If Your Finances Are Tight, Don’t Assume Fintech Is Your Friend – Forbes

December 23, 2021 by No Comments

Woman holding a mobile phone with loan application approval. She is being prompted to press a button … [+] to release the funds. Close up.


Breaking a general rule, I’ll talk about a personal experience. Being in the market for a piece of equipment for personal and business use, I noticed a site offered a form of fintech-driven financing. Filled out the form, sent over some additional information, and, poof, there was an offer to pay for the item over two years.

Looking at the details, though, it became apparent the terms were pretty steep. Not that the fintech company made that overly clear. Instead, it focused on the monthly payment (which couldn’t be paid down sooner to save money) and how good this would be to develop commercial credit history with Dun & Bradstreet.

Some quick quality time with a calculator showed that the terms translated into an annual 25% rate. Which was ridiculously high. I turned down the kind offer and walked away with what already had been a growing distrust of fintech.

“Help the unbanked,” they say. “Offer credit alternatives for those who had been using payday loans.”

But while fintech is a broad space of technology, some of those engaged in the space look at lot like non-tech predatory finance companies from the outside.

Look at a release today from the Consumer Financial Protection Bureau, titled, “CFPB Shutters Lending by VC-Backed Fintech for Violating Agency Order.”

Today, the Consumer Financial Protection Bureau (CFPB) announced that 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 lawsuit also accuses LendUp of violating fair lending regulations.

The CFPB alleged in 2016 that LendUp “did not give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed to consumers it would.”

The company had positioned itself as an alternative to payday loans, a type of short-term lending that tends towards usurious rates. It still markets itself as having been “founded with one clear, straightforward purpose: to provide anyone with a path to better financial health.”

Although now under frequently asked questions, in answer to “Are you still lending?” is the following: “LendUp made a business decision to cease lending and is no longer servicing loans. You can continue to access a series of online …….

Source: https://www.forbes.com/sites/eriksherman/2021/12/22/if-your-finances-are-tight-dont-assume-fintech-is-your-friend/


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