PITTSBURGH – A Washington County woman alleges in a class action lawsuit that an Illinois online lender has violated state laws in charging usurious interest rates on loans it offered to its customers.
Patricha McDaid (individually and on behalf of all others similarly situated) first filed suit in the Allegheny County Court of Common Pleas on July 23 versus Avant, LLC of Chicago, Ill.
After accepting loan applications, evaluating a consumer’s creditworthiness and makes a loan offer, Avant requests WebBank to issue the loan. Two days after a loan is issued, WebBank sells the loan back to Avant without recourse. The loans are simple interest loans.
Most of the loans are high-interest, with interest rates reaching up to 36 percent simple interest per year. The loans also include an origination fee, which generally is a percentage of a loan’s principal balance and are often in the hundreds to thousands of dollar.
When consumers default on a loan, Avant sells their loans for pennies on the dollar to various debt buyers. When Avant sells its loans, it sells all rights, title, and interest in and to the loans to the debt purchaser. The debt buyers then attempt to collect the full balance of the loans from consumers.
“In August of 2017, Avant issued a personal loan to McDaid. The loan was used for personal, family and/or household purposes. The loan was issued in the amount of $4,200. Yet McDaid only received $4,042.50 of actual money because Avant charged and deducted a $157.50 ‘administration fee.’ Interest also was charged on the loan. The interest and administration fee yielded an annual percentage rate of over 29.94 percent,” the suit says.
“McDaid made $687.64 in payments on the loan: $285.10 of these payments went to principal and $402.54 of these payments went to interest and fees. At a certain point, McDaid could no longer repay the loan and the loan was charged-off. After the loan was charged-off, Avant allegedly sold all of its rights and interest in the loan to a debt buyer called Absolute Resolutions Investments, LLC. To the extent ARI actually bought the loan, it did so for pennies on the dollar of the unpaid balance. After buying the loan for pennies on the dollar, ARI sued McDaid in a
Washington County Magisterial District Court. McDaid hired an attorney to defend the lawsuit. The Magisterial District Court eventually ruled in favor of McDaid and against ARI.”
According to the litigation, Avant is a non-bank that is not licensed under the Consumer Discount Company Act and is not authorized under any law to charge interest above the Loan Interest Protection Law’s 6 percent interest rate cap, but does so regardless. The suit adds that Avant’s actions make loans more expensive, increase the risk of default, and make the consequences of default much worse.
“For example, because of the unlawful interest and fees charged when the account was active, McDaid’s payments went to unlawful interest and fees, rather than paying down the amount McDaid actually received on the loan. So, when McDaid defaulted, she owed substantially more than she otherwise would have owed had Avant charged interest and fees at the lawful rates and amounts,” per the suit.
“Similarly, because of the unlawful interest and fees that continued to accumulate on the account when the account was in default, McDaid owed more than she otherwise would have owed had Avant charged interest and fees at the lawful rates and amounts. Avant’s actions caused and continue to cause substantial harm to Pennsylvania consumers by making their loans more costly, increasing their chances of default, and making the consequences of default far worse. McDaid brings this action seeking redress for the harm Avant’s actions caused.”
For counts of violating the Loan Interest Protection Law, the Consumer Discount Company Act and the Unfair Trade Practices and Consumer Protection Law, the plaintiffs are seeking an order declaring defendant’s conduct unlawful; an order certifying the proposed class, appointing plaintiff as representative of the proposed class, and appointing undersigned counsel as counsel for the proposed class; actual, statutory, treble, and all other damages available by law, along with pre- and post-judgment interest; attorneys’ fees and costs and all other relief that is just, equitable and appropriate.
The plaintiffs are represented by Kevin J. Abramowicz, Kevin W. Tucker, Chandler Steiger and Stephanie Moore of East End Trial Group, in Pittsburgh.
The defendant has not yet secured legal counsel.
Allegheny County Court of Common Pleas case GD-21-008447
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com