________________________________
United States District Judge
30th December U N I T E D S T A T E S D I S T R I C T C O U R T N O R T H E R N D I S T R I C T O F C A L I F O R N I A GRANTED Judge Jacqueline Scott Corley Case 3:21-cv-06945-JSC Document 18 Filed 12/30/21 Page 19 of 19