Internet Lenders and Opt-Outs From Arbitration Clauses

When making large purchases like a home or car, Americans often turn to options for funding outside of the banks. Online lending has become a popular option for such funding. Online lenders offer competitive rates compared to traditional banks with the convenience of never having to leave your home to secure an important loan.

However, these online lenders come with significant drawbacks, including interest and other hidden fees in their loan agreements. These are fees that applicants may not even realize are there. Complicating matters is the fact that many lenders prohibit customers from filing a lawsuit against them, choosing instead to go through an arbitration process, which can favor the big companies.

These lenders offer a period when you can opt out of your arbitration clause, and in most instances, it is within 30 or 60 days. If you fall into this category, our legal team at East End Trial Group will help you avoid having to pay any hidden fees on your loan.

What Is an Online Lender?

Online lending is an alternative form of borrowing money that allows the borrower options beyond traditional banks. The term “online lending” is a wide definition that includes institutions such as credit unions, government loans, and other credit forms structurally similar to bank loans that originate outside of a traditional bank.

These new lenders differentiate themselves from the traditional lending facilities in multiple ways:

  • Coming from institutions not traditionally part of the banking industry.
  • Using different communication methods with clients.
  • Using metrics as a basis for rates and approvals, rather than traditional measurements such as a FICO credit score.
  • Employing a more streamlined or automated approval process than the process used by traditional lenders.

There are advantages to using these online forms of lending:

  • Comparing loans: The online lenders afford you the opportunity to compare multiple loans at once.
  • Easy application: The application process is quick, easy, and can happen without leaving your home.
  • Pre-approval: Many of these online lenders offer a pre-approval process to determine if you are qualified for a particular loan.

While internet lending does offer some conveniences, there are also drawbacks. While the online aspect of the process can make it convenient to apply for a loan or engage with the company, you also need to be wary that you are storing your sensitive information online. You must be sure that the company is trustworthy and that they are protecting your information.

A major problem that has been associated with several online lenders are the high fees and interest rates they attach to their loans. There are questions about the legality of these fees, though there are ways to combat them.

Can I File a Claim Against My Online Lender?

When you have a dispute with your online lender about the fees they charge, your options are unfortunately limited due to a clause you may not know you signed. When you sign a contract with these lending agencies, there is a little-known clause in the contract that says that you agree to waive your right to file a lawsuit in exchange for having your dispute settled through arbitration.

Arbitration is a faster and less expensive process for resolving conflicts with a major company. A moderator will listen to both sides of a case in a similar manner to a hearing or trial, then they will make their decision. This is a controversial method of resolving conflicts as it tends to favor the company rather than the individual.

What Are My Options in a Dispute with an Online Lender?

Some regulators have voiced concern over these so-called “mandatory arbitration agreements.” They show up in several prominent business lines, most notably credit cards and investment companies.

As a result, regulators such as the Consumer Financial Protection Bureau (CFPB) and the Securities and Exchange Commission (SEC) have considered banning the provisions altogether. The courts have come out in support of the provisions with the U.S. Supreme Court ruling that arbitration clauses and class action waivers are enforceable.

Given the negativity arising from the use of mandatory arbitration claims, many online lenders have allowed customers to opt out of this provision within the first 30 or 60 days of a contract. Many customers do not know about this provision.

If you have had problems with any of the following lenders or believe you are paying too much, please contact us:

  • Avant
  • Best Egg
  • Upgrade
  • Upstart
  • Prosper

PA Consumer Protection Lawyers at East End Trial Group Will Fight to Get You Out of Restrictive Arbitration Agreements

If you have signed a contract with an online lender, you might have unknowingly opted out of your right to file a claim against the lender to settle any agreements. Our PA consumer protection lawyers at East End Trial Group can help. Call us at 412-223-5740 or contact us online to schedule a free consultation. Located in Pittsburgh, we serve clients throughout Pennsylvania.

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