SoLo Funds Class Action: "Zero-Interest" Loans Accused of Hidden Fees

Case Overview: A class action lawsuit has been filed against SoLo Funds, alleging that the company misleads borrowers with claims of zero-interest loans and charges excessive fees disguised as "tips" and "donations."

Consumers Affected: Individuals who have used SoLo Funds to borrow money.

Court: U.S. District Court for the Central District of California

SoLo Funds, a fintech peer-to-peer lending platform based in Los Angeles, is being sued over claims of deceptive advertising. 

The lawsuit alleges that SoLo misleads borrowers with claims of zero-interest loans and no hidden fees, but actually makes consumers pay “tips” and “donations” that are, in effect, hidden finance charges, resulting in extraordinarily high annual percentage rates.

SoLo Funds Accused of Charging Excessive Fees, Misleading Borrowers

Ohio resident Danielle Cofield filed the proposed class action lawsuit against the company, claiming she was misled by its fee structure which allegedly obscured the true cost of her loans. 

Since joining the platform in 2021, Cofield has borrowed approximately $35,000 through SoLo, often paying high tip and donation fees, according to the lawsuit. On a $500 loan Cofield paid an extra $95 in tips and donations, which, over a three-day period, equates to an APR of over 2,300%. She claims SoLo’s system suggested paying these fees to improve her chances of loan approval and alleges that SoLo falsely displayed a 0% APR on these loans.

Cofield’s frustration grew in April, when SoLo approved her for a $500 loan but never funded it, according to the lawsuit. Despite the missing funds, SoLo still sent her a “Payment Overdue” notice.

How SoLo Funds' Tip and Donation System Works

According to the complaint, SoLo’s lending system requires borrowers to select a “tip fee” and “donation fee” when applying for a loan. Although labeled as optional, these fees are highly encouraged, with SoLo suggesting that higher tips increase a loan’s approval chances, the lawsuit alleges. The lawsuit also claims that SoLo’s app does not clearly allow borrowers to skip the donation fee, instead burying the option in a separate section of the app.

The lawsuit argues that SoLo’s tips and donations structure conceals the actual cost of the loans. Despite SoLo’s assurances that loans are interest-free, these fees function as finance charges, leading to extremely high effective interest rates, sometimes reaching triple-digit APRs. Loans on SoLo’s platform range from $20 to $575, with repayment periods often less than a month.

Lawsuit Claims SoLo Funds' Marketing Deceives Borrowers About Loan Costs

Cofield and other borrowers say they were not made fully aware of these added fees or the APR on their loans until the funds were disbursed. Many of SoLo’s advertisements promote zero-interest loans, which, plaintiffs argue, mislead borrowers into believing they’re getting low-cost credit. 

Documents on SoLo’s website and app also list 0% APR and no finance charges, creating confusion for borrowers who later face high costs in tip and donation fees. Cofield’s case alleges that these hidden fees misled her into believing she was obtaining fair, zero-interest loans. 

Like many other cash advance apps, SoLo claims to offer consumers an affordable alternative to high-interest payday loans, but borrowers are charged fees that amount to significant interest in practice.

Cash Advance Apps Face Growing Scrutiny Over Hidden Fees and High APRs

This lawsuit is not the first legal challenge SoLo has faced over its fee structure. In July, Pennsylvania’s Attorney General settled with SoLo over similar allegations, resulting in SoLo paying $158,000 in restitution and civil penalties. In May, Connecticut’s Department of Banking penalized SoLo for classifying finance charges as “tips,” requiring SoLo to reimburse borrowers and pay $100,000 to the state.

SoLo also faces legal issues in California, Washington, D.C., and from the Consumer Financial Protection Bureau, which has an ongoing case questioning the platform’s voluntary tipping model. SoLo has defended itself, claiming its tips support peer-to-peer lending and pointing to prior negotiations with the CFPB.

Other cash advance apps are facing similar lawsuits over hidden fees and excessive APRs. The cash advance app Earnin has been accused of trapping users in cycles of debt with high fees, and another cash advance company, Klover, is facing a lawsuit from customers who allege that the company’s fees result in interest rates over 1,000%.

In the SoLo lawsuit, Cofield wants to represent consumers from across the country in her claims of violations of the Truth In Lending Act; California’s Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law; and Ohio’s Consumer Sales Practices Act. She is seeking damages, interest, injunctive relief, restitution, costs, and fees.

Case Details

• Lawsuit: Cofield v. SoLo Funds, Inc.
• Case Number: 2:24-cv-8934
• Court: U.S. District Court for the Central District of California

Plaintiffs' Attorneys

• Kyle McLean, Lisa R. Considine, and Leslie L. Pescia (Siri & Glimstad LLP)

Have you used SoLo Funds or other cash advance apps? Share your experiences and thoughts on their fee structures in the comments below.