Bankers Healthcare Group, Pinnacle Bank ‘Disguise’ Consumer Loans as Business Loans to Hide Illegal Lending, Class Action Says

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A proposed class action alleges Bankers Healthcare Group (BHG) and part-owner Pinnacle Bank have issued to consumers expensive loans fraudulently disguised as business loans to hide their “predatory” lending practices.

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The 18-page lawsuit claims the nationwide lenders have run afoul of numerous consumer protection laws, including the federal Truth in Lending Act, by conspiring to mislead tens of thousands of middle-income individuals to take out large, high-cost financial loans. The suit alleges that the defendants have disguised these loans as “commercial loans” despite being aware that the borrowers are full-time, W-2 employees with no intention of starting their own businesses as “sole proprietors” and who, instead, took out the loans for personal or household purposes.

“Fraudulently disguising their personal loans as business loans (to non-existent ‘sole proprietorships’) allows [the defendants] to conceal their predatory lending practices, which squarely violate federal and state consumer-lending statutes,” the case charges.

According to the complaint, the lenders impose on borrowers excessive origination fees and interest rates without providing certain disclosures required by law, and penalize or “outright prohibit[]” consumer prepayments in order to “maximize interest accrual.” The filing additionally claims that the companies charge interest on undisbursed funds and secure their loans with all of a borrower’s property as collateral, without providing the requisite disclosures and consumer protections for such an agreement.

“In sum, [BHG and Pinnacle Bank] have knowingly inserted false ‘commercial’ and ‘sole proprietor’ language into their loan documents sent to consumers, to fraudulently disguise ‘consumer credit’ transactions as ‘commercial’ credit transactions,” the lawsuit contends. “[The defendants’] purpose in disguising their consumer lending as ‘commercial’ lending is to evade federal and state regulatory scrutiny, and to increase their own profits at the expense of unsuspecting consumers like [the plaintiffs].”

The defendants’ alleged solicitation process begins with an offer of fast funding in large amounts from either BHG or Pinnacle Bank, the suit explains. The companies mislead consumers to believe that the loans will not require collateral or affect a borrower’s credit score, the case alleges, adding that the lenders “avoid consumer credit reporting only by fraudulently drafting and reporting their loans as business loans, to businesses that [the defendants] know are non-existent.”

As the complaint tells it, the lenders’ salespeople typically fill out most or all of the loan application for the borrower and “routinely persuade” them to click through the online paperwork—which relies heavily on “legalese”—while the salesperson remains on the phone with the consumer.

“Even where consumers voice questions or concerns about certain terms in [the companies’] loan documents, BHG personnel are trained to orally explain away predatory terms as innocuous, earning the consumer’s trust with their interpersonal charisma and apparent professional knowledge,” the filing claims.

The lawsuit argues that, as a result, borrowers remain in the dark about the lenders’ “expensive and punitive” financial terms “until well after a transaction is executed.”

After one plaintiff, a Texas resident, spoke to a BHG salesperson on the phone in July 2021 and was informed that he qualified for a large cash loan, the man was sent pre-filled paperwork to sign electronically, the suit says. The promissory note included in the documents sent to the plaintiff identified Pinnacle Bank as the creditor and listed the man as a consultant, despite the fact that he had never worked as one, the case relays. In addition, the promissory note stated that it was “FOR COMMERCIAL PURPOSES,” even though the plaintiff had informed the BHG salesperson that he intended to use the loan to help pay off credit card debt, the complaint shares.

“The pre-filled, ‘COMMERCIAL’ and ‘Consultant’ language in [BHG and Pinnacle Bank’s] loan documents was verifiably false, and both defendants knew this when they sent their pre-filled loan documents to [the plaintiff],” the filing contests. “Yet [the borrower] relied upon BHG’s direct, fraudulent inducements to quickly and electronically sign the Pinnacle [Bank] loan documents.”

According to the lawsuit, the loan documents imposed “crippling credit terms” on the plaintiff. Per the suit, the lenders deducted more than $6,500 in origination fees from the principal amount of $84,512.80 and charged an annual percentage rate of roughly 18 percent, all without disclosing these terms to the consumer, as required by law.

What’s more, the case claims the documents unlawfully barred borrower prepayments for a certain period and stipulated that the loan was secured by all of the plaintiff’s property, including his home.

“Such predatory lending tactics have allowed [the defendants] to boost their shared assets and revenues by approximately eight or nine figures in recent years, at the expense of tens of thousands of individual consumers nationwide,” the complaint stresses.

The lawsuit looks to represent anyone who signed or co-signed a financial loan from Bankers Healthcare Group or Pinnacle Bank in an amount of $20,000 or more, under a promissory note identifying the “debtor” as a “sole proprietor” or as a natural person doing business as (d/b/a) himself or herself.

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