Santander Consumer USA, Inc. has been hit with a proposed class action lawsuit in Arkansas over allegations the lender charged illegal “pay-to-pay” fees to consumers who attempted to make loan repayments online or over the phone.
According to the complaint, all four named plaintiffs took out loans with Santander to finance car purchases and were each subsequently charged a $10.95 “pay-to-pay” fee for payments made online or over the phone. The case contends that Santander represented these charges as “pass-through fees” to a third-party payment processing company yet kept “nearly the entire amount” of the fees as profit.
The case explains that Santander’s contracts, which are binding on Arkansas residents, contain a choice-of-law provision that establishes the agreements shall be governed by federal law and the state laws of Texas. The Texas Debt Collection Act (TDCA) makes it illegal for debt collectors to assess fees incidental to a debt that are not explicitly permitted by the agreement creating the obligation or affirmatively authorized by law, according to the complaint. Furthermore, the complaint argues that Santander violated the federal Fair Debt Collection Practices Act by collecting more money than necessary to compensate a third-party payment processor.
The case claims that although Santander was aware that “pay-to-pay” fees violate the debt collection laws of certain states due to previous legal action, the defendant still charged the fees in willful violation of the TDCA. The lawsuit looks to represent a class comprising all U.S. consumers who have a car loan with Santander stipulating that “federal and Texas law apply to this contract” and have paid a fee for making payments online or over the phone.
Originally filed in the Circuit Court of Jefferson County, Arkansas, the suit has since been removed to U.S. District Court for the Eastern District of Arkansas.