De La Torre v. Cashcall, Inc.

Facts

D is a lender of consumer loans to high-risk borrowers. D offers an unsecured $2,600 loan, payable over a 42-month period, and carrying an annual percentage rate (APR) of either 96 percent or, 135 percent. People who took out such loans were “consumers with low credit scores,” living “under financial stress.” D attracted borrowers through its television advertisements showing the ability to get money quickly. Ps do not contend Ds advertising was deceptive. Nor do they claim D failed to disclose accurately the terms of the loan as required by federal law. Ps allege that D violated California's unfair competition law (UCL). The UCL defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice.” Ps assert that D's lending practice was unlawful because it violated section 22302, the section that applies the unconscionability doctrine to consumer loans. The district court certified Ps' lawsuit as a class action. The class consisted of borrowers who took out loans from D of at least $ 2,500 “at an interest rate of 90% or higher.” D moved for summary judgment on the unfair competition claim. The court determined that the UCL cannot be used as a basis for Ps' Unconscionability Claim because ruling on that claim would impermissibly require the Court to regulate economic policy. The court held that it could not fashion a remedy “without deciding the point at which D's interest rates crossed the line into unconscionability.” It’s decision held that the legislature decided not to cap loan rates above $2500 and if the court decided they were unconscionable would be to second guess the legislature. P appealed. The Ninth Circuit certified  this question: “‘Can the interest rate on consumer loans of $ 2500 or more governed by California Finance Code § 22303, render the loans unconscionable under California Finance Code § 22302?’”

Issues

Rule of Law

Holding and Decision

Legal Analysis

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