Continuing the nationwide trend, the Illinois attorney general sued four online payday lenders and a lead provider, alleging that their practices violate the state’s Payday Loan Reform Act.
Regulators from around the country have focused their attention on payday lenders recently, from the California Department of Business Oversight (click here to read our previous newsletter) to the Justice Department (click here to read our previous newsletter) to the Federal Trade Commission (click here to read our previous newsletter).
In a new suit, Illinois AG Lisa Madigan said BD PDL Services LLC, Mountain Top Services LLC, Red Leaf Ventures LLC and VIP PDL Services LLC charged rates in excess of those allowed by statute, which permits charges of up to $15.50 per $100 in loans. According to the complaint, the defendants charged nearly twice that, up to $30 per $100 loan.
The defendants also allowed borrowers to take out multiple loans at a time in contravention of the Payday Loan Reform Act (PLRA) and failed to provide required disclosures and written agreements as required by the law. Pursuant to the PLRA, all payday lenders are required to be registered in the state, but none of the defendants—all of which are based out of state and operate exclusively online—has a license.
A fifth suit targeted MoneyMutual LLC, a company endorsed by talk show host Montel Williams, that provides customer leads to lenders (pitching the company as “a trusted source to our 60 lenders” in TV ads). The AG said the PLRA’s broad definition of lender encompasses the lead generator as it includes “any person or entity…that…arranges a payday loan for a third party, or acts as an agent for a third party in making a payday loan.”
According to the complaint, the statute required MoneyMutual to obtain its own license and vet lenders before matching them with borrowers. By connecting borrowers with lenders not licensed in the state of Illinois that charge finance fees and percentage rates ranging between 200 and 1,400 percent, the company additionally knowingly violated the statute since 2011, the AG claimed.
All the suits—which were filed after cease and desist orders issued by the Illinois Department of Financial and Professional Regulation were ignored—seek a halt to the allegedly illegal practices and an order to cancel current loan contracts between the defendants with Illinois customers and provide restitution. The complaints also request civil penalties under the PLRA as well as the Illinois Consumer Fraud and Deceptive Business Practice Act.
To read the complaint in Illinois v. MoneyMutual, click here.
To read the AG’s press release about the other suits, click here.
Why it matters: The complaint affirms the continuing focus by both state and federal regulators on payday lenders, with the Consumer Financial Protection Bureau set to issue new rules for the industry later this year. AG Madigan managed to reference a second hot-button issue in her suits, noting that MoneyMutual’s collection of personal information triggered data security concerns given the recent rash of hacks and cyber attacks. As part of the application process, MoneyMutual collects data such as Social Security numbers, address and employment records, and personal banking information, all of which it shares with third parties, she said.