Banking and Finance Law Daily Wrap Up, LOANS—Illinois AG files five lawsuits against online payday lenders, (Apr 9, 2014)

By Stephanie K. Mann, J.D.

Illinois General Lisa Madigan filed five lawsuits in a sweep cracking down on unlicensed, online payday lenders and a loan lead generator in Cook County Circuit Court on behalf of the Illinois Department of Financial and Professional Regulation against four out-of-state payday lenders that are operating exclusively online, selling payday loans racked with fees that are double the amount allowed under state law. The lawsuits allege BD PDL Services LLC, Mountain Top Services I LLC, Red Leaf Ventures LLC, and VIP PDL Services LLC charged Illinois borrowers $30 for every $100 loaned and allowed borrowers to take out multiple loans at once. These lawsuits follow several cease and desist orders issued to the lenders and Money Mutual by the Department.

Loan limits. The Illinois Payday Loan Reform Act limits the fees a payday lender can charge a consumer to no more than $15.50 per $100 loaned. Payday lenders cannot issue a loan to a consumer if the loan would result in the consumer being in debt to one or more payday lender for more than 45 consecutive days, and they cannot issue a loan to a consumer who already carries balances on two loans. Lenders must also wait seven days before issuing a loan to a repeat customer, once the customer’s loan is paid off.

“These online, unlicensed predatory lenders are putting Illinois consumers into unregulated, unprotected payday loans,” Madigan said. “None of these payday lenders is complying with the consumer protection we fought for over a decade to put into place to keep borrowers from being trapped in loans with excessive interest rates and fees.”

Loan generator. Madigan filed a fifth lawsuit against online broker MoneyMutual LLC for its role generating customer leads on payday loans with unlicensed lenders in violation of state law. The Attorney General’s lawsuit alleges the company was able to attract borrowers to its website in large part due to the profile of its celebrity spokesman Montel Williams.

Madigan also expressed concerns about the company’s data collection practices in light of the recent wave of major data security breaches. MoneyMutual requires potential borrowers to share their personal banking information, Social Security number, date of birth, driver’s license information, private address and employment records, all of which can be shared with third parties, putting borrowers at significant risk of identity theft.

“Out-of-state lenders who ignore Illinois laws to take advantage of vulnerable consumers deserve to face the full weight of our laws,” said Manuel Flores, Acting Secretary of Financial and Professional Regulation. “It is gratifying that the Attorney General is backing up our cease and desist orders with demands for full restitution for the unwary borrowers.”

Lawsuits. Madigan’s lawsuits ask the court to permanently ban the defendants from the payday loan business in Illinois, cancel pending payday loan contracts with Illinois consumers, and require full restitution. The lawsuits also seek to impose on the defendants an array of civil penalties for violations of the Payday Loan Reform Act of 2005 and the Illinois Consumer Fraud and Deceptive Business Practice Act.

Companies: BD PDL Services LLC; MoneyMutual LLC; Mountain Top Services I LLC; Red Leaf Ventures LLC; VIP PDL Services LLC

LitigationEnforcement: IllinoisNews Loans