• Published on 27 June 2017
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PayPal invests in online lender LendUp

PayPal Holdings Inc has invested in LendUp, a San Francisco-based startup that offers loans online to consumers who have been traditionally overlooked by banks because they are considered too risky. LendUp said it had secured a strategic investment from the payments company. It did not disclose terms of the deal. PayPal confirmed in a statement that it had made an investment. LendUp also said that Carrie Dolan, the former chief financial officer of online lender LendingClub and treasurer of Charles Schwab Corp, has been appointed as an adviser to its board of directors.

Founded in 2012, LendUp is among the cohort of young tech-savvy companies that automate parts of the lending process to make it cheaper and faster to provide loans to consumers and small businesses online. It seeks to differentiate itself by offering products that it believes can help consumers with low credit scores and volatile incomes achieve financial health. LendUp's chief executive, Sasha Orloff, said in an interview that the company was planning to use new injection of cash to expand its customer base and was also exploring ways it could work with PayPal.

"Dan Schulman has been very vocal about supporting the undeserved," Orloff said, referring to PayPal's chief executive.

PayPal has been expanding partnerships and acquiring new services to gain advantage over rivals in a highly competitive digital payments market. LendUp describes its first product, LendUp Ladder, as an alternative to traditional payday loans. It carries a flat fee and allows users to borrow more if they earn points by paying back their loans on time or watching financial education videos. It also offers a credit card that does not require a security deposit.

The company, however, has been the subject of regulatory actions over its business practices.

Last September the U.S. Consumer Financial Protection Bureau ordered LendUp to pay $3.6 million in fines and refunds to customers over lending practices that took place from 2012 to 2014. The same month, the company agreed to pay $2.7 million in a settlement with the California Department of Business Oversight over allegations of illegal fees and violations of payday and installment lending laws.

Orloff said that in its early days the company did not have the "team in place to understand the complexities of the financial services space," but has since built up its legal and compliance team.

Re-disseminated by The Asian Banker from Reuters