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North American Financial Unlicensed Lending California Class Action

North American Financial Corporation (NAFC) has been making mortgage loans in California. What’s wrong with that? The complaint for this class action alleges that the company was not licensed to make such loans, but only to act as a broker between consumers and a licensed lender. Thus, the complaint argues, the borrowers for those loans are not required to pay interest on them.

The class for this action is all California residents who borrowed money from NAFC for a consumer loan, between July 1, 2014 and August 27, 2018, at a time when NAFC did not have a license allowing it to engage in lending in California.

NAFC has an office in San Diego, California. Between 2014 and 2018, the complaint claims, NAFC made 319 loans “without having first obtained a license to make such loans in California.” The complaint alleges that, under the California Financial Code, any unlicensed lender making a consumer loan is prohibited from collecting any payment towards interest or other charges, and is limited to the return of their principal only.”

Attached to the complaint as Exhibit A is the deed of trust for one such loan, to the plaintiffs in this case, Loreto and Mercedes Lagrisola.

The complaint also asks that the statute of limitations be tolled because “NAFC’s dual role as both loan broker and lender prevented [the Lagrisolas] From learning about its unlicensed status as lender.” That is, if NAFC had acted only as the broker for the loan, it would have been responsible to ensure that the Lagrisolas and other borrowers applied for loans only from licensed lenders.

As both the broker and the lender, NAFC was able to hide the fact that it was unlicensed. Therefore, the complaint contends that the statute of limitations should run not from the date of each illegal loan but from the first date the borrowers would have been able to learn about NAFC’s unlicensed lending. The complaint claims, “The first public revelation of NAFC’s unlicensed lending activity was by way of a settlement agreement entered into by NAFC with California [g]overment regulators in December of 2020.”

An additional complication exists. The complaint suggests that NAFC has likely sold the loans and received an underwriting fee or other profit for them. This fee is an unjust enrichment to NAFC and, the complaint claims, “rightfully the property of” the borrowers because it represents interest and other charges on the loans. The complaint therefore asks that the profit NAFC earned by selling the loans be returned to the borrowers.

The sole count is violation of California’s Business and Profession Code via an unlawful act.

Article Type: Lawsuit
Topic: Loans

Most Recent Case Event

North American Financial Unlicensed Lending California Complaint

July 5, 2021

North American Financial Corporation (NAFC) has been making mortgage loans in California. What’s wrong with that? The complaint for this class action alleges that the company was not licensed to make such loans, but only to act as a broker between consumers and a licensed lender. Thus, the complaint argues, the borrowers for those loans are not required to pay interest on them.

North American Financial Unlicensed Lending California Complaint

Case Event History

North American Financial Unlicensed Lending California Complaint

July 5, 2021

North American Financial Corporation (NAFC) has been making mortgage loans in California. What’s wrong with that? The complaint for this class action alleges that the company was not licensed to make such loans, but only to act as a broker between consumers and a licensed lender. Thus, the complaint argues, the borrowers for those loans are not required to pay interest on them.

North American Financial Unlicensed Lending California Complaint
Tags: Not Licensed to Make Loans, Unfair Business Practices