CFPB drops case against Los Angeles lender, citing 'weaponization' of consumer protection

The Consumer Financial Protection Bureau dropped a complaint against a Los Angeles lending platform, SoLo Funds Inc., that it charged last year with advertising no-interest loans when the agency claimed the company charged high fees in the form of a "tip" or "donation."  

The CFPB, under the Trump administration, filed a joint stipulation to dismiss the entire case - with prejudice - in the Central District of California on Friday. Consumer Financial Protection Bureau v. SoLo Funds Inc., 24-cv-04108 (C.D. Cal., filed May 17, 2024). 

Russ Vought, the new director of the Office of Management and Budget and acting director of the CFPB, blasted the decision to file the case in the first place Sunday in a post on X, crediting SoLo with what he described as coming up with an "innovative solution" to help working class Americans facing unexpected bills.  

"Shockingly, the CFPB tried to destroy this company, SoLo, which incurred million in legal fees and had to lay off 30% of its workforce," he wrote, adding that the "weaponization of consumer protection must end."

SoLo Funds has run into trouble with state regulators, including California's Department of Financial Protection and Innovation, which reached a settlement with the company in 2023.  

When the consumer protection agency's lawsuit was filed last year, then-director Rohit Chopra blasted the company "for using digital trickery to hide interest and fees on its online loans." 

The CPFB news release was removed from the agency website on Monday. Attorneys for the agency did not respond to requests for comment.

Travis Holoway, the CEO of SoLo Funds whose attorneys with Goodwin Procter LLP and McGlinchey Stafford PLLC had accused the federal agency of withholding discovery of its four-year investigation, hailed the decision to drop the case.

"As a disruptive fintech leader, SoLo, a certified benefit corporation, is proud to have over 2 million users that have injected $1 billion into working-class communities via its peer-to-peer community finance platform, and we look forward to continuing this critical work now that this costly litigation is behind us," he wrote in a statement.

The company downplayed the amount of the tips and donations, saying in a statement that discovery showed that for every $100 loan on its platform, the average "tip" offered was $10.40 and the average donation was $6.20 - "collectively, less than half the cost of an overdraft fee or bounced check."

The CFPB was created in the wake of the Great Recession in 2011 as part of the Dodd-Frank Act, which was passed by Congress and signed by President Barack Obama the year before. But Vought, serving as its acting director, has ordered the agency to stop all enforcement work, prompting lawsuits challenging the constitutionality of that action. 

California Attorney General Rob Bonta joined an amicus brief filed in two of those lawsuits, one filed by the City of Baltimore and the other by the National Treasury Employees Union.  

"The Trump Administration's takeover of the CFPB is an effort to destroy the federal agency responsible for protecting American families from being exploited by big banks and payday lenders," he wrote in a statement. "Eliminating the only federal agency with oversight over big banks puts everyday consumers at higher risk for financial losses, and places higher demands on states like California." 

In the amicus brief by California, 22 other states and the District of Columbia, they argued in favor of a preliminary injunction, saying that they are now unable to communicate with officials at the federal agency. The proposed injunction will be considered by Senior U.S. District Judge Amy Berman Jackson, an appointee of President Barack Obama.

"The sudden withdrawal of these CFPB services, supervision and collaborative assistance will thus inflict immediate harm on States and their residents," Andrea Oser of the New York attorney general's office wrote. "Indeed, these harms have already begun.

"In the absence of a functioning CFPB, States have suddenly lost the CFPB's significant expertise and resources that can be invaluable in ongoing matters that protect their residents," she added. "States' access to the benefits provided by the CFPB has effectively ceased." National Treasury Employees Union et al. v. Vought et al., 25-cv-00381 (D. D.C., filed Feb. 9, 2025).

That has led to some uncertainty over how cases will be handled in which the federal agency worked with attorneys in California.

Next month, a 9th U.S. Circuit Court of Appeals panel is due to consider a man's appeal of a summary judgment order for operating a fraudulent student loan debt relief enterprise by the CFPB, two states and the Los Angeles city attorney's office. Consumer Financial Protection Bureau et al. v. Wen et al., 23-55700 (9th Circ., filed Aug. 9, 2023).