On March 19, 2014, Attorney General Lisa Madigan joined in the increased scrutiny and focus on lenders, both online and storefront, by filing suit against a Chicago area short-term lender (the “Company”) that also operates in at least three other states. The lawsuit alleges that the Company misled borrowers into buying a product that was advertised as a way to protect the borrowers from defaulting on payments in the event of a job loss. But, General Madigan alleges that the protections never materialize and that the fee is the Company’s way of raising interest rates that skirt the state’s usury cap. When discussing the suit, General Madigan said in her office’s press release that “[t]his 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.” The relief sought is prohibiting the Company from selling lines of credit and revolving credit in Illinois, requiring the Company to pay restitution to all impacted consumers and assessing penalties against the Company for violating the law.
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It is critical that lenders remain vigilant and transparent in their marketing efforts and assessment of fees to avoid similar scrutiny from state Attorneys General throughout the country.