CHICAGO (Legal Newsline) – Illinois Attorney General Lisa Madigan filed a lawsuit on Wednesday against a Chicago-area short-term lender that allegedly sold a loan meant to evade state reforms.
CMK Investments Inc., doing business as All Credit Lenders, sells small consumer loans and lines of credit through its storefronts in Illinois, South Carolina and Wisconsin. All Credit Lenders allegedly evaded Illinois’ 36 percent interest rate cap by offering a short-term loan product that works like a revolving line of credit but offers none of the protections of a credit card.
While All Credit Lenders allegedly offers the credit card-like products with advertised interest rates of 18 to 24 percent, the account protection fees the company charges raises the interest rates to between 375 percent and more than 500 percent.
Madigan’s lawsuit alleges that when All Credit Lenders borrowers only pay the minimum payment, none of the payment goes toward the principal of the loan. The minimum payments allegedly only cover the bi-weekly fees charged to consumers.
“This new loan product is one of the most abusive attempts to evade the reform laws we have seen,” Madigan said. “This company provides consumers repayment schedules where not one penny of their payment goes toward paying down the principal balance, making it impossible to pay off their loan.”
Madigan’s lawsuit alleges violations of the Illinois Consumer Fraud and Deceptive Business Practice Act. It is the first action Madigan’s office has taken under the new federal Dodd-Frank Act. The suit seeks to ban All Credit Lenders from selling lines of credit and revolving credit in the state, assess penalties for the alleged violations and provide restitution to all impacted consumers.
Original Story: Ill. AG Madigan uses Dodd-Frank Act to sue Chicago-area lender