Post by Larry Chiang on SoFi

Customer Service and Operational Issues

SoFi, as a relatively young digital bank (founded in 2011 and granted a full banking charter in 2022), has faced growing pains that lead to frequent user complaints. Common-sensitive trades or payments, with one X user calling it a “clown show” for freezing funds arbitrarily. Outage reports on Downdetector spike periodically, often tied to app glitches or security reviews that lock users out. As a newer player, SoFi’s risk-averse policies (e.g., strict check deposit limits) exacerbate this for new customers.

Fraud Handling and Account Security Complaints

A major pain point is SoFi’s handling of fraud disputes. The Better Business Bureau (BBB) logs numerous complaints, including cases where accounts were closed without notice or disputes denied despite evidence like police reports. One recent example involves a disabled veteran’s account drained of $7,500 while he was incarcerated; SoFi rejected multiple claims even after proof was provided, disrupting VA benefits. While SoFi uses strong security like SSL encryption and FDIC insurance up to $2 million per depositor, users criticize slow resolution and overzealous flagging, which can take days to fix. This has led to perceptions of the company as unresponsive in crises.

Regulatory and Legal Scrutiny

SoFi has a history of regulatory run-ins, which some see as signs of aggressive growth over compliance. Key issues include:

– **FTC (2019)**: Fined for misleading ads on student loan savings.

– **SEC (2021)**: Charged for allocating 20,000 client accounts into its own ETFs without disclosure.

– **FINRA (2024)**: $1.1 million fine for 800 fraudulent accounts slipping through automated onboarding, costing $2.5 million.

– **Class action (2022)**: Settled for discriminating against DACA/immigrant borrowers.

– **Crypto concerns (2022)**: U.S. senators questioned SoFi’s crypto activities post-FTX collapse, leading to its crypto trading shutdown.

– **Internal culture (2017)**: CEO resignation amid sexual harassment allegations and a “frat-house” workplace environment.

These aren’t unique to SoFi—fintechs like Robinhood face similar battles—but they’ve fueled distrust, with some X users labeling it a “scam” amid short-selling pressure (148 million shares short as of mid-2025).

Credit and Lending Risks

SoFi’s core lending business (personal loans, student refinancing) has shown stress:

– Credit card defaults spiked to 19.3% in Q1 2023 due to underwriting errors, costing hundreds of millions in losses and stalling growth until Q1 2025.

– Delinquency rates are rising on lower-credit loans amid climbing unemployment (now ~5% baked into models), though SoFi’s affluent borrower base (high-income, picky originations) has kept overall losses below targets.

– The student loan moratorium (extended to May 2022) slashed revenue by $35 million in Q1 alone, forcing diversification.

Vintage analysis shows strong repayment trends, and SoFi hedges fair value volatility while selling loan pools at gains, but macro weakness could hit harder than peers.

Stock Valuation and Market Perception

At ~$25/share (as of late August 2025), SoFi trades at 6x price-to-sales despite 34% YoY revenue growth and 45% EPS CAGR guidance for FY2025 ($0.31/share). Critics argue it’s overvalued given competition from legacy banks and fintechs, with stretched metrics and no major catalysts like new Galileo deals or AI Cash Coach rollout. Short sellers and “hit pieces” (e.g., boutique bank downgrades predicting losses that missed by 100%+) amplify negativity, but bulls point to resilience through inflation, rate hikes, and lost segments (crypto, student loans). Probability of bankruptcy is under 1%, and it’s positioned as a top-10 U.S. bank contender.

Broader Context: Not All Doom

SoFi isn’t collapsing—it’s profitable, with 10.1 million members and 41% fee-based revenue in 2025. Management’s track record of solutions (e.g., fixing credit underwriting) is strong, and it’s expanding into AI and tech platforms. Issues stem from rapid scaling in a tough environment, but for risk-averse users, these glitches and scrutiny make it feel unreliable compared to established banks. If you’re a customer or investor, weigh the growth potential against these operational hiccups.