Kaschak v. Bankers Healthcare Group, LLC

Filing 24

MEMORANDUM Opinion and Order Signed by the Honorable Steven C. Seeger on 4/25/2024. For the foregoing reasons, the Court grants in part and denies in part Defendant's motion to dismiss (Dckt. No. 15 ). Mailed notice. (jjr, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JONATHAN D. KASCHAK,

)
)
Plaintiff,
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v.
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BANKERS HEALTHCARE
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GROUP, LLC,
)
)
Defendant.
)
____________________________________)

Case No. 23-cv-15452
Hon. Steven C. Seeger

MEMORANDUM OPINION AND ORDER
This case is about consumer loans masquerading as business loans. Plaintiff Jonathan
Kaschak, a utility lineman, borrowed over $100,000 from Defendant Bankers Healthcare Group,
LLC. He used the money to pay off his personal debts, but the loan didn’t last.
Kaschak needed cash. So he asked Bankers Healthcare to refinance his loan and extend
more credit. Bankers Healthcare declined to refinance the loan. But it offered Kaschak a second
loan, which he accepted. He borrowed roughly $70,000.
The loans had lender-friendly terms. The interest rate of each loan was well into the
double-digits. Even so, Kaschak buckled down and made substantial payments under both loans.
And then, he sued.
Both loans say that they’re business loans. But according to the complaint, the loans
aren’t business loans at all. They’re consumer loans in disguise. And Bankers Healthcare knew
it.
Basically, Kaschak alleges that Bankers Healthcare made personal loans and masked
them as business loans. Bankers Healthcare knew full well that Kaschak wanted personal loans.

And the company knew that Illinois puts limits on the amount of interest that a lender can charge
a consumer. So the company made the personal loans look like commercial loans to evade
restrictions on the amount of chargeable interest.
The complaint includes three claims under state and federal law. Bankers Healthcare, in
turn, moved to dismiss.
For the following reasons, the motion to dismiss is granted in part and denied in part.
Background
At the motion-to-dismiss stage, the Court must accept as true the complaint’s wellpleaded allegations. See Lett v. City of Chicago, 946 F.3d 398, 399 (7th Cir. 2020). The Court
“offer[s] no opinion on the ultimate merits because further development of the record may cast
the facts in a light different from the complaint.” Savory v. Cannon, 947 F.3d 409, 412 (7th Cir.
2020).
The story begins in 2021, when Jonathan Kaschak received a flyer from Defendant
Bankers Healthcare Group LLC. The flyer offered him a loan. See Cplt., at ¶ 14 (Dckt. No. 1).
Kaschak is an electrical utility lineman, and he was a receptive audience for the offer of a
loan. Id. at ¶ 7. At the time, he had “a large number of personal debts,” and he wanted to reduce
the interest rates. Id. at ¶ 15. So Kaschak responded to the flyer and reached out to Bankers
Healthcare. Id.
Bankers Healthcare circled back by email and offered Kaschak a loan. Id. at ¶¶ 16–17.
The company said that it would document the loan as a business loan. Id. at ¶ 18. Kaschak
pushed back, explaining that he was not engaged in any business. Id. at ¶ 19.
That revelation didn’t trouble Bankers Healthcare. The company responded that it would
put down that he was a “consultant” for its own purposes. Id. at ¶ 20. Plus, by calling Kaschak a

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“consultant,” the company would not have to report the loan on Kaschak’s personal credit report.
Id.
In reality, Kaschak was not a consultant, and he was not engaged in any business. Id. at
¶ 21. And Bankers Healthcare knew it. The company knew that Kaschak was not a consultant
and did not want the loan for business purposes. Id. at ¶ 22.
Before getting the loan, Kaschak provided information that was consistent with getting a
personal loan. Kaschak gave Bankers Healthcare his Social Security number, not an Employer
Identification Number. Id. at ¶ 24. He gave Bankers Healthcare copies of his paystubs, too. Id.
Kaschak also told Bankers Healthcare what he intended to do with the loan proceeds.
“When asked for the purpose of the loan, Plaintiff advised that they included paying off credit
cards and other loans.” Id.
As the complaint tells it, Bankers Healthcare documented the loan as a business loan to
get around Illinois restrictions on the rate of interest. Id. at ¶ 25. But the company never
revealed the real reason why it wanted to call the loan a commercial loan. Bankers Healthcare
never explained that it was trying to evade statutory limits on the amount of chargeable interest.
Bankers Healthcare made the first loan to Kaschak in July 2021. Id. at ¶ 26. The loan
agreement identified the debtor as “Jonathan D. Kaschak d/b/a Jonathan D. Kaschak,
Consultant.” See 7/2/21 Loan Agreement (Dckt. No. 1-1, at 2 of 7).
The nominal principal amount of the first loan was $125,355. See Cplt, at ¶ 26 (Dckt.
No. 1). Kaschak only received $111,955. Id. If you’re wondering about the $13,000+ gap,
you’re not alone.
The complaint doesn’t fill in the $13,000+ gap in the story. But based on the loan
agreement, it looks like Bankers Healthcare took a big bite out of the loan through fees. The

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loan agreement included a “Doc Fee” of $2,995, an “Optional Limited Personal Guaranty” of
$7,840, a “reimbursable Servicing Fee” of $2,520, and a “Wire Fee” of $45. See 7/2/21 Loan
Agreement (Dckt. No. 1-1, at 2 of 7). That’s $13,400 of the $125,355.
The loan agreement contains lots of small print, using a font size that only an ant could
enjoy. By the look of things, based on the nearest ruler, it looks like each letter was only a
millimeter, give or take. That’s pretty small. Putting one millimeter in perspective, lice are two
or three millimeters long.
This Court did some textual detective work with assistance from a nearby “everything”
bagel. The letters in the loan agreement are noticeably smaller than a sesame seed. In fact, a
sesame seed is larger than some of the words. The letters are about the size of a poppy
seed. And the pieces of roasted garlic dwarf everything.
It’s the font size that you would pick if you didn’t want the other side to actually read
it. After all, reading small print is a pain in the neck (and a pain on the eyes). It’s hard to read,
so it’s a deterrent to getting read. One could be forgiven for thinking that drafters of contracts
sometimes use small print to deter the other side from reading it.
As you might guess, the fine print had plenty of lender-friendly provisions.
The loan agreement required Kaschak to make 84 payments of $2,689.34. Id. That’s a
whopping $225,904.56 to repay a loan of $111,955. See 7/2/21 Loan Agreement (Dckt. No. 1-1,
at 3 of 7) (“FOR COMMERCIAL PURPOSES AND VALUE RECEIVED, Debtor does hereby
promise to pay to Creditor . . . the total sum of Two Hundred Twenty-Five Thousand, Nine
Hundred Four DOLLARS and Fifty-Six CENTS ($225,904.56).”).
It doesn’t take a math whiz to see that the amount of the repayment is double the amount
of the loan. Borrow $111,955, and then pay $225,904.56.

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According to the complaint, the annual percentage rate (APR) on the loan was roughly
22.96%. See Cplt., at ¶ 28 (Dckt. No. 1). But Addendum “A” to the loan agreement stated that
the interest rate was 18.74%. See 7/2/21 Loan Agreement (Dckt. No. 1-1, at 6 of 7).
The loan agreement included other lender-friendly provisions, too. The loan agreement
prohibited Kaschak from prepaying any part of the loan for 48 months. Id. at 3 of 7.
Doing a little math, 48 months x $2,689.34 per month equals $129,088.32. So, at the
very least, the loan agreement required Kaschak to fork over $129,088.32 to repay the loan of
$111,955.
The loan agreement required Kaschak to make repayments through ACH debit.1 See
Cplt., at ¶ 26 (Dckt. No. 1); see also 7/2/21 Agreement (Dckt. No. 1-1, at 3 of 7). The agreement
included a choice-of-law provision, too. Illinois law governed the contract. See Cplt., at ¶ 26.
Kaschak signed the loan agreement. Right below the signature block, the loan agreement
identified the debtor as “Jonathan Kaschak – Owner,” followed by “Jonathan D. Kaschak d/b/a
Jonathan D. Kaschak, Consultant.” See 7/2/21 Loan Agreement (Dckt. No. 1-1, at 4 of 7). In a
similar vein, the accompanying settlement statement referred to the borrower as “Jonathan
Kaschak – Owner.” Id. at 2 of 7.
Kaschak ultimately received the funds. And when he got his hands on the money,
Kaschak acted like a consumer who had received a personal loan. He did not use the proceeds
for business purposes. Instead, Kaschak used the money for personal, family, or household
purposes. See Cplt., at ¶ 23 (Dckt. No. 1).

“An ACH debit transaction is a debit directly from a personal savings, personal checking, or business
checking account.” What is an ACH debit transaction?, EPA, https://www.epa.gov/lead/what-ach-debittransaction (last visited Apr. 8, 2024).
1

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The money didn’t last. After about a year, Kaschak ran short on cash. Id. at ¶ 29. So he
contacted Bankers Healthcare about the possibility of refinancing the loan and receiving
additional credit. Id.
Bankers Healthcare declined to refinance the loan. Id. But it offered Kaschak another
loan. Id. Kaschak agreed.
Bankers Healthcare and Kaschak entered into a second loan agreement in September
2022. Id. at ¶ 30. The nominal principal was $76,900. Id. But Kaschak received only $69,955.
Id.
Once again, fees took a big bite out of the loan. The agreement included almost $7,000
in fees, including $950 for a “doc fee,” $4,200 for “Optional Limited Personal Guaranty,” $1,750
for a “Reimbursable Servicing Fee,” and $45 for a “Wire Fee.” See 9/21/22 Loan Agreement
(Dckt. No. 1-3, at 3 of 6).
The loan agreement required Kaschak to make 96 payments of $1,207.56 each, all by
ACH debit. Id. at 6 of 6. That’s $115,925.76 to borrow $69,955. Id.
The second loan agreement was less restrictive about prepayment than the first loan
agreement. The second loan agreement prohibited Kaschak from repaying the loan for at least
12 months. Id. at 3 of 6.
According to the complaint, the loan had an APR of about 13.81%. See Cplt., at ¶ 32
(Dckt. No. 1). But the second loan agreement says that the interest rate was 10.99%. See
9/21/22 Loan Agreement (Dckt. No. 1-3, at 6 of 6).
The second loan agreement provided that Florida law – not Illinois law – governed. Id. at
3 of 6.

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The second loan agreement gave a different description of the debtor. The second loan
agreement identified the debtor as “Jonathan D. Kaschak d/b/a Jonathan D. Kaschak, Sole
Proprietor.” Id.
So, in the first loan, Kaschak was a consultant, but in the second loan, Kaschak was a
sole proprietor. But according to the complaint, Kaschak was just an ordinary person who
wanted a loan to pay his bills.
Kaschak made substantial payments under both loans. See Cplt., at ¶ 33 (Dckt. No. 1).
The complaint does not allege that Kaschak defaulted, or failed to make any payments, or
anything of that sort. By the look of things, the repayment went smoothly.
And then, Kaschak sued. He claims that Bankers Healthcare made “usurious and
oppressive loans” in violation of Illinois law. Id. at ¶ 34. According to him, Bankers Healthcare
covered up the purpose of the loans and did not give proper disclosures. Id.
Kaschak’s complaint includes three counts under state and federal law. See id. at 6–9.
Count I is a claim under the Illinois Interest Act, 815 ILCS 205/4. Id. at ¶¶ 35–43.
Kaschak alleges that Bankers Healthcare, an unlicensed lender, made him a consumer loan at an
interest rate of more than 9%. Id.
Count II is a claim under the Electronic Funds Transfer Act, 15 U.S.C. § 1693k. Id. at
¶¶ 44–47. Kaschak claims that the loan agreements required him to repay a consumer loan by
electronic fund transfers, in violation of federal law. Id.
Finally, Count III is a claim under the Illinois Consumer Fraud and Deceptive Business
Practices Act (“ICFA”), 815 ILCS 505/2. Id. at ¶¶ 48–52. Kaschak contends that Bankers
Healthcare violated that statute by: (1) making a usurious and oppressive loan, (2) resorting to

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false statements of business purpose to cover up the usurious nature of the loan, and (3) violating
the Electronic Funds Transfer Act. Id. at ¶ 49.
Bankers Healthcare moved to dismiss for failure to state a claim, and moved to dismiss
one of the claims for lack of standing. See Mtn. to Dismiss (Dckt. No. 15).
Legal Standard
A motion to dismiss under Rule 12(b)(1) tests the jurisdictional sufficiency of the
complaint. When it comes to standing, a party can bring a facial challenge or a factual challenge.
Courts “must accept as true all material allegations of the complaint, drawing all reasonable
inferences therefrom in plaintiff’s favor, unless standing is challenged as a factual matter.”
Laurens v. Volvo Cars of N. Am., LLC, 868 F.3d 622, 624 (7th Cir. 2017) (quoting Remijas v.
Neiman Marcus Grp., LLC, 794 F.3d 688, 691 (7th Cir. 2015)).
If a party brings a factual challenge to standing, a district court “may properly look
beyond the jurisdictional allegations of the complaint and view whatever evidence has been
submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Ezekiel v.
Michel, 66 F.3d 894, 897 (7th Cir. 1995) (citing Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188,
191 (7th Cir. 1993)); Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443–44 (7th Cir.
2009).
A motion to dismiss for failure to state a claim under Rule 12(b)(6) challenges the
sufficiency of the complaint, not its merits. See Fed. R. Civ. P. 12(b)(6); Gibson v. City of
Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a motion to dismiss, a district
court accepts as true all well-pleaded facts in the complaint and draws all reasonable inferences
from those facts in the plaintiff’s favor. See AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th
Cir. 2011).

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To survive a Rule 12(b)(6) motion, the complaint must provide the defendant with fair
notice of the basis for the claim, and it must be facially plausible. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
“When ruling on a motion to dismiss, the court may consider ‘documents . . . attached to
the complaint, documents . . . central to the complaint and . . . referred to in it, and information
that is properly subject to judicial notice.’” Amin Ijbara Equity Corp. v. Vill. of Oak Lawn, 860
F.3d 489, 493 n.2 (7th Cir. 2017) (quoting Williamson v. Curran, 714 F.3d 432, 436 (7th Cir.
2013)).
Claims of deceptive acts or practices under the Illinois Consumer Fraud and Deceptive
Business Practices Act require the plaintiff to meet the heightened pleading standard of Rule 9(b)
of the Federal Rules of Civil Procedure. See Vanzant v. Hill’s Pet Nutrition, Inc., 934 F.3d 730,
738 (7th Cir. 2019). Rule 9(b) requires a party alleging fraud to “state with particularity the
circumstances constituting fraud.” See Fed. R. Civ. P. 9(b). The plaintiff must allege the “who,
what, when, where, and how” of the alleged fraud. See Vanzant, 934 F.3d at 738.
Analysis
I.

Illinois Interest Act (Count I)
The first claim involves the Illinois Interest Act, 815 ILCS 205/4. See Cplt., at ¶¶ 35–43

(Dckt. No. 1). The gist of the claim is that the loan agreements charged too much interest, in
violation of Illinois law.
The Illinois Interest Act limits the amount of interest that a lender can charge. The
statute sets the ceiling at an “annual percentage rate of 9%.” See 815 ILCS 205/4(1).

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But the statute includes a few exceptions. One exception covers “any business loan to a
business association or copartnership or to a person owning and operating a business as sole
proprietor.” See 815 ILCS 205/4(1)(c). The statute defines a “business” as a “commercial,
agricultural or industrial enterprise which is carried on for the purpose of investment or profit.”
Id.
That language raises a question: when is a loan a “business loan”?
In Bankers Healthcare’s view, both loans are business loans. See Def.’s Mem., at 7
(Dckt. No. 16). Why? Because the loan agreements say so.
Bankers Healthcare points to language in the loan agreements that characterize the loans
as business loans. And sure enough, the loan agreements are chock-full of language saying that
they are commercial loans.
For example, the title of the first loan agreement is “FINANCING AGREEMENT (Sole
Proprietorship).” See 7/2/21 Loan Agreement (Dckt. No. 1-1, at 3 of 7). The loan agreement
identifies the borrower as “Jonathan D. Kaschak d/b/a Jonathan D. Kaschak, Consultant.” Id.
The loan agreement begins with the phrase “FOR COMMERCIAL PURPOSES AND VALUE
RECEIVED.” Id.
The agreement refers to itself as a “COMMERCIAL LOAN,” albeit in tiny print. Id.
The agreement even includes a section entitled “COMMERCIAL TRANSACTION,” which says
that Kaschak “hereby acknowledges, warrants, and represents that this is a commercial
transaction,” and that “the Debtor is in fact a business.” Id. at 4 of 7. Comparable language
appears in the second loan agreement, too.

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From a doth-protest-too-much perspective, one could be forgiven for wondering why the
loan agreements go out of their way to say that they are commercial loans. It’s the contractual
equivalent of “nothing to see here.”
The text of the loan agreements is evidence that the loans were commercial loans. But at
this early stage, it is not dispositive evidence. A loan isn’t a commercial loan simply because the
loan agreement says so.
Under Illinois law, the four corners of a contract do not control whether a loan is a
commercial loan. Instead, Illinois courts look behind the curtain of the contract and gaze at
what’s actually happening. Illinois law pierces the contractual veil, and looks at the reality
lurking behind the language of the contract.
As a starting point, Illinois courts apply a simple strategy when deciding whether a loan
is a business loan: follow the money. Courts look to the actual use of the funds, and have
“found significant the fact that proceeds of the loan were in fact used for business purposes.”
Whirlpool Fin. Corp. v. Sevaux, 96 F.3d 216, 228 (7th Cir. 1996); see also Preferred Cap.
Lending, Inc. v. Chakwin, 2015 WL 5920789, at *3 (N.D. Ill. 2015).
The recipient of the money is important, too. Illinois courts consider whether borrowers
“directed the proceeds of the loan to be paid” to a corporation. See Whirlpool Fin. Corp., 96
F.3d at 228. A related factor is whether “the loans had been obtained in anticipation of future
financial gain” to a corporation. Id.
Courts consider all facts and circumstances when deciding whether a loan is a business
loan. “The Illinois courts have taken a fairly pragmatic approach to determining whether a
particular loan falls within one of the categories of ‘business loans’ enumerated in subsection
4(1)(c).” Id. at 227.

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If the loan went to a consumer, and if the debtor used the money for personal expenses,
there’s a good chance that it’s a consumer loan, not a commercial loan. If it walks like a duck,
and quacks like a duck, then it’s probably a duck – even if the duck calls itself a chicken.
The substance is what matters. “Whether a loan is usurious depends on whether the party
intended to charge unlawful interest. This question of fact is determined by the nature and
substance of the transaction rather than its form, to insure against evasion of the statute by a
party’s ingenious schemes or devices.” Saskill v. 4-B Acceptance, 453 N.E.2d 761, 765 (Ill.
App. Ct. 1983) (citations omitted); see also Jackson v. Payday Fin., LLC, 79 F. Supp. 3d 779,
785 (N.D. Ill. 2015).
When it comes to deciding whether a loan is a business loan, it’s substance over form, not
form over substance. Slapping a “commercial loan” nametag on a personal loan doesn’t make it
a commercial loan. A rose by any other name would smell as sweet. See William Shakespeare,
Romeo and Juliet, act II, sc. 2. And a pig by any other name would still be a pig.
A different approach would make it all too easy to evade the statute. After all, the whole
point of the statute is to outlaw certain types of contracts. It would be funny if people could use
a contract to get around a statute that prohibits certain contracts.
By way of analogy, imagine if a statute prohibited the sale of tigers. Then, imagine if the
ringmaster of a circus had a few extra tigers laying around, and wanted to offload one of the
tigers and sell it to one of the clowns. And then, imagine if the ringmaster and the clown agreed
in the contract that the tiger was really a dog. Would the language of the contract foreclose a
claim that the contract was unlawful? Unlikely. See EEOC v. Boeing Servs. Intern., 968 F.2d
549, 556 n.7 (5th Cir. 1992) (“[I]f the issue was before us, we would not hold that a cat was a
dog simply because a defendant called the cat a dog.”).

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It doesn’t take much imagination to envision how that principle would wreak havoc. All
sorts of statutes prohibit contracts of one form or another. What if a supplier and a purchaser
entered into an agreement that violated the antitrust laws? Could they contract around that
problem by agreeing that the contract is not a restraint of trade?
And what about an employment contract that is blatantly discriminatory? Could an
employer and an employee avoid the discrimination laws by adding contractual language saying
that there is no discrimination? What about a contract for the sale of an unlawful firearm, where
an M-16 is called a handgun? Or a contract for the sale of “baby powder,” when it’s really
cocaine? And so on.
A lender can’t get around a consumer protection statute simply by getting a consumer to
sign a document saying that the consumer isn’t really a consumer. The statute exists to protect
consumers and prohibit certain contracts. Parties cannot use a contract to get around a statute
that prohibits the contract. If both parties knew that the language of the agreement was phony
baloney, it is hard to see how the phony baloney could provide a saving grace.
“Because I said so” isn’t persuasive to anyone (except parents). And in this context,
“because the contract says so” isn’t persuasive, either. When the validity of the contract is at
issue, courts are free to look behind the words, and see what’s actually happening.
At the end of the day, the Illinois Interest Act looks at what happened in the real world.
The label on a contract might not reflect the reality of the situation. And under Illinois law,
substance matters.
Kaschak alleged that the loan agreements aren’t what they purport to be. The complaint
alleged that the loans were personal loans, not commercial loans – and Bankers Healthcare knew
it. At this early stage, that’s enough for the claim to live to fight another day.

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Next, Bankers Healthcare relies on transcripts of calls that a representative of the
company had with Kaschak before each loan. During each call, he apparently confirmed that the
loan was, in fact, a business loan.
As an aside, the jury’s out on how persuasive those transcripts will be at trial. Each call
is almost identical. It reads like someone marched through a checklist, reading a list of scripted
questions in rote fashion. It’s the type of call that someone might do simply to make a
self-serving record. Maybe it’s just camouflage.
Even so, at this stage, the persuasiveness of the transcripts is not the issue. The
transcripts are extrinsic evidence. The motion-to-dismiss stage is not the time or the place for a
defendant to wheel out all of its evidence. At this early stage, the question is simply whether the
complaint does enough to state a claim. The question is not whether the plaintiff has a winning
claim.
There is nothing wrong with a lender confirming that a business loan is, in fact, a
business loan. That’s a good thing, not a bad thing, because lenders have a duty to comply with
the law. Still, Kaschak alleges that Bankers Healthcare knew the truth, and made the loans look
like business loans even though it knew that he was a consumer looking for a consumer loan.
That allegation states a claim.
In the end, the procedural posture of the case is enough to resolve this dispute. At the
motion-to-dismiss stage, the Court must accept all well-pled facts as true. And here, Kaschak
alleges that Bankers Healthcare made a consumer loan, and papered-over that reality to disguise
it as a business loan. That’s enough to state a claim.

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II.

Electronic Funds Transfer Act (Count II)
The second claim falls under the Electronic Funds Transfer Act, 15 U.S.C. § 1693k. See

Cplt., at ¶¶ 44–47 (Dckt. No. 1). The claim is about the contractual obligation to pay by
electronic transfers.
The statute prohibits a lender from “condition[ing] the extension of credit to a consumer
on such consumer’s repayment by means of preauthorized electronic fund transfers.” See 15
U.S.C. § 1693k.
Kaschak alleges that the loan agreements violated that statute by requiring payments
through ACH. An ACH authorization gives a lender permission to take money directly from an
account, and do so electronically when the money is due.
Bankers Healthcare moves to dismiss on two grounds. First, the company contends that
Kaschak lacks standing because he did not suffer an injury in fact. See Def.’s Mem., at 11 (Dckt.
No. 16). Second, the company argues that the complaint fails to state a claim because the loan
agreements provide for alternative (i.e., non-ACH) methods of payment. Id.
A.

Standing

Before diving into the merits, the Court must secure its footing, from a standing
perspective.
Article III empowers federal courts to hear cases and controversies, and one of the
bedrock requirements is the existence of standing. A plaintiff has standing only if that party “(1)
suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant,
and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins,
578 U.S. 330, 338 (2016); see also Pennell v. Glob. Tr. Mgmt., LLC, 990 F.3d 1041, 1044 (7th
Cir. 2021).

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To establish an injury in fact, a plaintiff must show that she suffered “an invasion of a
legally protected interest” that is “concrete and particularized” and “actual or imminent, not
conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (internal
quotation marks omitted). “Article III standing requires a concrete injury even in the context of
a statutory violation.” Spokeo, Inc., 578 U.S. at 341. “A ‘concrete’ injury must be ‘de facto’;
that is, it must actually exist.” Id. at 340. The injury must be “‘real,’ and not ‘abstract.’” Id.
Pocketbook injuries count as injuries. Decades ago, the Supreme Court recognized that
economic injuries may support standing. See Sierra Club v. Morton, 405 U.S. 727, 733 (1972)
(“[P]alpable economic injuries have long been recognized as sufficient to lay the basis for
standing.”). “The injury-in-fact necessary to support standing may be an economic injury.” See
15 James Wm. Moore et al., Moore’s Federal Practice § 101.40[5][c] (3d ed. 2019).
Standing is “not dispensed in gross.” See TransUnion LLC v. Ramirez, 594 U.S. 413,
431 (2021). That is, a plaintiff must have standing for “each claim.” Id. A plaintiff could have
standing to bring one claim, but lack standing to bring some other claim.
Standing is not in-for-a-penny, in-for-a-pound. Getting your foot in the door of the
federal courthouse for one claim does not guarantee that the other foot can come along for the
ride.
Bankers Healthcare argues that Kaschak has failed to allege that he suffered an injury in
fact. See Def.’s Mem., at 11 (Dckt. No. 16). Kaschak responds that he suffered financial harm
because of the automatic ACH transfers. See Pl.’s Resp., at 11 (Dckt. No. 22). According to
Kaschak, he attempted to cancel the ACH authorization, but Bankers Healthcare “continued
submitting debits, causing Plaintiff to incur fees.” Id.

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Kaschak alleges that he suffered a pecuniary loss because of the automatic ACH
payments. At the pleading stage, that’s enough to allege an injury. An out-of-pocket loss is a
ticket into the federal courthouse. If the claim doesn’t pan out as a factual matter, Bankers
Healthcare could raise it in a motion for summary judgment.
B.

The Merits

On the merits, Kaschak claims that the loan agreements violated federal law by requiring
payments by electronic fund transfer.
The Electronic Funds Transfer Act creates a set of rules for electronic payments by
consumers. Congress concluded that the “rights and liabilities of consumers” were “unclear”
when it came to “the use of electronic systems to transfer funds.” See 15 U.S.C. § 1693a. So
Congress passed the statute to fill the void and pin down consumer rights.
The statute “provide[s] a basic framework establishing the rights, liabilities, and
responsibilities of participants in electronic fund and remittance transfer systems.” See 15
U.S.C. § 1693b. The text explains that the “primary objective of this subchapter . . . is the
provision of individual consumer rights.” Id.
As a starting point, the statute provides that the “terms and conditions of electronic fund
transfers involving a consumer’s account shall be disclosed at the time the consumer contracts
for an electronic fund transfer service.” See 15 U.S.C. § 1693c. The disclosures must use
“readily understandable language.” Id.
The statute includes a special provision about electronic transfers for consumer loans.
The Act provides that “[n]o person may . . . condition the extension of credit to a consumer on
such consumer’s repayment by means of preauthorized electronic fund transfers . . . .” See 15
U.S.C. § 1693k(1). The only exceptions involve credit under an overdraft credit plan, or credit

17

extended to maintain a specified minimum balance in the consumer’s account. See 12 C.F.R.
§ 205.10(e)(1).
The statute focuses on the moment of contract formation. A lender may not “condition”
the “extension” of credit on repaying the loan electronically. See 15 U.S.C. § 1693k(1). The
statute takes an ex ante perspective, and imposes a ban when the lender and the consumer agree
to the loan in the first place.
The statute defines an “electronic fund transfer” as “any transfer of funds, other than a
transaction originated by check, draft, or similar paper instrument, which is initiated through an
electronic terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct,
or authorize a financial institution to debit or credit an account.” See 15 U.S.C. § 1693a(7).
Kaschak claims that the loan agreements violated the statute by requiring payment
through ACH transfers. See Cplt., at ¶¶ 26(d), 30(d) (Dckt. No. 1). And sure enough, the loan
agreements contain language that requires electronic transfers.
The loan agreements include a paragraph entitled “AUTOMATIC PAYMENT (ACH).”
See 7/2/21 Agreement (Dckt. No. 1-1, at 3 of 7); see also 9/21/22 Agreement (Dckt. No. 1-3, at 3
of 6). Based on the Court’s tape measure, the entire paragraph is 5/16th of an inch tall.
The paragraph begins with a sentence that required Kaschak to pay only through ACH
transfers. “All payments in accordance with this Note shall be made in the form of an ACH
transfer directly from the Debtor’s business account.” Id.
By the look of things, that provision seems to fall within the reach of the statute. The
statute provides that “[n]o” lender may “condition the extension of credit to a consumer” on
repayment by “electronic fund transfers.” See 15 U.S.C. § 1693k(1). But the loan agreements
say that “[a]ll payments . . . shall be made” by ACH transfers. See 7/2/21 Agreement (Dckt.

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No. 1-1, at 3 of 7); see also 9/21/22 Agreement (Dckt. No. 1-3, at 3 of 6). The statute says “no,”
but the loan agreements say “all.”
In response, Bankers Healthcare points out that the loan agreements leave the door open
to the possibility of paying by other means. See Def.’s Mem., at 11 (Dckt. No. 16). According
to the company, the loan agreements “expressly permit repayment through additional payment
methods.” Id. at 1; see also id. at 11.
Bankers Healthcare doesn’t point to any specific language. It doesn’t quote any
language, either. And it doesn’t offer a citation, except a blanket reference to an entire page of
the contract, which is stuffed with microprint. Id. at 11 (citing “page two of both agreements,”
which the Court reads to mean the second page of the exhibit, which is really the first page of the
contract).
Maybe Bankers Healthcare was referring to the sentences that followed the sentence that
created the duty to pay by ACH transfers. Again, the paragraph begins with a blanket
requirement: “All payments in accordance with this Note shall be made in the form of an ACH
transfer directly from the Debtor’s business account.” See 7/2/21 Agreement (Dckt. No. 1-1, at 3
of 7); see also 9/21/22 Agreement (Dckt. No. 1-3, at 3 of 6). But the paragraph didn’t stop there.
It went on to explain what would happen if Kaschak terminated the ACH authorization, with or
without consent.
It offered two bad options.
“The Debtor’s termination of an ACH authorization without the Creditor’s prior written
consent shall be considered an event of default. Should Debtor terminate an ACH authorization
with the consent of Creditor, and delivers [sic] payments by check or other non-ACH form of
payment, Debtor agrees to pay a service, handling and accounting expense fee to Creditor

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resulting from the making of a non-ACH payment in an amount equal to fifteen percent (15%) of
the payment then due.” Id. (emphasis added).
As Bankers Healthcare sees things, the loan agreements offered Kaschak an exit ramp.
The loan agreements allowed Kaschak to seek the company’s consent before terminating the
authorization. And the loan agreements allowed for the possibility that Bankers Healthcare
might give that consent, which would allow Kaschak to pay by other means. So, in the
company’s view, the loan agreements didn’t categorically require payments by ACH transfer.
That’s cold comfort. The reality is that the loan agreements required Kaschak to pay by
ACH transfer, or else he would get hammered.
The agreements included a bright-line rule. “All payments . . . shall be paid in the form
of an ACH transfer.” Id. The words “all” and “shall” don’t leave a lot of wiggle-room. Id. The
agreements cover every payment (“all”), and create a mandatory obligation (“shall”) to pay by
electronic transfer.
Kaschak couldn’t cut the cord without permission. If Kaschak tried to pull the plug and
terminate the ACH authorization without consent, that termination would be an “event of
default.” Id. And then, “the entire amount of principal then unpaid and all unpaid interest shall
become, without notice or demand, at the option of the Creditor, immediately due and payable.”
Id.
Even if Bankers Healthcare gave its consent, bad things would happen. If Kaschak
terminated the ACH authorization with the company’s consent, and then made the payment by
check or other means, then Kaschak would have to pay a “service, handling and accounting
expense fee” of “fifteen percent (15%) of the payment then due.” Id.

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By the look of things, it was a choice between a sledgehammer and a mallet. If Kaschak
terminated without consent, then he would commit a default, and the entire amount of the debt
became due. If Kaschak terminated with consent, then he would owe the amount of the monthly
payment that was then due, plus 15%.
That’s not much of an exit ramp. The loan agreements required Kaschak to pay by
electronic transfer. If he didn’t, then he had to pay everything (because of a default), or pay
more (because of the 15% fee). If that’s a choice, it’s not much of a choice.
Other courts have held that the statute applies to a loan agreement even if the consumer
can revoke the authorization for electronic transfers at any time. See FTC v. PayDay Fin. LLC,
989 F. Supp. 2d 799, 812 (C.D.S.D. 2013); O’Donovan v. CashCall, Inc., 2009 WL 1833990, at
*3 (N.D. Cal. 2009) (“The right to later cancel EFT payments does not allow a lender who
conditions the initial extension of credit on such payments to avoid liability.”).
If that’s true, then surely the statute applies if Kaschak could cancel only with the consent
of Bankers Healthcare, and only if he paid a 15% fee. In fact, Kaschak stood in a worse position
than the plaintiffs in PayDay and CashCall. Unlike those plaintiffs, Kaschak didn’t have a right
to revoke. And even if Bankers Healthcare gave him permission, then he would have to pay
more.
Overall, the complaint does enough to allege a violation of the Electronic Funds Transfer
Act. The statute says that lenders cannot require consumers to pay loans by electronic transfers
as a condition to getting a loan. See 15 U.S.C. § 1693k(1). Bankers Healthcare extended credit.
It did so based on the conditions in the loan agreements. And one of the conditions required
payments by ACH transfers. That’s enough to state a claim.

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III.

Illinois Consumer Fraud Act (Count III)
The final claim falls under the Illinois Consumer Fraud and Deceptive Business Practices

Act (for those who crave acronyms, “ICFA”), 815 ILCS 505/2. See Cplt., at ¶¶ 48–52 (Dckt.
No. 1).
“The ICFA is a regulatory and remedial statute intended to protect consumers against
fraud, unfair methods of competition, and other unfair and deceptive business practices.” Geske
v. PNY Techs., Inc., 503 F. Supp. 3d 687, 704 (N.D. Ill. 2020) (cleaned up).
The statute prohibits “[u]nfair methods of competition and unfair or deceptive acts or
practices, including but not limited to the use or employment of any deception, fraud, false
pretense, false promise, misrepresentation or the concealment, suppression or omission of any
material fact, with intent that others rely upon the concealment, suppression or omission of such
material fact . . . in the conduct of any trade or commerce . . . whether any person has in fact
been misled, deceived or damaged thereby.” See 815 ILCS 505/2.
“A plaintiff is entitled to recovery under ICFA when there is unfair or deceptive
conduct.” Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010). “The elements of a claim
under the ICFA are: ‘(1) a deceptive or unfair act or practice by the defendant; (2) the
defendant’s intent that the plaintiff rely on the deceptive or unfair practice; and (3) the unfair or
deceptive practice occurred during a course of conduct involving trade or commerce.’” Wigod v.
Wells Fargo Bank, N.A., 673 F.3d 547, 574 (7th Cir. 2012) (quoting Siegel, 612 F.3d at 934).
Kaschak asserts that Bankers Healthcare violated the Act in three ways: (1) making a
usurious and oppressive loan, (2) resorting to false statements of business purpose to cover up
the usurious nature of the loan, and (3) violating the Electronic Funds Transfer Act. See Cplt., at
¶ 49 (Dckt. No. 1).

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In Bankers Healthcare’s view, the complaint fails to plead that it engaged in a deceptive
act or an unfair act. The company also asserts that a violation of the Electronic Funds Transfer
Act cannot give rise to a claim. The Court will address each argument in turn.
A.

Deceptive Act

The first argument is about pleading with particularity. The Court agrees that Kaschak
needs to allege more details to state a fraud-based claim.
“To establish a violation of the [I]CFA’s prohibition on deceptive acts or practices, a
plaintiff must prove that: (1) the defendant engaged in a deceptive act or practice; (2) the
defendant intended that the plaintiff rely on the act or practice; and (3) the act or practice
occurred in the course of conduct involving a trade or commerce.” Bober v. Glaxo Wellcome
PLC, 246 F.3d 934, 938 (7th Cir. 2001) (citations omitted).
When alleging a deceptive act under the ICFA, a plaintiff must satisfy the heightened
pleading requirement of Rule 9(b). See Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732,
736 (7th Cir. 2014). A plaintiff must plead “the identity of the person making the
misrepresentation, the time, place, and content of the misrepresentation, and the method by
which the misrepresentation was communicated to the plaintiff.” Uni*Quality, Inc. v. Infotronx,
Inc., 974 F.2d 918, 923 (7th Cir. 1992).
Rule 9(b) requires specifics, not generalities. A complaint must describe the “who, what,
when, where, and how” of the fraud, “the first paragraph of any newspaper story.” See United
States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009). It’s the difference
between a sportswriter saying that a local team won a sporting event, and saying that the
’85 Bears crushed the Patriots by a score of 46-10 in Super Bowl XX in New Orleans, thanks to
Walter Payton, the best defense of all time, and Da Coach.

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Granularity serves an important purpose. After all, accusing someone of fraud is serious
business. Requiring specifics helps to winnow out insubstantial claims on the front end. It
forces a plaintiff to perform a pre-complaint investigation and think through the claim before
launching a missive at the other side. It empowers district courts to act as gatekeepers, and it
protects defendants from shaky, shadowy claims. See United States ex rel. Berkowitz v.
Automation Aids, Inc., 896 F.3d 834, 840 (7th Cir. 2018); Fidelity Nat’l Title Ins. Co. of N.Y. v.
Intercounty Nat’l Title Ins. Co., 412 F.3d 745, 748–49 (7th Cir. 2005); Ackerman v.
Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999). It helps the parties frame
discovery, too.
In Bankers Healthcare’s view, Kaschak “relies simply on the terms of his loan for the
deceptiveness prong.” See Def.’s Mem., at 13 (Dckt. No. 16). It believes that Kaschak failed to
allege how “he was deceived into making the allegedly false statements.” Id. at 14. And it
argues that Kaschak’s statements are too vague to satisfy Rule 9(b)’s heightened pleading
requirement. Id.
Kaschak alleges that, after he contacted Bankers Healthcare, the company “responded
that it would state that Plaintiff was a ‘consultant’ for its own purposes and so it would not have
to report the loan on Plaintiff’s personal credit report.” See Cplt., at ¶ 20 (Dckt. No. 1).
That is, Kaschak asserts that Bankers Healthcare told him that it would list him as a
consultant to avoid reporting the loan on his personal credit report. Id. But he alleges that the
company actually documented the loan as a business loan “to evade Illinois restrictions on the
rate of interest that may be charged.” Id. at ¶ 25.
Kaschak’s allegations fall short of Rule 9(b)’s heightened pleading requirement. The
pleading leaves too many questions unanswered. The complaint doesn’t allege a lot of details

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about what happened when Kaschak told Bankers Healthcare that he wanted a consumer loan.
And it doesn’t include many specifics about how the company responded.
What did Kaschak tell the company? Who did he contact, and when? When did someone
tell Kaschak to list himself as a consultant? Who told him that? How was the information
conveyed? And so on.
At this stage of the proceedings, Kaschak does not need to show, beyond doubt, that
Bankers Healthcare engaged in fraud. See Uni*Quality, Inc., 974 F.2d at 923. Even so, he must
answer the “who, what, when, where, and how” of the circumstances surrounding the fraud. See
Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007) (citation omitted).
On that front, he falls short. The complaint sketches an outline, but does not fill in the details.
In sum, Kaschak’s allegations are too vague to support an inference of fraud under Rule
9(b)’s heightened pleading requirement. So, his allegations about deception under the ICFA do
not survive the motion to dismiss.
B.

Unfair Act

The other possible route under the statute involves allegations of unfair acts. See 815
ILCS 505/2 (prohibiting “unfair or deceptive acts or practices”).
When determining whether conduct is unfair under the ICFA, Illinois courts consider
three factors: “(1) whether the practice offends public policy; (2) whether it is immoral,
unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to
consumers.” Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 961 (Ill. 2002). A
plaintiff need not meet all three factors. A “practice may be unfair because of the degree to
which it meets one of the criteria or because to a lesser extent it meets all three.” Id.; see also
Horist v. Sudler & Co., 941 F.3d 274, 280 (7th Cir. 2019).

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A practice “offends public policy” when “the practice violates statutory or administrative
rules establishing a certain standard of conduct.” Saika v. Ocwen Loan Servicing, LLC, 357 F.
Supp. 3d 704, 716 (N.D. Ill. 2018). “[A] practice may be considered immoral, unethical,
oppressive, or unscrupulous if it imposes a lack of meaningful choice or an unreasonable burden
on the consumer.” Saccameno v. Ocwen Loan Servicing, LLC, 372 F. Supp. 3d 609, 631 (N.D.
Ill. 2019) (quoting Stonecrafters, Inc. v. Foxfire Printing & Packaging, Inc., 633 F.Supp.2d 610,
616 (N.D. Ill. 2009)).
A plaintiff does not have to plead unfair conduct with particularity under Rule 9(b),
because unfair conduct is not the same thing as “fraud or mistake.” See Fed. R. Civ. P. 9(b); see
also Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663,
670 (7th Cir. 2008) (“Because neither fraud nor mistake is an element of unfair conduct under
Illinois’ Consumer Fraud Act, a cause of action for unfair practices under the Consumer Fraud
Act need only meet the notice pleading standard of Rule 8(a), not the particularity requirement in
Rule 9(b).”); Vanzant v. Hill’s Pet Nutrition, Inc., 934 F.3d 730, 739 (7th Cir. 2019).
In Bankers Healthcare’s view, Kaschak’s allegations about unfairness fail because – even
assuming that the loans are consumer loans – the APRs fell “significantly below the maximum
allowable rate of 36% under the Predatory Loan Prevention Act, 815 ILCS 123/15-5-5.” See
Def.’s Mem., at 13 (Dckt. No. 16). The company also argues that Kaschak has failed to identify
any specific disclosures that he should have received but did not receive. Id. at 14.
Pushing back, Kaschak argues that “[c]harges in excess of those permitted by law are
‘unfair’ under Robinson.” See Pl.’s Resp., at 12 (Dckt. No. 22). He asserts that Bankers
Healthcare engaged in unfair practices by offering him loans at higher rates than the maximum
amount permitted for unsupervised consumer lenders. Id. at 13.

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Kaschak has done enough to plead an ICFA claim rooted in unfairness. As the Court
explained, Kaschak adequately pleads a claim under the Illinois Interest Act. His ICFA claim is
partly based on the same allegations – i.e., that Bankers Healthcare provided him loans at
impermissibly high interest rates.
That conduct also supports an ICFA claim about unfair conduct. See Jackson, 79 F.
Supp. 3d at 788 (allowing an ICFA claim about impermissible interest to move forward and
opining that “the alleged assessment of interest over 100% is unscrupulous and oppressive and
sufficiently constitutes an unfair practice”).
So, Kaschak can proceed with an ICFA claim based on unfair conduct.
That said, not every part of the claim survives. Kaschak alleges that he did not
understand the interest rates in the loan agreements. See Cplt., at ¶ 34 (Dckt. No. 1). The loan
agreements included an Addendum, which stated that the interest rate was 18.74% on the first
loan and 10.99% on the first loan. See 7/2/21 Agreement (Dckt. No. 1-1, at 6 of 7); see also
9/21/22 Agreement (Dckt. No. 1-3, at 3 of 6). A party “cannot close his eyes to the contents of a
document and then claim that the other party committed fraud merely because it followed this
contract.” See Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 767 (7th Cir. 2010) (quotation
omitted).
A theory that Kaschak didn’t understand the numbers in the contract cannot survive. But
maybe his theory is that the numbers are wrong. Or maybe he is alleging that the loan
agreements miscalculated the interest rates. After all, the complaint alleges that the first loan had
an APR of 22.96% (not 18.74%), and alleges that the second loan had an APR of 13.81% (not
10.99%). See Cplt., at ¶¶ 28, 32 (Dckt. No. 1); 7/2/21 Loan Agreement (Dckt. No. 1-1, at 6 of

27

7); 9/21/22 Loan Agreement (Dckt. No. 1-3, at 6 of 6). If that’s the theory, Kaschak can move to
amend the complaint.
C.

Electronic Funds Transfer Act

Finally, Bankers Healthcare argues that the Electronic Funds Transfer Act is not a
predicate under the ICFA. See Def.’s Mem., at 12 (Dckt. No. 16). That is, the question is
whether a violation of the Electronic Funds Transfer Act counts as an “unfair practice” and gives
rise to a claim under the ICFA.
Out of the gate, the company recognizes “the unremarkable position that unfair or
deceptive conduct may violate multiple statutes.” See Def.’s Reply, at 13 (Dckt. No. 23).
The company points to a provision in the statute entitled “Violations of other Acts.” See
815 ILCS 505/2Z. The statute gives a long list of more than 30 state statutes. Id. And then, the
text says that “[a]ny person who knowingly violates” any of those statutes “commits an unlawful
practice within the meaning of this Act.”
Bankers Healthcare points out that the (federal) Electronic Funds Transfer Act is not in
the list. In its view, the absence of a reference to the Electronic Funds Transfer Act speaks
volumes. Applying a familiar canon of construction (expressio unius est exclusio alterius), the
company argues that a violation the Electronic Funds Transfer Act cannot give rise to a claim.
This Court isn’t so sure. By the look of things, the list includes state statutes, not federal
statutes. The text is silent on whether a violation of a federal statute can give rise to liability
under the ICFA. And more broadly, Bankers Healthcare doesn’t cite any Illinois case law
supporting the notion that the list of statutes is exhaustive.
The text says that a violation of Statutes 1–31 is an unlawful practice within the meaning
of the Act. It doesn’t say whether a violation of any other statutes can give rise to a claim under

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the IFCA, too. Maybe Illinois courts infer meaning from textual silence, based on the canon of
construction, or maybe they don’t. Maybe a list of 31 statutes conveys breadth, not exclusivity.
The briefing on this issue is too cursory. Based on the submissions, the Court doesn’t
have much Illinois case law to go on. So, for now, the claim survives. The parties can address
this argument again when the time comes for dispositive motions.
Conclusion
For the foregoing reasons, the Court grants in part and denies in part Defendant’s motion
to dismiss.

Date: April 25, 2024
Steven C. Seeger
United States District Judge

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