Federal and state officials are cracking down on companies that provide sensitive consumer financial information to payday lenders, another front in an ongoing battle against high-cost loans.
In the latest round, Illinois Attorney General Lisa Madigan filed five lawsuits this week in Cook County (Ill.) Circuit Court against four out-of-state online payday lenders and a loan lead generator promoted by talk show host Montel Williams.
VIP PDL Services LLC, Red Leaf Ventures LLC, Mountain Top Services I LLC and BD PDL Services LLC allegedly sold payday loans with fees that were double the amount allowed under state law. The four lenders charged Illinoisans $30 for every $100 loaned and allowed borrowers to take out multiple loans at once, violating the Payday Loan Reform Act, according to the lawsuits.
Madigan also sued MoneyMutual LLC, an online broker that allegedly generated leads on payday loans with unlicensed lenders, a violation of Illinois law. MoneyMutual attracted borrowers because of the profile of celebrity spokesman Williams, Madigan charges.
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 also expressed concern about MoneyMutuals data collection practices. MoneyMutual requires potential borrowers to share their personal banking information, Social Security number, date of birth, drivers license information, private address and employment records, all of which can be shared with third parties, putting borrowers at significant risk of identity theft.
The five lawsuits request that the court permanently ban the defendants from the payday loan business in Illinois, require full restitution and cancel pending payday loan contracts with Illinoisans. The suits also seek to impose civil penalties for the alleged violation of the Illinois Consumer Fraud and Deceptive Business Practice Act and the Payday Loan Reform Act of 2005.
The Payday Loan Reform Act in Illinois 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 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 their loans are paid off.