Madigan cracks down on unlicensed, predatory payday lenders

Attorney general, Department of Financial & Professional Regulation take action against online payday lenders and lead generator promoted by talk show host Montel Williams

[April 10, 2014]  CHICAGO — Attorney General Lisa Madigan filed five lawsuits Tuesday in a sweep cracking down on unlicensed, online payday lenders and a loan lead generator, promoted by talk show host Montel Williams, for illegally offering expensive, predatory loans that trap Illinois borrowers in excessive, cyclical debt loads.

Madigan filed lawsuits this week 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 with fees that are double the amount allowed under state law. The lawsuits allege that 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.

The 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 their being in debt to one or more payday lenders 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 their loans are 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."

Madigan filed a fifth lawsuit against online broker MoneyMutual LLC for its role in generating customer leads on payday loans with unlicensed lenders in violation of state law. The lawsuit alleges that 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.

Madigan's lawsuits follow several cease-and-desist orders issued to the lenders and MoneyMutual by the Department of Financial and Professional Regulation.

"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."

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.

Assistant Attorneys General Sarah Poulimas and Khara Coleman Washington are handling the cases for the attorney general's Consumer Fraud Bureau.

[Text from file received from the office of Illinois Attorney General Lisa Madigan]