Best Egg Charges Unlawful Interest Rates on Small Loans in Penn., Class Action Claims

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A proposed class action claims Marlette Funding, known otherwise as money lender Best Egg, has charged small loan borrowers in Pennsylvania interest rates and fees far in excess of what’s permissible under state law.

According to the lawsuit, Best Egg has routinely issued loans with interest and fees that total more than Pennsylvania’s six-percent cap on simple interest per year. The suit moreover contends that although the company has allegedly attempted to circumvent state laws by partnering with non-party Cross River Bank, “this partnership does not make Best Egg’s loans lawful” given Best Egg, and not Cross River, is the true lender.

“Best Egg cannot charge, collect, contract for, or receive most of the interest and fees it charges, collects, contracts for, or receives because Best Egg is not and has never been licensed to do so,” the complaint scathes.

The lawsuit states that Pennsylvania’s Consumer Discount Company Act (CDCA), which regulates personal loans in the state, prohibits non-banks such as Best Egg from charging, collecting, contracting for or receiving interest and fees that total more than the interest non-banks are permitted to charge without a CDCA license. Under the Loan Interest and Protection Law (LIPL), non-banks may charge no more than six percent simple interest per year, the case says, and thus the CDCA limits non-banks without a CDCA license to the same six-percent cap on interest and fees.

According to the lawsuit, Best Egg operates a lending platform and accepts applications for simple interest loans through its website. Once a consumer receives a loan offer, the defendant asks Cross River Bank to issue the loan and then purchases the obligation from the bank two days after it’s issued, the case relays. The suit claims that most, if not all, loans issued by Best Egg are high-interest, with rates as high as 36 percent, and include an origination fee that often amounts to hundreds or thousands of dollars. Per the case, the origination fee, which is typically a percentage of the loan’s principal balance, plus the simple interest rate, well exceed the state’s six-percent limit on such.

The case alleges Best Egg’s actions are unlawful given the lender is a non-bank who is not licensed under the CDCA and therefore unauthorized to charge more than the LIPL’s six-percent interest rate cap. Though the defendant allegedly attempts to skirt the CDCA by partnering with a bank, the lawsuit argues that Best Egg cannot take advantage of the interest rate caps offered to banks once the loan is sold. Moreover, Best Egg, and not Cross River Bank, is the “true lender” of the loans at issue, meaning the interest rates and fees on the defendant’s loans “are never lawful,” according to the complaint.

The plaintiff, a Westmoreland County resident, claims to have initially taken out a loan with Best Egg in the amount of $8,000 and was charged a $399.20 origination fee plus an annual interest rate of 17.30 percent. After a certain point, the plaintiff found he could no longer make payments on the loan and it was charged off, according to the complaint. Although the plaintiff paid back 57 percent of the money he received, he found he still owed 78 percent of that initial amount at the time the loan was charged off because of the high interest rate and origination fee, the case alleges. 

Per the suit, Best Egg sold the plaintiff’s loan for “pennies on the dollar” to a debt buyer called UHG I, LLC.  

The plaintiff’s allegations then pick up in a separate lawsuit the man filed against Capital Link Management, LLC, who was hired by UHG to collect on the loan purchased from Best Egg. 

In that case, filed the same day as the suit against Best Egg, the plaintiff alleges Capital Link Management violated the federal Fair Debt Collection Practices Act (FDCPA) by attempting to collect on debts for which an illegal interest rate was charged. Per the suit, Capital Link could not lawfully collect the interest and fees on the plaintiff’s account because UHG, as a non-bank entity without a CDCA license, was not permitted to charge, collect, contract for, or receive more than the state’s six-percent cap on interest and fees.

The case argues that Capital Link had no policy, practice or procedure in place to screen debt buyers from whom it collects debt to ensure they are permitted to collect the demanded amount of interest and fees.

Initially filed in Allegheny County, Pennsylvania’s Court of Common Pleas, both suits have since been removed to the state’s Western District Court. The two complaints can be found below.

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