Need a Loan? Ben Jealous' Payday Lender Offers Them At A 900% Annual Interest

By Mark Uncapher MCGOP Chairman

Imagine you are short of money and are offered a loan that requires that, for every dollar borrowed, on an annual basis you must pay $9 in interest.  Those are Tony Soprano terms. 

Yet these are exactly the loan terms offered by “LendUp,” the business that Ben Jealous financed as a venture capitalist. In California and Louisiana, LendUp offers loans with 917.71% APR and in Mississippi loans run as high as a 1016.79% APR.[1]  Brazenly though, Jealous told the Baltimore Sun that he still considers LendUp “a leading voice for eradicating underhanded lending practices.”[2] 

The US Consumer Financial Protection Bureau and the California Department of Business Oversight would beg to differ with him.  They have fined his LendUp company nearly $3 million. The California agency said its fine reflected “allegations that it charged illegal fees and committed other widespread violations of payday and installment lending laws.”

Here is what the Jealous idea of a “good guy” payday lender was caught doing:

• LendUp was found to have miscalculated interest rates, meaning it charged customers overinflated charges.
• LendUp charged illegal fees and over inflated interest rates. The company charged customers fees for accessing their loans on the same day they were approved, but such charges are illegal under California law.
• LendUp charged customers for extending their payment period from 15 to 30 days, which is also illegal.
• LendUp told customers that they had to take out an installment loan if they wanted a payday loan, contradicting a law that says a loan provision cannot depend on the customer buying another product.
• LendUp advertised loans in states where they were not available. LendUp advertised its loans throughout the US, when in fact, a large proportion of its loan products were only available in California.
• LendUp falsely told customers that borrowing from LendUp would improve their credit scores. LendUp promised borrowers with low credit scores that if they repaid their LendUp loan on time, it would pass this information on to credit bureaus, thereby improving these borrowers' credit scores. However, in many cases, it never passed this information on, meaning that even if borrowers paid back their loans on time, it made no difference to their credit score.[3]

Ben Jealous cannot claim that he did not know about questionable payday industry lending practices.  At the NAACP which he headed, his organization has long taken a very active role against these abusive practices.  Their resolutions condemning predatory lending practices include “Discriminatory Sub-prime and Predatory Lending Practices” in 2000, “Predatory and Payday lending Practices” in 2001, “Anti-predatory Mortgage & Payday Lending Practices” in 2005, and “Reaffirming 2002 Policy on Predatory and Payday Lending Practices” in 2005 and “Affirmation Against all Predatory Lending Practices” in 2013.

Ben Jealous’ claim that his financial backing for LendUp was designed to “clean-up” the payday lending industry deserves more skepticism.  According a Pew Charitable Trust study, 650% is the typical APR is typical for lump-sum online payday loans.  Pew also concludes that online alternatives, such as LendUp, are often more expensive than loans obtained through storefronts.[4]

Neither was LendUp only a small part of the portfolio of companies that Jealous was involved with.  LendUp received over $361 million in venture funding, has 220 employees and has made 4 million loans totaling more than $1 billion.[5],[6]  In fact, LendUp’s officers have a strong enough relationship with the candidate that they are among Jealous’ California based contributors, giving him some $4,500 in donations.

So, Ben Jealous was against payday lending at the NAACP, until he saw an opportunity as a businessman to make money at it.  And then incredibly, and despite all the compelling evidence that his company engaged in predatory business practices, he claims that “his” payday lending business really performs a social service.

[1] https://www.lendup.com/rates-and-notices

[2] http://www.baltimoresun.com/news/maryland/politics/bs-md-jealous-venture-capitalist-20180820-story.html

[3] https://www.businessinsider.com/lendup-forced-to-pay-63-million-2016-9

[4] https://www.pewtrusts.org/en/research-and-analysis/reports/2014/10/fraud-and-abuse-online-harmful-practices-in-internet-payday-lending

[5] https://www.kaporcapital.com/portfolio/

[6] https://www.crunchbase.com/organization/lendup   https://www.crunchbase.com/organization/kapor-capital/current_employees/current_employees_image_list#section-current-team