Cleveland, Ohio, Fifth Third bank is facing a consumer banking class action lawsuit over alleged illegally high interest rates on loans.
Filed in U.S. District Court in Cleveland the lawsuit alleges Fifth Third Bank charges illegally high interest for what the plaintiffs refer to as "payday"loans. The lawsuit centers around the question of whether the cost Cincinnati-based Fifth Third charges for its Early Access loan program are considered fees or interest.
The loans are used as advances on a borrower' paycheck. The customer gets a short-term loan, with money directly deposited in a checking account. Fifth Third charges a 10 percent fee that is taken out of the customer' next paycheck before it is direct-deposited. Fifth Third also takes the loan amount out of the paycheck, as long as the next direct deposit is at least $100.
Plaintiffs, William Klopfenstein and Adam McKinney, claim in the lawsuit that Fifth Third' fees amounted to interest with annual percentage rates that can top 1,000 percent. That' because the loans are paid back quickly, so the rates soar on an annual basis. Each of the plaintiffs claim they've paid more than 1,000 percent annualized rates on several occasions.
Allegedly, Ohio law stipulates a 25% maximum limit on the interest rates banks can charge on loans limits banks to a maximum 25 percent annual interest rate on loans.
The plaintiffs want Fifth Third to pay back all of what they call excessive interest charges to customers. Fifth Third doesn't comment on pending litigation.
The lawsuit seeks to represent all people who received Early Access loans and repaid them within 30 days. Cleveland-based law firm Spangenberg Shibley & Liber issued a news release last week publicizing the case.
