MyPillow and CEO Mike Lindell are suing another merchant cash advance company over an allegedly illegal loan.
The Chaska-based manufacturer borrowed $1.5 million from Cobalt Funding Solutionsin September and agreed to make 50 daily payments for a total repayment of $2.2 million, according to a lawsuit filed last week in Carver County District Court.
The resulting 409% interest rate is “many times greater than the maximum interest rate permitted under the applicable state usury law,” the suit says.
“Cobalt ... took advantage of MyPillow, a cash-strapped business that needed funds quickly,” the complaint says. “This transaction is an illegal, usurious loan,” and MyPillow wants a judge to declare the loan unenforceable and award unspecified damages.
Cobalt did not immediately return a request for comment Tuesday.
The companies essentially offer payday loans for businesses, and the industry “engages in loan sharking,” the lawsuit says. In this case, Cobalt offered to buy MyPillow’s future receivables and later filed a lien against the pillow maker to seize funds.
The purchase of future receivables was “merely a sham intended to evade the applicable usury law,” the complaint says. “Lenders ... ensure that they will be repaid at grossly inflated rates by hook or by crook.”