CHICAGO (STMW) — An Elgin-based cash-lending business is charging its customers with interest rates as high as 500 percent, state prosecutors say.
Illinois Attorney General Lisa Madigan filed the lawsuit Tuesday in Cook County Circuit Court against CMK Investments Inc., which operates the cash-lending service All Credit Lenders throughout Chicago, Wisconsin and South Carolina, accoding to a release from the state’s attorney’s office. The business itself is based in northwest suburban Elgin, the release said.
Madigan alleges ACL is evading the state’s 36 percent interest-rate cap by offering a short-term loan product that acts like a revolving line of credit but offers none of the protections of a credit card. The lender offers credit card-like products with advertised interest rates of 18 to 24 percent, the lawsuit said. However, the company thwarts the state interest rate cap by tacking on a “required account protection fees.”
Translation: when the extra fees are factored into the total cost of the short-term loan, the interest rates soar from 375 percent to more than 500 percent, according to the lawsuit.
“This new loan product is one of the most abusive attempts to evade the reform laws we have seen,” Madigan said in the release. “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.”
The Illinois Department of Financial and Professional Regulation assisted Madigan’s office with its investigation.
Madigan’s lawsuit is the first action her office has taken under the new federal Dodd-Frank Act. It also alleges violations of the Illinois Consumer Fraud and Deceptive Business Practice Act, according to the compliant. The lawsuit seeks to ban the company from selling lines of credit and revolving credit in Illinois, provide restitution to all impacted consumers and assess penalties for violating the law.
(Source: Sun-Times Media Wire © Chicago Sun-Times 2014. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)