CINCINNATI — A federal judge has granted class-action status to a 9-year-old lawsuit that alleges Fifth Third Bank misled consumers about the interest rates they paid on cash-advance loans.
It's a case that could cost the bank more than $280 million, according to court filings. The lawsuit alleges Fifth Third violated Truth in Lending rules and breached loan agreements when it offered Early Access loans by quoting an annual percentage rate of 120% for short-term loans that carried much higher effective interest rates.
Fifth Third declined to comment on the March 26 ruling by U.S. District Judge Michael Barrett.
People who were enrolled in Fifth Third's Early Access Loan Program from Aug. 3, 2011 through April 30, 2013 will be eligible to pursue damages on the Truth in Lending act claims. Those suing for breach of contract can opt into the class action if they enrolled in Early Access before May 1, 2013, and took out at least one loan from the program.
"We are pleased with Judge Barrett's ruling, which clears the way for a classwide trial and the return of hundreds of millions in usurious interest to thousands of Fifth Third customers," said Hassan Zavareei, a Washington, D.C., attorney who successfully argued the case on behalf of plaintiffs.
"While we cannot comment on the pending litigation, Fifth Third's commitment is to put our customers first," said Fifth Third spokesman Ed Loyd.
Aspreviously reported, the bank has argued its customers were aware of the fees they were paying for Early Access loans, which allowed people to borrow against their next paycheck when they were short on cash.
Because the bank clearly spelled out that borrowers would pay a $10 fee on every $100 borrowed, Barrett initially dismissed the breach of contract claim. But he was reversed by the Sixth Circuit Court of Appeals, which ruled the bank's contracts included two contradictory explanations for the annual percentage rate that applied to its loans.
"The APR is designed to allow people to compare the cost of credit, and it's exactly what it doesn't do here," University of New Mexico Law Professor Nathalie Martin said last July. Martin predicted that the case would be certified as a class action, increasing the pressure on Fifth Third to settle the case.
This article was written by Dan Monk for WCPO.