Company Behind BestEgg.com Facing Class Action Over Alleged ‘Rent-A-Bank’ Loan Scheme

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A proposed class action claims the operator of online lender BestEgg.com is engaged in a “rent-a-bank” scheme whereby it issues loans with unlawful interest rates to Pennsylvania residents.

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The 21-page lawsuit says that in an attempt to “hide the true nature of its loans” and evade state usury laws, the company behind Best Egg—Marlette Funding, LLC—pays a state-chartered bank to identify itself as the lender of the loans the defendant issues to consumers. Per the suit, the online lender formats the transaction to give the impression that a borrower’s loan has been directly issued by the bank, when, in truth, the defendant alone administers the loan and “enjoys the profit.”

According to the case, Pennsylvania law stipulates that unlicensed, non-bank lenders such as Best Egg are prohibited from issuing loans with interest rates at more than six percent.

In spite of this, the defendant’s unlawful scheme enables it to “routinely” charge double-digit interest rates far in excess of the state’s legal rate cap and has resulted in scores of Pennsylvania residents being overcharged tens of millions of dollars, the complaint alleges.

As the filing tells it, Best Egg’s excessive interest rates and hefty initial origination fees can generate annual percentage rates up to 36 percent for three- and five-year loans, and even higher if the consumer pays the loan off early.

The suit relays that some borrowers are “forced to come up with thousands of extra dollars each year to avoid defaulting on [the defendant’s] loans, and tens of thousands more dollars over the life of a loan to avoid default.”

The plaintiffs, two Pennsylvania residents, claim the defendant wrongly charged them tens of thousands more in interest than they should have paid over the course of their loans.

The lawsuit looks to represent anyone who, within the applicable statute of limitations period, was issued a Best Egg loan and paid interest, fees or any amount above principle in excess of six percent simple interest per year.

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