North American Financial Corp. Issued Hundreds of Loans in Calif. Without a License, Class Action Says

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A proposed class action alleges North American Financial Corp. originated more than 300 loans to California consumers between July 2014 and August 2018 without having a license to do so, and as such must return the money. 

The 10-page complaint alleges North American Financial violated a California law that requires any person or business engaged in lending money to consumers to have a license by acting as the loan broker for 319 loans issued between July 1, 2014 and August 27, 2018. The plaintiffs allege the defendant’s role as both loan broker and lender prevented them from learning about its unlicensed status. 

“Ordinarily, the loan broker would be tasked with ensuring that Plaintiff and homeowners only borrowed from lenders with the proper license in the state, but here, NAFC’s dual role led to its being in a position to keep that information from Plaintiff borrowers,” the suit charges. 

According to the complaint, the first public revelation of North American Financial’s unlicensed lending activity came by way of a settlement agreement the company entered into with California regulators in December 2020. 

As a result of North American Financial’s conduct, the lawsuit says, the company is not permitted to receive interest or other finance charges on the loans it used and is limited to the recovery of principal only. Moreover, the suit claims the underwriting fee or other profits earned by North American Financial in connection with originating loans, typically in the one to two percent range, are unlawful and amount to “unjust enrichment.” 

“The money is rightfully the property of Plaintiffs, who at the moment they were solicited and signed up for their consumer loans by the unlicensed lender, NAFC, had a statutory right to repay the loan without regard to any interest due,” the complaint reads. “The subsequent resale of the loan and the profit earned from that sale is money rightfully constituting interest or other finance charges toward the loan and under the law must be returned to each plaintiff to whom NAFC extended an unlicensed loan.” 

The plaintiffs estimate that the average amount of each loan issued by North American Financial in California during the class period is between $400,000 and $500,000, the suit says. According to the case, the total amount loaned by the defendant without a license is $191,400,000. 

Initially filed on May 10 in San Diego County Superior Court, the lawsuit was removed to California federal court on July 5. 

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