(KWQC) – Authorities in Illinois are making stronger efforts to fight back against lenders that are selling loans illegally. Attourney General Lisa Madigan made the announcement on Thursday.
The loans that Madigan is fighting against are specifically small-dollar loans that carry multiple hidden costs and fees. So far, the state has reached a $3.5 million settlement with All Credit Lenders that has provided consumers with hundreds of thousands of dollars in restitution.
Under the terms of the settlement, All Credit Lenders, based in Elgin, must immediately stop offering the revolving line of credit that carried hidden interest rates disguised as “required account protection fees” ranging from 350 percent to more than 500 percent. The company must also stop collecting on these loans and waive outstanding balances for thousands of consumers. All Credit Lenders has already paid $200,000 in restitution to borrowers who were unemployed or receiving social security at the time they received their loan and borrowers who had previously filed complaints with Madigan’s office.
Madigan has also reached agreements with five other lenders in addition to this settlement. The five lenders offer similar loans, but they must immediately stop lending and collecting on those loans.
“These are egregious violations of the payday reform law we fought to put in place to protect consumers from outrageously expensive loans,” Madigan said. “All Credit Lenders and these other operators concoct illegal fees and costs, then fail to disclose them, and as a result, consumers end up owing enormous amounts outlawed by our reforms.”
In 2014, Madigan filed a lawsuit that alleged that the “account protection fee” was undisclosed interest. If true, the fee would have violated Illinois’ 36 percent interest rate cap set in the Illinois Financial Services Development Act (FSDA), which misled consumers about the true cost of their loans. Madigan also alleged the structure of the loans, including its failure to amortize, had an unfair and abusive design that kept consumers in constant debt.
This settlement resolves Madigan’s lawsuit.
For more information on the settlement or Lisa Madigan’s efforts to crack down on predatory lenders, visit this link.