De La Torre v. CashCall, Inc.

CashCall, Inc. (defendant) issued low-value, unsecured consumer loans to high-risk borrowers at astronomical annual interest rates. The type of loans CashCall specialized in were typically referred to as payday loans. CashCall advertised its products to desperate borrowers who needed quick cash, and its most popular product was an unsecured $2,600 loan with an annual interest rate between 96 and 135 percent. A group of borrowers, led by Eduardo De La Torre (plaintiff), brought a class action against CashCall under California’s unfair-competition law (UCL), arguing that CashCall’s business practices were unlawful because CashCall charged unconscionably high interest rates. All class members had taken out loans of at least $2,500 that were subject to annual interest rates of over 90 percent. The California Finance Code (CFC) imposed an interest-rate cap on loans under $2,500; however, the interest rates on loans over $2,500 were not capped. The CFC also stated that the unconscionability doctrine could be applied to all consumer loans. CashCall moved to dismiss the class action, arguing that CashCall’s interest rates could not be held unconscionable as a matter of law because there was no interest-rate cap on loans over $2,500. The district court agreed and dismissed the class action. De La Torre appealed. On appeal, before issuing a decision, the Ninth Circuit certified a question to the California Supreme Court regarding whether the unconscionability doctrine could be applied to invalidate the interest-rate provision on a loan that was not subject to the CFC’s interest-rate cap.