MDG Interest on Loans for California Consumer Purchases Class Action

MDG USA, Inc. offers a website on which it sells consumer goods like televisions, computers, furniture, gaming devices, and appliances. It also offers consumers credit so they can buy these items. But the complaint for this class action alleges that MDG sets its interest rates at or above 35%, when the maximum interest rate permitted under California law is 10%. The complaint seeks restitution for those already paying for such loans and an injunction to stop MDG from continuing with this practice in California in the future.

The class for this action is all individuals in California who, between March 25, 2018 and March 25, 2022, paid interest on a loan obtained from, marketed, underwritten, or serviced by MDG.

Providers of credit in California may charge higher interest rates if they have licenses to make consumer or commercial loans. MDG does not have this kind of license, the complaint alleges, and so they are bound by the interest rate limitation of either 10% or 5% plus the federal funds rate on a certain date related to the loan, whichever is higher. The complaint alleges that MDG’s interest rate of 35% or more violates this law.

According to the complaint, MDG tries to get around this California limitation by what it calls a “rent-a-bank” arrangement with a Utah state bank, Capital Community Bank (CC Bank). The complaint alleges that the loans are issued by CC Bank “on paper,” but that in reality “MDG itself markets the loans, makes the loans, originates the loans, services the loans…, and contacts borrowers who miss payments.” It also quotes MDG’s website as saying that MDG provides “the very best end-to-end service.”

The complaint claims that consumers get MDG loans through three steps completed at MDG’s website: filling out an application, getting pre-qualified, and buying an item online. Thus, the complaint claims, CC Bank “has virtually no involvement in the loans” except for lending its name to the process.

In fact, the complaint claims that CC Bank’s website says it is a “community-focused financial institution, serving the banking needs of Utah’s residents.” The complaint therefore alleges that MDG is the true and de facto lender for the loans and that the agreement with CC Bank is meant only to circumvent the law.

The complaint for this class action, Tyisha Danzy, applied for credit with MDG in November 2015. Her 2015 Agreement does not mention CC Bank, the complaint alleges, and charged her an interest rate of 40%.

In March 2018, she completed a second loan agreement with MDG. The complaint says the agreement does include corporate logos of both MDG and CC Bank, does identify CC Bank as the party extending the loan, and sets an interest rate of 35.95%. The complaint alleges that “MDG had and continues to have the predominant economic interest in the loans and therefore MDG is the true or de facto lender…”

The sole count is unjust competition.

Article Type: Lawsuit
Topic: Loans
Tags: Excessive Interest Rate, Loan-Related Unfair Practices, Rent-a-Bank Scheme