An Elgin-based short-term lender is being sued by the Illinois attorney general for charging interest rates that can reach as much as 500 percent, according to a lawsuit.
Attorney General Lisa Madigan filed suit in Cook County court Tuesday against CMK Investments Inc., which operates as All Credit Lenders and is based in Elgin, though the company operates storefronts across Illinois, Wisconsin and South Carolina.
Prosecutors say the lender is evading the state's 36 percent interest-rate cap by tacking on "required account protection fees" to its short-term loan products. When those fees are factored into the total cost of the short-term loan, the interest rates can be between 375 percent and 500 percent, even though the lender advertises interest rates between 18 percent and 24 percent, according to a news release.
When consumers make minimum payments to the lender, none of that money goes to paying down the principal of the loan, but only covers the extra fees, Madigan's lawsuit says.
"This new loan product is one of the most abusive attempts to evade the reform laws we have seen," Madigan said in the news 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 suit seeks to ban the company from selling lines of credit and revolving credit in Illinois, provide restitution to impacted consumers, and other penalties.