In 2008, plaintiffs filed a class action lawsuit alleging that CashCall, an Orange County-based lending company, violated California law by offering $2,600 loans to consumers with annual interest rates of 96% or 135%. The lawsuit alleges that such loans are “unconscionable” under California law, meaning that they are “unreasonably and unexpectedly harsh,” “unduly oppressive,” or “so one-sided as to shock the conscience.”
Following dismissal of the federal lawsuit on procedural grounds, the case is now proceeding in California Superior Court in San Mateo County.
Federal Court Litigation
The district court certified the case as a class action, but then granted CashCall’s summary judgment motion. In its summary judgment motion, CashCall argued that its consumer loans could not be unconscionable under California’s Financial Code.
Along with co-counsel, our firm appealed the district court’s summary judgment decision to the Ninth Circuit Court of Appeals. The Ninth Circuit asked the California Supreme Court to determine whether interest rates for loans over $2,500 could be deemed unconscionable under California’s Financial Code.
California Supreme Court Decides in Favor of Consumers
On August 13, 2018, the California Supreme Court issued an opinion addressing whether consumer loan terms—specifically interest rates—can be deemed “unconscionable” in violation of California law. The Court ruled unanimously in our favor, finding that an interest rate on a loan above $2,500 may be unconscionable.
In its decision, the Court explained its determination:
Courts have a responsibility to guard against consumer loan provisions with unduly oppressive terms.
The California Supreme Court case was followed closely, sharply dividing consumer advocacy groups and pro-business organizations. The unanimous ruling is a major victory for consumers and is expected to have a significant impact on the consumer lending market in California, particularly high-interest lending to “subprime” borrowers with low credit scores.
CashCall Consumer Loans Case Now Proceeding in State Court
After the California Supreme Court answered this important legal question, the case returned to federal court. The district court judge dismissed the case on procedural grounds, finding that he no longer had jurisdiction because all federal claims had been resolved.
On March 7, 2019, Plaintiff Eduardo De La Torre refiled the case in California Superior Court, County of San Mateo. All applicable statutes of limitations are tolled back to the filing of the federal case in 2008.
Conditioning Claims Settlement
Plaintiffs and CashCall previously settled allegations that CashCall violated the law by requiring borrowers to repay their loans by electronic funds transfers (EFTs). Plaintiffs contended that CashCall’s practice violated the federal Electronic Funds Transfer Act and California law.
The district judge granted final approval of the settlement on November 17, 2017. Class members who actually paid non-sufficient funds (NSF) fees before any cancellation of their initial EFT authorizations received a proportional allocation of the $830,000 settlement fund. CashCall also released all class members from any obligation to pay such NSF fees.
About Our Consumer Protection Practice
For nearly 30 years, our consumer protection attorneys have challenged unfair business practices that erode consumers’ confidence and compromise their rights. We have recovered hundreds of millions of dollars for clients in litigation against the world’s largest corporations, earning some of the largest consumer settlements of all time and establishing our reputation as a skilled and trusted advocate for consumers.
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