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> LendUp has been subject to multiple enforcement actions by the CFPB. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing

> LendUp has been subject to multiple enforcement actions by the CFPB. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing from the company, the CFPB sued LendUp in 2020 for allegedly violating the Military Lending Act and obtained a judgment against LendUp in that action. In September 2021, the CFPB filed this third action alleging that LendUp: So YC funded a payday lender that targeted active duty military service members?

colechristensen 5y ago
That seems to be a fair assessment.
newbie789 5y ago
dang 5y ago
YC wouldn't do that. I don't know the history here but I do know that both founders left the company years ago (which is pretty unusual). I can only assume that a lot changed since they started 10 years ago (they were in W12).
- emodendroket 5y ago
  When did that happen? According to this piece, the first regulatory action against them for these practices was in 2016.
  - _liam 5y ago
    Looks to have been in 2018 or 2019
    - emodendroket 5y ago
      2019 looks right based on these sources: https://debanked.com/2019/01/lendup-gets-a-shake-up/ https://debanked.com/2019/01/lendup-gets-a-shake-up/ https://www.crunchbase.com/person/jacob-rosenberg https://www.crunchbase.com/person/jacob-rosenberg (it would seem Rosenberg actually left in 2018) Though according to the first one Orloff stayed on the board even after that point.
- coderintherye 5y ago
  DanG, do you have any comments regarding the replies you received to your comment here? You seem to have made a blanket statement that YC wouldn't do that, but the evidence points to the fact that YC did do that, as it funded the founders who made these decisions that led to enforcement actions in 2016 against them. It's not like this is esoteric finance law either, I've worked in fintech lending during this whole time period and some of these violations are lending regulation 101. Military Lending Act compliance at the very least is dead simple to comply with and is the very first thing most lenders ensure compliance with (due to it being federal, whereas some more esoteric state level stuff can often get missed).
  - tomhoward 5y ago
    Dang doesn't represent YC's accelerator/investments arm (i.e., he's an employee engaged to run HN, not a YC partner who makes investment decisions or official YC announcements). But here's an article from 2016 about what LendUp was trying to do back then: https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn:pYGg https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn... I don't know much about LendUp at all, but I do remember the surprise - and feeling it myself - when it was announced that YC was funding a payday lending company. Then I remember the thinking behind it being explained (perhaps on HN, perhaps elsewhere) and seeing that the founders seemed to be making a sincere effort to offer something that was at least just less-terrible than the existing payday lending options around (many of which involve dealing with crime gangs), which made me think "OK, I guess it's worth a try". I presume YC thought the same thing when they invested almost ten years ago. If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before, I still don't think it's reprehensible that YC thought it was worth backing founders that seemed to be making a sincere effort to try.
    - emodendroket 5y ago
      I don't think it's true that the only alternative is loan sharks. It's mostly "traditional" payday lenders, many of which are owned by the big banks (through a couple layers of obfuscation to cover up the stench).
- ddtaylor 5y ago
  This may not have been YC's intent, but it does appear that's what's effectively happened in the end. I have to assume that YC has some method of exit strategy to separate itself from companies that deviate so strongly. Maybe YC was just asleep at the wheel, I don't know, but in either case they are attached to the failure here.
- isx726552 5y ago
  Did YC divest itself once the problems started?
istjohn 5y ago
YC should take steps to ensure the businesses they invest in operate ethically. Of course, the first step would be to acknowledge that something went terribly wrong here.
hn_throwaway_99 5y ago
Somebody commented in another thread, but basing it on the Military Lending Act seems like the most straightforward thing to give federal jurisdiction, as most usury laws are at the state level. Tax evasion wasn't Al Capone's primary crime either.

colechristensen 5y ago

That seems to be a fair assessment.

newbie789 5y ago

dang 5y ago

YC wouldn't do that. I don't know the history here but I do know that both founders left the company years ago (which is pretty unusual). I can only assume that a lot changed since they started 10 years ago (they were in W12).

emodendroket 5y ago
When did that happen? According to this piece, the first regulatory action against them for these practices was in 2016.
- _liam 5y ago
  Looks to have been in 2018 or 2019
  - emodendroket 5y ago
    2019 looks right based on these sources: https://debanked.com/2019/01/lendup-gets-a-shake-up/ https://debanked.com/2019/01/lendup-gets-a-shake-up/ https://www.crunchbase.com/person/jacob-rosenberg https://www.crunchbase.com/person/jacob-rosenberg (it would seem Rosenberg actually left in 2018) Though according to the first one Orloff stayed on the board even after that point.
coderintherye 5y ago
DanG, do you have any comments regarding the replies you received to your comment here? You seem to have made a blanket statement that YC wouldn't do that, but the evidence points to the fact that YC did do that, as it funded the founders who made these decisions that led to enforcement actions in 2016 against them. It's not like this is esoteric finance law either, I've worked in fintech lending during this whole time period and some of these violations are lending regulation 101. Military Lending Act compliance at the very least is dead simple to comply with and is the very first thing most lenders ensure compliance with (due to it being federal, whereas some more esoteric state level stuff can often get missed).
- tomhoward 5y ago
  Dang doesn't represent YC's accelerator/investments arm (i.e., he's an employee engaged to run HN, not a YC partner who makes investment decisions or official YC announcements). But here's an article from 2016 about what LendUp was trying to do back then: https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn:pYGg https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn... I don't know much about LendUp at all, but I do remember the surprise - and feeling it myself - when it was announced that YC was funding a payday lending company. Then I remember the thinking behind it being explained (perhaps on HN, perhaps elsewhere) and seeing that the founders seemed to be making a sincere effort to offer something that was at least just less-terrible than the existing payday lending options around (many of which involve dealing with crime gangs), which made me think "OK, I guess it's worth a try". I presume YC thought the same thing when they invested almost ten years ago. If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before, I still don't think it's reprehensible that YC thought it was worth backing founders that seemed to be making a sincere effort to try.
  - emodendroket 5y ago
    I don't think it's true that the only alternative is loan sharks. It's mostly "traditional" payday lenders, many of which are owned by the big banks (through a couple layers of obfuscation to cover up the stench).
ddtaylor 5y ago
This may not have been YC's intent, but it does appear that's what's effectively happened in the end. I have to assume that YC has some method of exit strategy to separate itself from companies that deviate so strongly. Maybe YC was just asleep at the wheel, I don't know, but in either case they are attached to the failure here.
isx726552 5y ago
Did YC divest itself once the problems started?

istjohn 5y ago

YC should take steps to ensure the businesses they invest in operate ethically. Of course, the first step would be to acknowledge that something went terribly wrong here.

hn_throwaway_99 5y ago

Somebody commented in another thread, but basing it on the Military Lending Act seems like the most straightforward thing to give federal jurisdiction, as most usury laws are at the state level. Tax evasion wasn't Al Capone's primary crime either.