Marriott Employees Federal Credit Union Facing Class Action Lawsuit Over Allegedly Predatory ‘Mini-Loan’ Practices

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Allegedly unlawful lending practices are the subject of a proposed class action lawsuit filed by two plaintiffs against reportedly non-profit Marriott Employees Federal Credit Union (MEFCU) in Pennsylvania district court. 

According to the complaint, MEFCU offers to its members a mini-loan product. To be eligible for a mini-loan, a MEFCU member must, among other requirements, be in good standing and agree to a direct deposit minimum payment of $33 per week to be deducted from his or her wages, the case explains. The lawsuit adds that another condition for eligibility for the defendant’s mini-loans is to authorize MEFCU to obtain additional payroll deductions from members’ Marriott wages, including allowing $10 per week to be taken on top of the aforementioned loan payment. Notably, the weekly $10 deduction is frozen by MEFCU as an effective “cash security” the borrower cannot use, the suit says. Further still, the lawsuit states MEFCU charges employee borrowers $35 for what the company labels as an “application fee” for each mini-loan. This fee applies even when a borrower has previously applied for such a loan and/or when a prior mini-loan has already been paid off, the case claims.

The defendant reportedly does not run credit checks nor perform any credit investigation on mini-loan applicants before extending a loan, the case says. Rather, MEFCU simply communicates that “the agreed upon sums shall be deducted from the consumer’s payroll deductions.” The defendant, the lawsuit alleges, markets its mini-loan product primarily to some of Marriott’s most vulnerable employees. From the complaint:

“MEFCU markets its mini-loan product to lower income Marriott employees who perform the day-to-day, hourly work of running Marriott’s hotels and who live paycheck to paycheck. Recent studies have concluded that irregular scheduling by employers is a nationwide problem that creates extreme economic uncertainty for tens of millions of American workers and has a disproportionate impact on women and people of color.”

Many employees look to MEFCU’s mini-loan product to help cover basic personal and household essentials, the complaint states. The defendant, however, allegedly does not disclose the true costs and terms of its mini-loans accurately and conspicuously as required by the federal Truth In Lending Act (TILA). MEFCU’s mini-loans are no more than a leverage mechanism tied directly to Marriott’s allegedly “unfair and unpredictable scheduling practices,” the case claims. 

All told, the lawsuit alleges, the number of hours worked and the amount of money needed to live day to day don’t add up for mini-loan borrowers:

“The mini-loan gives employees quick access to $500.00 that they can use to pay off living expenses that are unaffordable when hours are reduced. In exchange, employees agree to make automatic payments out of their MEFCU account of (1) a $35.00 "application fee", (2) the sum of $90.00 per month for five months, and (3) a final payment of $79.23, for a total of $564.23. This amount does not include a $250.00 required cash security deposit that accumulates through $10.00 weekly deductions from the mini-loan borrowers’ wages that is held in a MEFCU share savings account but frozen and inaccessible to borrower, during the loan payment period.”

The complaint can be read below.