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James v. National Financial, LLC

Delaware Court of Chancery
132 A.3d 799 (2016)


Facts

Gloria James (plaintiff) had a GED and worked for low wages. She mistook a student loan she obtained for night school for a grant and had to repay it after dropping out. She had no bank accounts, using a prepaid credit card and high-interest loans to pay for essentials. James borrowed $200 from “Loans Till Payday,” operated by National Financial, LLC (defendant). Delaware had outlawed short-term payday loans, but National simply recast its loans as nonamortizing installment loans that renewed for a longer period. National continued describing its rates as “block” rates, like $30 per $100 borrowed, to make their loans sound cheaper. Employees routinely told customers that the annual percentage rate (APR) meant nothing unless the loan remained outstanding for a year. James focused on the block rate and told a general manager she would repay $130 next payday, then $130 the payday after that. But the loan required 26 $60 interest-only payments, followed by a balloon payment of $200 plus another $60 of interest, stating an APR of 838 percent. The actual APR totaled 1,095 percent, with finance charges totaling $1,620. James broke her hand at work the next day and subsequently missed work for a week, but National refused any accommodations and began collection, calling James’s work and trying to debit her prepaid credit card. After repaying $197, James brought a class action with Truth in Lending Act (TILA) claims, challenging the loan as unconscionable. The trial court refused to certify a class but allowed James’ individual claims to proceed.

Rule of Law

Issue

Holding and Reasoning (Laster, J.)

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