Illinois v. CMK Invs., Inc.
| Decision Date | 09 December 2014 |
| Docket Number | No. 14 C 2783,14 C 2783 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, ILLINOIS ATTORNEY GENERAL, Plaintiff, v. CMK INVESTMENTS, INC. d/b/a ALL CREDIT LENDERS, an Illinois Corporation, Defendant. |
OPINION AND ORDER
This is a case brought for and on behalf of the People of the State of Illinois by Lisa Madigan, the Illinois Attorney General ("Plaintiff") to remedy alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 Ill. Comp. Stat. 505/1 et seq., and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), 12 U.S.C. § 5301 et seq., by Defendant CMK Investments, Inc., d/b/a All Credit Lenders ("All Credit Lenders"). Plaintiff alleges that All Credit Lenders offers an unfair revolving line of credit product and engages in unfair, abusive, and deceptive practices in connection with that product. Before the Court is All Credit Lenders' motion to dismiss. Because the Court finds that the claims are not barred by res judicata or by the disclosures that accompanied the loan agreement, the motion to dismiss [13] is denied.
12 U.S.C. § 5531(d). The Consumer Financial Protection Bureau ("CFPB") is one of the agencies charged with enforcing the Dodd-Frank Act.
Illinois has several statutes regulating consumer loans. In 2005, Illinois enacted the Payday Loan Reform Act. A "payday loan" is a loan where the finance charge exceeds an annual percentage rate of 36% and the term does not exceed 120 days. 815 Ill. Comp. Stat. 122/1-10. The Consumer Installment Loan Act ("CILA"), 205 Ill. Comp. Stat. 670/1 et seq., was amended in 2010 to regulate "small consumer loans," which are loans "upon which interest is charged at an annual percentage rate exceeding 36% and with an amount financed of $4,000 or less." 205 Ill. Comp. Stat. 670/15(b). Lenders licensed under CILA cannot also obtain a license under the Payday Loan Reform Act; they must choose whether they want to provide loans under one statute or the other. But a lender licensed under CILA may also make certain open-ended loans pursuant to the Illinois Financial Services Development Act ("FSDA"), 205 Ill. Comp. Stat. 675/1 et seq. Unlike other lenders under the FSDA, CILA licensees are capped at charging 36% interest on any open-end credit products offered under the FSDA. 205 Ill. Comp. Stat. 675/3(a).
Since 1999, All Credit Lenders has offered short-term consumer loan products. Prior to 2011, All Credit Lenders was licensed under CILA. In January 2011, before the 2010 changes toCILA and the FSDA went into effect, All Credit Lenders applied for a license under the Payday Loan Reform Act, which it received in April 2011. Shortly thereafter, All Credit Lenders returned that license to the Illinois Department of Financial Institutions, opting instead to maintain its CILA license.
In March 2011, All Credit Lenders introduced a new open-end credit product, the Revolving Credit Plan. The Revolving Credit Plan is typically for an amount between $100 and $2,000. Consumers are given two forms: an agreement and disclosure form, as well as a billing cycle schedule. The disclosed interest rate varies between 18% and 24%. The consumer is also required to pay an account protection fee. The account protection fee provides that the consumer will not be charged the account protection fee or interest for a period of up to twelve months if the consumer becomes unemployed or loses his or her government benefits. Certain restrictions apply, including that the account must be current before the benefit takes effect. In those agreements where the disclosed annual percentage rate is 18%, the account protection fee is at least $10 for every $50 of the consumer's outstanding balance, payable every billing cycle (i.e. every two weeks). For example, a consumer with an outstanding balance of $800 would pay All Credit Lenders an account protection fee of $160 every two weeks in addition to any daily interest that has accrued at the 18% rate. In those agreements where the disclosed annual percentage rate is 24%, the account protection fee is either $11 or $15 for every $50 of the consumer's outstanding balance.
The agreement provides that the minimum payment for each billing cycle is "the total interest charged for the billing cycle plus the Account Protection Fee and paper billing fee if any." Ex. 1 to Compl. at 2. In bold letters, the agreements further states, "PLEASE NOTE: if you only pay your minimum payment, you will not pay down your principal balance." Id.Suggestions are made as to how to pay down the principal balance, which include making payments before due dates and in amounts greater than the minimum payment.
In connection with signing the agreement, consumers receive a billing cycle schedule that provides payment dates typically corresponding with employment pay dates for one year. Consumers are directed to make a payment at All Credit Lenders' stores on each payment due date. When a consumer asks what the payment amount is, the consumer is quoted the minimum payment amount, which includes only interest and the account protection fee. All Credit Lenders' agents do not inform consumers that the amount covers only interest and fees and not principal, leading consumers to believe that they are paying down principal in addition to interest. Moreover, the billing cycle schedule suggests to consumers that if payment is made on each listed date, the loan will be paid off. But if only the minimum payment is made on each listed payment date, consumers never pay off their loans.
Plaintiff has provided several examples of consumers who have obtained credit through All Credit Lenders' Revolving Credit Plan. In November 2012, Cheryl Wooden-Wolf met with an All Credit Lenders agent about obtaining a loan to help pay her bills. She entered a Revolving Credit Plan agreement with All Credit Lenders for $450 on November 21, 2012, believing that she was taking out a loan in which the entire proceeds would be fully repaid through a fully amortizing payment schedule by a specified end date. When she asked for the total pay-off amount, the agent told Wooden-Wolf that she would have to pay $101 every two weeks. In connection with this representation, Wooden-Wolf received a schedule of billing cycle dates that began in December 2012, with November 22, 2013 as the last listed date. The loan agreement specified an annual percentage rate of 24% interest, but she was also charged anaccount protection fee of $11 for every $50 borrowed. All Credit Lenders' agent did not explain the nature or amount of the account protection fee to Wooden-Wolf when she signed the agreement. The first few times a payment was due, Wooden-Wolf paid the amount she was told to pay, believing she was paying both principal and interest. After making approximately four payments, she realized her principal balance had not decreased. Thus, in February 2013, she paid $553.50 to pay off the remaining balance of her loan, having made payments totaling approximately $900 over a three month period on a $450 loan. If she had paid only the disclosed 24% interest rate on her loan over that time, she would have paid $27 in interest.
As another example, Loralty Harden entered a Revolving Credit Plan agreement with All Credit Lenders in November 2011 for $100 at a stated interest rate of 18%. The agreement included an account protection fee of $15 on every $50 borrowed. In March or April 2012, Harden paid the outstanding balance and received an additional $100 from All Credit Lenders. In July 2012, she learned that her outstanding balance on this additional $100 was not decreasing despite the fact that she had made payments as directed by All Credit Lenders' agents. Upon inquiry, the agent explained the account protection fee and its purpose to protect her in case she became unemployed. As Harden was retired and received monthly disability and social security benefits, she explained to the agent that the account protection fee did not apply to her. After Harden filed a complaint with the Illinois Attorney General's Office, All Credit Lenders agreed to stop collection on the agreement if she...
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