A proposed class action lawsuit claims the business practices of UHG I, LLC are unlawful and unfair in that the third-party debt collector buys and attempts to collect upon payday loans with “unconscionable” interest rates.
According to the 15-page lawsuit, the defendant “knowingly and intentionally” engages in “harmful” debt collection practices by purchasing numerous debts—namely charged-off payday loans inflated by lofty interest rates—and subsequently filing mass lawsuits against consumers in order to collect on the loans.
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“By bringing lawsuits and trying to collect on debts resulting from payday loans exceeding 90%, Defendant is attempting to collect on unconscionable debts in violation of the law,” the suit summarizes.
In September 2018, the plaintiff, a San Diego resident, accepted a $3,500 payday loan at an annual percentage rate (APR) of 128.4 percent with lender CashNetUSA, the case explains. Over the lifetime of the loan, the suit says, the plaintiff would pay more than $6,300 in interest, such that the total amount the consumer would have to pay back would approach nearly $10,000.
After falling behind on payments, the man’s loan quickly inflated, the filing claims. The defendant, who had purchased the debt, then sued the plaintiff in May 2021 in an attempt to collect the remaining balance, which had ballooned to $5,671.62 because of the “exorbitantly high” interest rate, the lawsuit charges.
The case explains that the annual percentage rate of a payday loan—a short-term loan often used to cover expenses between paychecks—can vary between roughly 300 percent to 600 percent. Therefore, most payday loans “become essentially ‘interest only’ loans and/or subject to default and additional penalties,” the complaint says.
“… [C]onsumers could not have avoided Defendant’s harm,” the filing contends. “… [T]hese are predatory loans that prey on vunerable [sic] low-income consumers.”
Consumers like the plaintiff believe they have “no option but to pay” by the time they have accrued the debt and are then allegedly sued by the debt collector, the case says.
The lawsuit looks to represent anyone residing in California from whom UHG I has attempted to collect a loan with an APR exceeding 90 percent since January 17, 2019.
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