eBay's Bill Me Later is facing a class-action lawsuit, which accuses the credit lender of charging interest and late fees that far surpass those allowed in the state of California.
The suit, filed Monday, alleges Bill Me Later's fees exceed the 10-percent interest limit California law allows non-bank lenders to charge their customers. Bill Me Later regularly surpasses this limit, sometimes charging 100 percent or more in interest, according to the court filing.
Bill Me Later, a company recently acquired by eBay, allows buyers to defer payment for goods purchased in more than 1,000 online stores, including Apple, Borders, Toys 'R' Us and Wal-Mart.
When contacted for comment, Bill Me Later said it could not comment on pending litigation. eBay, a co-defendant in the case, could not be reached for comment by press time.
According to the suit, Bill Me Later charged thousands of California residents more than $5 million in interest and penalties over the past four years.
One shopper was charged an annual percent interest rate of 115 percent, according to the filing. "While ordering books online for $40.87, I was invited to open a Bill Me Later account, which I did, wanting to know how it worked. I paid $20.07 for the first billing cycle," the customer says. "[After forgetting about the second cycle] on a balance of $20.87, I was charged a late fee of $19, plus a $2 finance charge."
Under California consumer-protection law, only bank entities are allowed to charge more than 10-percent interest. While Bill Me Later works with Utah's CIT Bank, it's actually Bill Me Later that acts as the lender, contends Steve Berman of Hagens Berman Sobol Shapiro, who is representing claimants in the suit.
"It is Bill Me Later who, using their own systems, decides if I am credit-worthy, not CIT Bank," Berman says.
The case aims to reduce fees Bill Me Later charges its California shoppers and reimburse consumers who paid interest and late fees over the past four years. A court date has not yet been set for this case.
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Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.