The California Department of Financial Protection and Innovation (DFPI) has announced that Nexo Capital will pay a settlement of $500,000 due to accusations of issuing loans without adequate borrower assessments. Between July 2018 and November 2022, Nexo issued over 5,456 consumer and commercial loans to California residents without a proper license.
According to the DFPI, Nexo failed to evaluate essential factors such as borrowers' credit history and overall financial condition before approving loans. Commissioner KC Mohseni emphasized the importance of compliance in lending practices, particularly highlighting the risks associated with crypto-backed loans, which often lack thorough underwriting policies.
The company must transfer all funds belonging to California residents to its affiliate, Nexo Financial LLC, within 150 days. This affiliate holds a valid California Finance Lenders License. Earlier in 2023, Nexo had discontinued its yield-bearing Earn Interest product for U.S. customers after settling a $45 million penalty with regulators.