ILike most people, Quentella Livers, a 75-year-old widow from New Orleans, sometimes receives fraudulent applications in the mail. So when she received a communication in May 2023 from a financial technology company called Dividend Finance informing her that a property she owned had been seized, she threw the document away, assuming it was trash.
But the warnings kept coming. Livers kept dismissing them — until he received a letter from a man named Jason, another New Orleans homeowner. Jason was receiving similar correspondence and checked property records to find that another financial company called GoodLeap had placed a lien on his own home as well as Livers’. It wasn’t just them. Someone from a construction company called Deep South Renovations allegedly took out hundreds of thousands of dollars in Dividend and GoodLeap loans on at least eight homes in the New Orleans area, pretending to be the owners and using their properties as collateral, according to Jason, who is contact the owners.
This person, listed on two contracts as Samantha McGee, took advantage of the fact that GoodLeap and Dividend pay loans directly to contractors performing home improvement projects, rather than to homeowners. McGee used real people and home addresses, but fake Social Security numbers and email addresses to secure the loans, Livers and Jason say. The perpetrator appears to have depended on GoodLeap and Dividend not to perform a title search on the homes to ensure that the Social Security numbers and IDs on the loan application matched those on file, Jason says. Livers called both companies to try to clear the warranty, a process she says was difficult. “When I talked to them, I said, ‘I don’t understand your company,’” Livers says. “Do you just give people loans without contacting them?”
Livers and Jason have since been contacted by the FBI about the case. (Jason is a pseudonym; he did not want his full name used in this article to protect himself from identity fraud, but he shared with TIME the paperwork he received from GoodLeap.) The FBI declined to comment on the matter, but several owners of houses where the victims were, they told TIME that they were contacted by the agency. Deep South Renovations could not be reached for comment.
Dividend says it investigated Livers’ concerns and took immediate action to terminate the loan and release the collateral. “Unfortunately, fraud is a widespread problem across all categories of financial services in today’s digital age,” a company spokesperson said in a statement to TIME. GoodLeap says the case was a “complex fraud scheme by sophisticated criminals,” and that it reported the fraud to the FBI and has cooperated with the agency in the investigation. “GoodLeap has experienced less than 0.05% of fraudulent transactions on our platform,” said Jesse Comart, a company spokesperson. “Protecting consumers from bad actors is our highest priority.”
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GoodLeap and Dividend are two of the few companies in the financial technology (or fintech) sector that make it easier for consumers to borrow money for home improvement projects, including installing solar panels. These companies, which include Solar Mosaic and Sunlight Financial (which filed for Chapter 11 bankruptcy in October 2023), make it relatively easy to get a loan, often using iPhones and tablets to facilitate a same-day sale.
But some consumer advocates say there’s a downside to this quick loan process: Verification skips important steps. “You have to make sure the person is who they say they are,” says Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center who studies banking and payment systems. “A lot of fintechs are not good at this.”
Livers and Jason appear to have been victims of what is called synthetic identity fraud. Many companies would have detected the scheme with a simple credit check, says Frank McKenna, co-founder and chief fraud strategist at Point Predictive, an AI anti-fraud company. A credit report must detect that the Social Security number listed on the application does not match the person’s actual Social Security number, according to McKenna. “There should have been a big red flag,” he says.
Dividend says it requires personal and multi-factor authorization to make loans. The company also claims that an incorrect Social Security number match to a name would raise a red flag and add a hard stop that must be cleared before the loan can be underwritten. This appears not to have happened in Livers’ case. GoodLeap claims to have “multiple layers of fraud protection” and has added new ones to “stay ahead of evolving criminal activity.” He says he reported the fraud to the FBI’s Financial Crimes Division.
Jason filed a complaint with the Consumer Financial Protection Bureau and received a letter from GoodLeap thanking him for bringing the circumstances to the company’s attention. He was not responsible for any debt, the letter said.
Jason also sent out a mailing to other homeowners in New Orleans who had a lien on their Goodleap homes but did not have permits for solar panels. For some of them, including Livers, the letter was how they discovered someone had withdrawn money in his name. David Bryan was another homeowner who had a lien placed on his property by Goodleap, who sent him a letter saying he owed $45,000. He’s still perplexed that GoodLeap gave him the loan. “Any loan I got, I went to the bank to sign,” says Bryan.
Traditionally, banks provided the majority of consumer loans. But after the Great Recession, banks tightened credit standards and new companies emerged to fill the gap. In 2023, 14% of personal loans were issued by fintechs, according to the Federal Reserve Bank of New York.
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While banks are subject to extensive monitoring by federal entities, fintech companies are not subject to much federal oversight or regulation. All they need to do is apply for and maintain a license to lend in a particular state, says Chris Odinet, a law professor at the University of Iowa. There are not many criteria for obtaining a lending license, says Odinet. “There are so many non-banking companies and fintechs of various sizes that it is difficult to have an inventory of companies so that they can be monitored to find out if they are involved in illegal practices”, says Odinet. “They don’t get caught until they do a lot of damage.”
Legal experts and consumer advocates say a wide range of fintech companies are skipping some important steps in the verification process. The whistleblowers told federal financial regulators that Cash App, a mobile payment platform, “has no effective procedures for establishing the identity of its customers.” according to NBC News.
Solar lenders are under special scrutiny for how they approve applications. In March, Minnesota Attorney General Keith Ellison filed a complaint against Goodleap, Sunlight Financial, Solar Mosaic and Dividend Solar Finance, alleging the companies engaged in deceptive lending practices. The lawsuit focuses on companies that “specialize in consumer loans through a software application on a smartphone or tablet” and claims that they win customers by promising quick and easy approval and requiring minimal documentation. The complaint alleges that sellers promise low interest rates and monthly payments while hiding a large upfront fee that is “secretly added” to the price of the system.
Neither Solar Mosaic nor Sunlight Financial returned requests for comment on the Minnesota lawsuit, which is working its way through court. In a statement provided to TIME, Fifth Third, owner of Dividend, said it believes the lawsuit’s allegations are “wrong” and that the company intends to “vigorously defend itself.” GoodLeap claims that its disclosures follow all federal and state laws, including the Truth in Lending Act.
Some consumers who knowingly signed up for loans from these companies claim they were charged unexpected fees or faced undisclosed conditions when their loans increased. Others say the solar panels they received did not produce the promised amount of electricity. Still other consumers complain that solar lenders lent money for panels that never worked.
A solar energy company, Pink Energy, signed up thousands of customers in 15 states, only to declare bankruptcy at the end of 2022. Seventeen attorneys general are investigating Pink Energy and the creditors it partnered with, including Dividend, of according to the Fifth Third annual report, the bank that owns Dividend. The bank is “currently cooperating with investigations related to several civil investigation demands from several state attorneys general regarding the residential solar installation industry and lending practices of credit providers to this market, which includes Dividend Solar Finance, LLC,” according to the annual report.
GoodLeap, Solar Mosaic, and Sunlight Financial are private companies, so it’s difficult to know how many loans they are making or the total value of those loans. But Fifth Third took out $3.8 billion in loans for solar power installation in the first three months of 2024, a 75% increase from the previous year, according to its earnings reports.
The Consumer Financial Protection Bureau declined to comment for this story, but referred TIME to its consumer complaints database. Out of more than 5 million complaints, 162 called GoodLeap, 185 called Solar Mosaic, 74 called Sunlight Financial and 3,717 called Fifth Third, the parent company of Dividend Solar Finance.
This story originally appeared on Time.com read the full story
