News

LendUp to liquidate assets and neobank subsidiary

Tuesday 2 August 2022 11:28 CET | News

US-based alternative lending company LendUp Global has reportedly begun liquidating assets, including its neobank subsdiary.

According to Protocol, the process will take place through an assignment for the benefit of creditors, a quieter alternative to a public bankruptcy. Protocol cited Fintech Business Weekly’s report from last week coming from the company. According to the source, Lendup is coming out of a regulatory battle from 2016 to the end of 2021. 

The company first entered into consent orders with regulators in 2016 after allegedly deceiving borrowers about the terms of their loans. Four years later the company was again cited by US The Consumer Financial Protection Bureau (CFPB) for violating military lending laws.

 

US-based alternative lending company LendUp Global has reportedly begun liquidating assets, including its neobank subsdiary.

Regulatory escalation peaked in December 2021 for LendUp

According to a Banking Dive article, The CFPB has upended the lending operation of online lender LendUp in December 2021, ‘for repeatedly lying and illegally cheating its customers,’ the bureau’s director, Rohit Chopra, said in a release cited by the media source at the time. LendUp agreed in December to pay the bureau a USD 100,000 penalty as part of a settlement that also prohibits the fintech from collecting on its loans, making new ones, or selling consumer data.

Banking Dive cited at a time a statement emailed to American Banker disclosing that, while not admit to liability in its settlement, it was ‘pleased to have fully resolved its litigation with the CFPB.’

Alternative lending in the US

Statista placed the total transaction value in the US alternative lending segment is projected to reach USD 334,277.7 million in 2021, with crowdlending being the largest market segment globally (USD 241,582.2 million). The sector is expected to show an annual growth rate of 4.70% (CAGR 2021-2025).

There have been more than one source citing a gradual increase of market penetration in the US for alternative lenders. However, in May 2022, a joint research paper issued by specialists from Ohio State University, the National Bureau of Economic Research, and Brigham Young University concluded that ’while the number of loan applications increased sharply in early March 2020, the supply of credit collapsed as lenders dropped from the platform so that the likelihood of applicants receiving loan offers fell precipitously. The funding model of fintech lenders helps explain the drying up of the loan supply as lenders became financially constrained and lost their ability to fund new loans’.

LendUp may be part of a cohort of alt lenders who face increased regulatory scrutiny for succumbing to bad practices after the increased demand for alternative loans amid the pandemic.

More: Link


Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

Keywords: lending, regulation, B2B payments, online banking
Categories: Banking & Fintech
Companies: LendUp
Countries: United States
This article is part of category

Banking & Fintech

LendUp

|
Discover all the Company news on LendUp and other articles related to LendUp in The Paypers News, Reports, and insights on the payments and fintech industry: