Internet payday lender fined more than $230,000 for unlicensed lending in Illinois

Payday-Loans-Yes.com issued largest fine in Illinois history against payday lender         

[May 31, 2007]  CHICAGO -- In its ongoing effort to protect consumers from unscrupulous lenders, the Illinois Department of Financial and Professional Regulation on Wednesday filed an order against Global Payday Loan LLC, doing business as Payday-Loans-Yes.com, ordering the firm to stop issuing loans to Illinois residents. The department also fined the firm $234,000 for charging Illinois customers excessive interest rates and ignoring the hard-won consumer protections established in the Payday Loan Reform Act.

"It is striking, even after Governor Blagojevich worked to enact payday loan reforms that protect Illinois consumers, Internet loan operations continue to violate the act, claiming the law doesn't apply to them," said Dean Martinez, secretary of Financial and Professional Regulation.

The Payday Loan Reform Act contains several important protections, all of which were ignored by Global Payday Loan, the department's order alleges. Investigating a consumer complaint brought by J.M. (the complainant's full name is being withheld for privacy reasons) who borrowed $300.00 through the company's online site, the department found serous problems with the transaction. First, the loan was written with a six-day term, which does not give the borrower sufficient time to repay the loan. Second, the fees on the loan exceeded the $15.50 per $100 allowed in Illinois. In fact, the annual percentage rate on the loan interest rate on the loan was 2,190 percent. Finally, the company failed to provide the borrower with a statement explaining her rights to initiate an interest-free repayment plan and her other consumer rights under the Payday Loan Reform Act.

"We are issuing the largest fine in Illinois history against a payday lender and hope this sends a message to other national companies that we intend to pursue all violations of Illinois' payday loan law," said Gina DeCiani, acting director of the Division of Financial Institutions.

The company continued to violate J.M.'s rights and is still sending her e-mail warnings that her account is "seriously delinquent." As of April 1, J.M. had already paid the lender $360, which is $13.50 more than the company was entitled to collect under the Payday Loan Reform Act. In April, J.M. and her employer received several calls demanding additional payment, with Global representatives asserting that the unpaid balance on her loan was $630.

"I have been in the middle of a nightmare, and I will be glad for it to be over," the complainant said. "I think that loan companies should have to obey Illinois laws. We have these laws to protect us, and when you are afraid to answer your phone, or that they'll call your supervisor, or garnish your wages, that's not right. This company should have to follow the rules no matter where their company is based. These people are sharks, and I don't owe them any more money, and don't deserve to be harassed by them. That's why I filed the complaint with the state of Illinois."

The order invokes the largest fines ever imposed on a payday lender. The total fine of $234,000 is apportioned as follows: 1. $1,000 per day for acting as a payday lender without a license, for a total fine of $210,000; 2. $1,000 for making a payday loan with a term of less than 13 days; 3. $1,000 for assessing finance charges in excess of $15.50 per $100 loaned; 4. $1,000 for failing to verify that a payday loan was permissible under the Payday Loan Reform Act; 5. $1,000 for failing to provide a consumer with notice of the right to a repayment plan; 6. $10,000 for interfering with the division's authority to examine a lender's books, records, and loan documents; and 7. $10,000 for engaging in unfair, deceptive and fraudulent practices in collecting a payday loan.

The order filed by the Illinois Department of Financial and Professional Regulation also requires the lender to provide documents showing whether it has made loans to any other Illinois consumers.

The department advises consumers to exercise extreme caution if they choose to take out a loan through the Internet. At the very least, consumers should try to determine whether the lender is licensed to make loans in Illinois. If they feel they have been victimized by an Internet lender, they should contact the Department of Financial and Professional Regulation to file a complaint.

A copy of the cease-and-desist order is available at www.idfpr.com. [To download Adobe Acrobat Reader for the PDF file, click here.]

[Text from Illinois Department of Financial and Professional Regulation news release received from the Illinois Office of Communication and Information]