A St. Clair County bank has removed a putative class action lawsuit filed against it to U.S. District Court for the Southern District of Illinois, alleging it will be forced to pay more than $5 million to customers if a judge decides against it.
First Bank faces a lawsuit filed by investment corporation LDJ Investments, which alleges the bank misrepresented the amount of interest it charged on loans.
In its complaint, LDJ Investments claims defendant First Banks enticed customers to borrow money from it by promising to charge a low interest rate on complex standardized loan documents.
However, First Banks based its purportedly lower interest rates on a per annum period of less than 12 calendar months, according to LDJ's complaint filed July 12 in St. Clair County Circuit Court.
"By using only 360 days, the Bank charged over 12 calendar months 1.4 percent more than the contract cost of credit at a rate of 101.4 percent of the represented rate," the suit states.
"In utter disregard of the rights of the Class, the Bank willfully and wantonly engaged in an ongoing systematic pattern and common practice of deception and unfairness throughout the loan transactions that included common misrepresentations, half-truths, and omissions on the loans of Plaintiff and Class in order to conceal the true 12 calendar month rate of interest and costs credit thereby surreptitiously increasing its profits at the expense of its borrowers."
By using inconspicuous, vague, confusing and contradictory language in all of its loan documents, First Banks intentionally created confusion among its clients about the actual interest rates they were being charged, LDJ's complaint says.
For instance, it represented that its interest rate was charged "per annum," a statement many of the bank's clients believed to mean per year, the plaintiffs claim. In fact, under Illinois law, when the phrase "per annum" is used in regard to interest rates, it must mean per year, according to the complaint. However, First Banks utilized the phrase "per annum" to mean 360 days, the suit states.
"The public policy of the State of Illinois as set forth in Promissory Notes and Bank Holiday Act and Interest Act prohibit the deceptive and unfair acts of the Bank set forth above," the complaint says. "The conduct of the Bank was intentional, deliberate, willful and wanton, based solely on greed, and performed in utter disregard of the rights of the Plaintiff and the Class."
In its notice of removal, First Bank admits no wrongdoing, but says it would have to pay significant amounts if the judge finds in LDJ's favor.
"Over this period, in the State of Illinois alone, First Bank had more than 19,000 commercial loans," the bank writes in its notice of removal. "The difference in accrued interest on these loans between the 360/365 and 365/365 method during this time period exceeds six million dollars."
Because the class action exceeds $5 million and because more than 100 members could be involved in the suit, the complaint falls under the district court's jurisdiction, according to First Bank.
In its complaint, LDJ wants the court to certify its complaint as a class action, to award compensatory damages, to downward adjust the principal balance of the bank's customers in an amount of the excess interest and to award pre- and post-judgment interest, attorneys' fees, costs and other relief the court deems just.
Bernard Ysursa of Cook, Ysursa, Bartholomew, Brauer and Shevlin in Belleville; Pat Ducey of the Law Office of Pat Ducey, Thomas R. Ysursa of Becker, Paulson, Hoerner and Thompson; and Eric W. Evans of Roth and Evans in Granite City will be representing LDJ.
Mike W. Bartolacci, Christopher M. Hohn and Jill M. Johnson of St. Louis will be representing First Bank.
U.S. District Court case number: 3:11-cv-695.