On March 11, a class action lawsuit was filed in the Philadelphia County Court of Common Pleas against a financial technology company offering cash advances up to $200 through a lending app. The lawsuit alleged the company charged loan equivalent APRs of 500 to 1,000 percent, violating Pennsylvania’s usury cap of 6 percent.
The complaint claimed the defendant structured its advances through three mechanisms resulting in excessive charges: (i) an express fee required to use advances for their advertised purpose; (ii) a “tip” charge that the complaint argued was actually an interest charge; (iii) and mandatory enrollment in a monthly membership plan costing $4.99 per month. The complaint alleged these charges are deceptive and illegal because they greatly exceeded Pennsylvania’s 6 percent rate cap established by statute and because the company is not licensed under Pennsylvania law.
The complaint alleged two claims against the defendant. Count I alleged violations of the Pennsylvania Consumer Discount Company Act for charging interest and fees exceeding the maximum legal rate, while Count II alleged violations of the Pennsylvania Loan Interest and Protection Law, which allows borrowers who have paid excessive interest to recover triple the amount of damages.
