Moneylion Lawsuit Guide: Beware Of Online Financing Advisory Debt Traps

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Boo Ali Khan

Boo Ali Khan is an ambitious lawyer. He developed a passion for justice during his stay at Cadet College HasanAbdal, the top-ranked college in Pakistan, leading him to become the first lawyer in his family. He completed his B.A.-LL.B. from the School of Law, Quaid-i-Azam University, Islamabad, and is now associated with the Islamabad Bar Council. His fields of interest lie in but are not limited to, criminal law, international criminal law, human rights, arbitration, constitutional law, international trade law, and contract law.

Latest posts by Boo Ali Khan (see all)

• Moneylion Lawsuit Guide: Beware Of Online Financing Advisory Debt Traps - June 26, 2022
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I still remember the time when I only used the smartphone apps in their basic versions. And I never tried providing all the information they asked for. Perhaps revealing my account details was scary for me.

Fast-forwarding to completing my LL.B., I had to buy subscriptions for some applications. These apps helped me manage the case files chronologically; some contained fancy drafts for legal writing and others helped with folder organization. But let me tell you, I did a lot of research, and even asked my peers about their authenticity, before entering my bank details for the subscriptions.

Recalling some even older events, I have to admit I had a hard time listening to my guardian angel while opening my first online banking account. I was skeptical about adopting this innovation. After all, who trusts anyone with their money? Do you?

I used to think, what if an app with my details started stealing my money. Luckily, I never faced an online payment fraud. But I had never been more cautious about buying subscriptions to applications before I heard about the MoneyLion case.

This MoneyLion Lawsuit guide is going to provide you with a complete overview of how MoneyLion scammed its customers. It will help you get familiar with what there is to look for when dealing with online financing advisory apps.

The court is in session!

A Brief Introduction Of The Case

This case was initiated in July 2019 after filing a complaint before the District Court for the Central District of California. The lawsuit was titled:

Marggieh DiCarlo vs. MoneyLion, Inc., MoneyLion of California LLC, ML Plus LLC, And ML Wealth, LLC.

Or simply,

DiCarlo vs. MoneyLion

In 2021, the case went to arbitration for a settlement to resolve the dispute out of the court. Unsatisfied with the decision, the plaintiff preferred an appeal to the 9^th Circuit Court. And consequently, the appellate court allowed the public relief by the arbitral tribunal.

However, the defendant is trying for a settlement which is yet to be reached.

Parties To The Suit:

Plaintiff: Marggieh DiCarlo

Defendant: MoneyLion, Inc., MoneyLion of California LLC, ML Plus LLC, And ML Wealth, LLC

You must be wondering why all the defendant parties have the same name? Are they one party or different with the same title?

Let me clarify it. The main defendant is MoneyLion Incorporation, a company based in Delaware and New York. It is the parent company and has its off-shoots as these subsidiary companies:

• MoneyLion California: A sub-company that lends financial services to the residents of California and grants them loans.
• MoneyLion plus (ML Plus): A subsidiary body that grants plus memberships to the consumers.
• ML Wealth: A body that keeps a check on the MoneyLion investment account of the plus members.

So Why Did The Plaintiff File The Suit?

The plaintiff, DiCarlo, filed a complaint against an “online smartphone application” of MoneyLion. She called it a “heinous debt trap.” This app was advertised to provide loans at a 5.99% annual percentage rate (APR) to consumers who couldn’t afford the high-interest bank rates.

This service was only for members who subscribed to the plus membership, the app’s premium version. Soon, the plaintiff realized that MoneyLion trapped her, and the app was deducting a certain amount from her primary bank account. She tried to cancel her plus subscription, but the app did not allow it. After exhausting all her options, she knocked at the court’s door, seeking justice from the state.

Including the plaintiff, many consumers also did not have any good reviews about the MoneyLion app either. A subscription fee of $29 was deducted from their investment accounts every month. A sacrifice they were asked to make for a loan.

After getting the plus membership, the plaintiff realized that it was a fraud only and an easy way of money minting. Once the app denied her cancelation request, she came to know that there was no escape without paying an outstanding payment pending for a month.

And the fun fact was that those terms and conditions were not mentioned while subscribing to the plus subscription.

If you are interested more in the “terms and conditions scam,” you may refer to my other guide, the Apple lawsuit guide.

The MoneyLion App Policy:

You might be wondering what the problem with this app’s policy was. After all, almost all the online apps that provide premium services charge their customers.

Allow me to say, these banking apps charge a monthly or annual subscription fee but without any hidden charges. And you can cancel your subscription whenever you want.

In the case of the MoneyLion app, it asked for multiple fees to provide a loan. It offered two versions:

1. Free “basic core” version
2. MoneyLion Plus for paid members only.

If a customer wanted to secure a loan of $500 at 5.99% APR, the app would ask them to upgrade to the Plus version of the app. This Plus version would then provide them with a bank account, an investment account, loan, weekly cash backs, feedback, and financial advisory services.

But remember, the customers wouldn’t just have to pay the subscription fees but also an additional fee in the investment account, i.e.,

• $29 membership fee/month to the company
• $50 investment contribution in your investment account/month

Making a total of $79/month as “Plus fees.”

Digging Deep Into The MoneyLion Swindling Approach:

MoneyLion was doing good to the people. Who would not want to secure a loan at the minimum interest rate? And $500 at 5.99% APR was not a bad deal at all. However, the problem was with the Plus fees of the app.

The MoneyLion policy was not like other regular apps. Instead, it was based on some supernatural principles of economics. And allow me to explain them.

Let’s say a customer upgraded their subscription in January and linked their primary bank account with the app. A $29 Plus fee would be deducted from their account every month. Now for some reason, they could not pay the fee for April but resumed paying for the rest of the year. This unpaid fee for April would be treated as debt by the app. Sounds logical up to this moment, right?

Now moving to the tricky part, even if the customer had paid a subscription fee for the rest of 11 months, i.e., $319, their Moneylion services would remain paused since the defaulted month. A win-win situation for MoneyLion, isn’t it?

Plaintiff faced a similar situation. A sum of $216 was debited from her bank account. But, the fee for March could not be processed by the MoneyLion app due to a lack of funds in the plaintiff’s primary account.

Dicarlo noticed that the app kept transacting the Plus fee from her account for the subsequent months, yet her services were paused, begging the question, what was she even charged for?

This redundant, fraudulent, misrepresenting, and fake membership fee policy opened her eyes. Resultantly, she lodged a complaint against the MoneyLion incorporation et al.

The Need For Discussing This Case:

Now, you might have started putting the pieces together: a company introduced its finance app; started charging more than standard fees for online services; and paused the benefits if there was a default payment.

But you might wonder what even the need for discussing all this is. Don’t worry. I’ll explain its significance in a non-legal way: how MoneyLion affected people and how its policy violated the state’s laws. Also, I will try to draw your attention to identifying your rights and their violations. And to enable you to start avoiding the mistakes before signing up for the paid subscription and finding the proper channel to initiate a lawsuit if you still feel aggrieved.

Factual Analysis Of The Case:

The Circumstances Of The Plaintiff:

Everyone wants to become a better version of themselves. And this struggle intensifies, especially when you are an entrepreneur or a sole business owner.

Plaintiff was a hairstylist and wanted to start her own business by opening a hair salon in the coming years. But just like most of the startups, there was one thing that she needed the most, capital. Resultantly, she wanted to save investment money aside, some from her salary and some from the business loan.

Plaintiff’s Introduction To MoneyLion:

I believe all of you might have experienced that if you talk about something, you start seeing its ads on your social media apps. Well, I still have this mystery to solve even if you have not experienced it. Whenever I think of buying something, all relevant ads somehow pop up on my Instagram.

That’s what exactly happened with the plaintiff. She encountered and installed the MoneyLion app when scrolling through her social media. She saw an advertisement about a $500 loan offer at a 5.99% APR, annual percentage rate, i.e., the interest rate charged per year.

She installed the app in July 2018 and used the free basic version for some time. Soon she learned that to be eligible for a $500 credit builder loan, she needed to upgrade her membership to the Plus version.

She signed up for the Plus membership on July 19, 2018. It was undisputed that she was unaware of the monthly membership fee ($29) and the additional investment charges ($50) into the investment account.

For the sake of case building, it is reiterated that she had no idea about the deceitful policy, i.e., the cancellation request would be denied if the membership fee for even a single month was outstanding.

Receiving Loan From The Defendant:

Plaintiff received the loan money, $500, right one week after applying for it. But the problematic element was the fraudulent MoneyLion gimmick that involved taking the money back from its customers.

When the plaintiff applied for the Plus membership, she entered her bank account details, linking her primary account with the app for the automatic membership payment. At the same time, she agreed to debit her investment account with $43 per month for the next 12 months, which would be deducted from her primary bank account. The significant point of understanding was that she unknowingly agreed to set her investment account as security for her loan.

Initiation Of The Lawsuit:

Let me remind you that the amount of $500 she received was not the only loan in the books of MoneyLion policy. It also included the unpaid membership fee for a month. So, if a person missed paying the subscription fee of a month or two, that outstanding payment would be treated as a loan or debt.

When the plaintiff agreed to put her investment account as security to pay her loan, she missed a monthly subscription fee. Resultantly, she plus membership services were paused.

Although her membership fees for the next months were transacted from her account, she had to pay the so-called debt for that corresponding month to resume her services.

It gets even more interesting. The MoneyLion server was based on such a “unique” algorithm that it did not allow her to use the money in her investment account to pay the loan.

The plaintiff tried reaching out to the administration via email and social media, but she just received automated responses. This ignited the situation. And with no other option left, the plaintiff asked for a jury trial.

Plaintiff’s Claim, From A Legal Perspective:

Here is a brief legal analysis for the audience who is looking for the legal backing of the plaintiff’s claims.

DiCarlo went to the court and filed a class action on behalf of other California residents who were also aggrieved. She relied on the following laws,

• Section 23(a) and b(3) of Federal Rules of Civil procedure allows her to file a class suit.
• Violation of California’s Unfair Competition Law that deals with unlawful, fraudulent, and misleading advertisements. The plaintiff alleged that MoneyLion made a false advertisement.
• Violations of California’s Consumer Legal Remedies Act which provides a list of fraudulent, unfair, and unlawful goods and businesses. The plaintiff argued that MoneyLion’s business through the online app was fraudulent.
• Violations of California’s Anti-Usury Laws prohibit the companies from charging fees, bonuses, commission(s), or interests above a certain amount permitted under this law. The interest rate is usually 10%, which is illegal if above. The plaintiff pleaded that MoneyLion charged above 645% interest from its Plus consumers.
• Violation of Truth in Lending Act Regulation Z commands to disclose the lending terms and conditions. The plaintiff argued that the 5.99% interest rate terms were false and frivolous.

Relief Sought By The Plaintiff:

The plaintiff prayed for the following reliefs:

• She demanded compensation for monetary loss and emotional distress, and punitive damages.
• She sought public injunctive relief.
• She prayed for compensation for her attorney’s fees and lawsuit costs.
• She asked for a jury trial from the court.
• She demanded to be declared the class representative.

The Defense By MoneyLion:

When the plaintiff filed a complaint against the defendant and sought compensation, it was evident that the defendant was going to defend its case. But did they have something convincing to say in their defense? Well, you can have your opinion about it, but they managed to build their case on the following basis:

They stated that MoneyLion intended to provide America with a revolutionary way to get ahead. For this development, they needed to introduce technology in the finance sector. And by technology, they meant their smartphone app, which would help consumers have an online bank account and an investment account, making it easy to apply for a loan.

The defendant argued to settle the case out of the court through alternative means. And they relied on one of the clauses from the terms and conditions of the upgrade, Plus membership, policy. According to it, the aggrieved party was bound to submit the claims to the affiliated arbitration center.

They further argued that the same clause also prohibited the plaintiff from filing a class action in the court as a class representative or member of the class to seek public relief. They contended that the plaintiff was not authorized to seek relief for the public good by acting as a private attorney.

The defendant prayed before the court to transfer the case from their jurisdiction to the arbitration.

The Decision Of The Court:

The court proclaimed that the arbitration agreement was valid, under which the plaintiff was not allowed to file for relief as a class representative. Therefore, the court referred the case to the arbitration, as a prima facie arbitration clause was present in the agreement for the resolution of disputes.

It is to be noted that the agreement allowed public relief in individual cases only. Hence, the court decided that the plaintiff could not claim public relief from them. The competent authority for such relief would be no other than the arbitration tribunal.

The arbitral tribunal upheld this decision of the court.

Appeal Against The Arbitration:

On December 11, 2020, an appeal was preferred to the United States Court of Appeals for the Ninth Circuit against the arbitral tribunal’s decision. The opinion of the appellate court was published on February 19, 2021.

This appellate court decided on the following question:

• Whether the plaintiff allowed to seek public relief from the court in a private suit acting as a private attorney?

The panel settled the issue and rejected the previous notion that public relief could not be obtained in an individual case. It allowed the plaintiff to seek justice for the public at large, reversing the tribunal’s impugned order.

My Opinion On The Case:

I will avoid commenting on the validity or legality of the case, as it incorporates many legal perspectives with different precedents. Still, I believe that if someone violates your right, you can go to court and seek the remedies available.

Plaintiff committed a negligent mistake when she signed MoneyLion’s policy without going through it. In my opinion, she did not know about the proper forum. Therefore, she went to court, the most recognized institution of justice.

The suit is still pending, and no settlement has been reached between the parties. I believe that DiCarlo will receive compensation. And why I am saying that is because it is not MoneyLion’s first lawsuit. There was a similar case between the Department of Commerce and MoneyLion in Minnesota, wherein the court ordered the MoneyLion incorporation to pay a fine of $100,000. It also ordered the defendant to forgive the loans of people who could not pay them.

I am hopeful that Dicarlo’s sufferings will bear fruit. And I can further anticipate an influx of lawsuits against MoneyLion following the appellate court’s decision. After all, this situation is no less of a scam.

Do you have a case against MoneyLion?

I’m pretty sure you would have figured it out by now whether you have a case against MoneyLion or not. However, to substantiate the legality of your stance against MoneyLion, you must fulfill the following criteria.

• You have been a Plus user of MoneyLion.
• You have applied for the loan at 5.99% APR.
• You have received the Plus services, but your services are paused due to outstanding payment.
• You have received a loan at a very high percentage of interest that violates any law mentioned above.

If you notice an issue, go and check the terms and conditions of their policy. See which legal forums are mentioned in case of an issue. If it talks about arbitration directly, go to an arbitral tribunal and seek relief. Do not waste time in the court if it is not mentioned as a legal forum in the policy.

Allow me to say that it is not just about MoneyLion. If any other online app of similar nature does wrong to you, no one can stop you from seeking compensation.

Frequently Asked Questions

Wrapping Up:

Following the established practice related to banking apps, MoneyLion introduced its application for mobile banking. They falsely advertised providing loans at the minimum interest rate to lure the public.

They publicized to grant loans at 5.99% APR whereas received above 600% interest. Plaintiff was one of the resentful people affected by this policy and went to court against this gimmick.

The District Court referred the case to arbitration, and the arbitral tribunal upheld the verdict of the District Court. Both decided that the plaintiff wasn’t eligible to obtain relief for herself or the public.

However, the court of appeal reversed the lower court’s verdict and granted the plaintiff her right to compensation. Also, the appellate court directed the arbitral tribunal to grant her injunctive relief.

Suppose you are a MoneyLion Plus user and have faced or are facing a similar situation. In that case, you have a valid and strong case against MoneyLion. Believe in yourself and the justice system. . Remember, Ubi Jus Ibi Remedium!

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