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Financial Services Law Insights and Observations

States sue installment lender for hidden add-on products

State Issues State Attorney General Enforcement Consumer Finance Predatory Lending Add-On Products Installment Loans

State Issues

On August 16, a multistate lawsuit led by the Pennsylvania attorney general was filed against a subprime installment lender for allegedly charging consumers for hidden add-on products without their consent. According to the Pennsylvania AG’s press release, consumers believed they had entered into agreements to borrow and repay, over time, a fixed loan amount when allegedly the lender “added hundreds to thousands of dollars to the total amount a consumer owed.” Among other things, the complaint claimed the lender’s alleged “aggressive, high-pressure sales tactics” were “dictated by a profit-driven model,” and that its loans and aggressive sales tactics targeted the most vulnerable borrowers (often subprime and deep subprime borrowers that already carry significant credit card, installment loan, and/or student loan debt) by offering them “small dollar personal loans with high interest costs.” Additionally, the complaint contended that the lender’s corporate policies and practices resulted in employees charging consumers for add-on products they did not know about and did not consent to buy, and that employees were encouraged to perpetrate the unlawful conduct by being rewarded for maximizing add-on charges. The complaint seeks restitution, repayment of unlawfully obtained profits, civil penalties, rescission or reformation of all contracts or loan agreements between the lender and affected consumers, and injunctive relief.