Class Action Lawsuit Alleges Klover App Charged Illegal Interest, Fees on Cash Advances in Philadelphia

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A proposed class action lawsuit claims Klover provides Philadelphia residents with cash advances at excessive interest rates, sometimes reaching as high as 1,000 percent.

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The 19-page lawsuit alleges the lending app has violated a Pennsylvania law prohibiting unlicensed entities from issuing loans with interest rates at more than six percent.

According to the complaint, the Klover app allows users to access up to $200 in cash advances per pay period. The defendant markets this service to borrowers who need cash “instantly” to cover unexpected expenses or time-sensitive obligations, the filing says. The suit explains that the app automatically deducts the advance amount and several additional charges from a user’s linked bank account as soon as their next paycheck is deposited.

Per the case, Klover charges consumers an express fee, a “tip” charge and a monthly membership fee to obtain compensation for lending money.

“These fees cost the equivalent of a loan with an annual percentage rate (APR) of 500%, 1,000%, or more, which makes it difficult for borrowers to pay their bills, and which greatly increases the chance that borrowers will overdraft their bank account,” the Klover lawsuit asserts.

The suit was filed by a Philadelphia County resident who says Klover charged him a $9.99 express fee to obtain a $75 advance to be repaid within seven days, which yielded a 694 percent APR. The filing notes that borrowers must pay the defendant’s express fee, which has allegedly ranged between $1.49 and $20.78, to receive cash instantly. Users who refuse to pay the express fee obtain an “inferior version” of Klover’s product that provides access to cash days after a request is made, the complaint shares.

As the case tells it, Klover also deceives users into paying a charge it misleadingly represents as a “tip.”

“Borrowers often pay [Klover’s] ‘tip’ charge because they are misled to believe that they are helping needy persons (rather than a large, well-funded corporate lender), or because they are misled to believe that payment is expected or necessary,” the complaint contends.

Finally, Klover users are required to pay a $4.99 monthly membership fee in order to receive a cash advance, the case says.

The lawsuit alleges that when this $4.99 monthly fee is included in the APR calculation for the plaintiff’s loan, his interest rate increases to over 1,041 percent.

The filing claims Klover’s cash advance product is nothing more than an illegal payday loan—a short-term, high-cost loan due on the borrower’s next payday.

“Pennsylvania outlaws payday lending (no matter its form) because the excessively high costs associated with this form of lending leave holes in paychecks, which can create a cycle of reborrowing, where borrowers take out new loans to fill the gaps created by old loans,” the suit says. “This cycle of reborrowing erodes the paychecks of borrowers, which prevents them from saving money for their families, and prevents the financially vulnerable from improving their situation and moving out of debt.”

The lawsuit looks to represent all Philadelphia County residents who obtained an advance or loan from Klover.

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