The opinion of the court was delivered by: Ian H. Levin, United States Magistrate Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs Elizabeth Cunningham and the estate of Louise Cunningham (hereinafter "Plaintiffs") bring a thirteen-count Second Amended Complaint alleging Truth in Lending Act and state law claim violations against Defendants EquiCredit Corporation of Illinois, The Loan Center, Inc. and Marvin Hunter for wrongful and predatory lending practices.
Defendant EquiCredit Corporation of Illinois (hereinafter "EquiCredit") moves the Court to dismiss Plaintiffs' Second Amended Complaint for failure to state a claim upon which relief can be granted. For the reasons set forth below, the motion is granted as to Count XIII and denied as to all other counts.
In 1984, Plaintiff Elizabeth Cunningham (hereinafter "Elizabeth") bought a home located at 2315 South Central Park in Chicago, Illinois. (2nd. Am. Compl. ¶ 6.) Elizabeth is disabled, and since 1995, her income has been limited to Social Security disability benefits and sporadic rental payments. (Id. at ¶ 6.) Plaintiff Louise Cunningham (hereinafter "Louise") was Elizabeth's mother and lived with Elizabeth from 1984 though October of 1999, when Louise passed away at the age of 85. (Id. at ¶ 7.) During that time period, Louise was not employed and her only income came from Supplemental Security Income payments. (Id. at ¶ 7.)
In early 1999, Plaintiffs' home was in a state of disrepair. (2nd. Am. Compl. ¶ 21.) Elizabeth met with Defendant Marvin Hunter ("Hunter"), a home improvement contractor, to discuss the condition of the home. (Id. at ¶ 21.) Hunter told Elizabeth that he could arrange to make the necessary home repairs and he referred Elizabeth to Defendant The Loan Center (hereinafter "The Loan Center), a mortgage broker, to obtain financing for the repairs." (Id. at ¶ 22.)
Elizabeth contacted The Loan Center and spoke with Derwin Moore (hereinafter "Moore"), an employee and loan representative (i.e., broker) of The Loan Center regarding the needed home repairs and her financial situation. (2nd. Am. Compl. ¶¶ 123-24.) Moore promised Elizabeth that she could get a new loan that would pay off her existing mortgage, provide her with extra cash and furnish the funds to make the needed repairs and improvements. (Id. ¶ 25.) Based on the telephone conversation, Elizabeth agreed to meet with Moore to discuss the loan. (Id. at ¶ 26.)
At the meeting, Moore reiterated The Loan Center's promise that it could locate funding that would provide Plaintiffs with a loan that would pay off the existing mortgage, provide her with $10,000.00 in extra cash, and furnish the funds needed to make the needed home repairs. (2nd. Aim Compl. ¶ 34.) Elizabeth and Moore discussed the loan and agreed that the home repairs should be financed by refinancing the existing mortgage through a new loan in the amount of $95,200.00 payable over a thirty year term. (Id. at ¶¶ 25, 28; Ex. A.)
In order to find an appropriate lender, Moore requested that Elizabeth fill out a Uniform Residential Loan Application (hereinafter "loan application"). (2nd. Am. Compl. ¶ 29; Ex. B.) Moore told Elizabeth that she had to show that she had a job in order to qualify for the loan. (Id. ¶ 30.) Plaintiffs allege that in section IV entitled Employment Information of the loan application, Moore instructed Elizabeth to falsely indicate that for the past two years she was employed by M & M Cleaning located in Broadview, Illinois. (Id. ¶ 30; Ex. B.) Moreover, in section V of the loan application, Moore instructed Elizabeth to note falsely that she received $1,800.00 per month from her M & M Cleaning job. (Id. ¶ 31; Ex. B.) In addition, Elizabeth noted that she received $678.00 per month in disability income and $675.00 per month from renting a first floor apartment; her mother, Louise, received $500.00 per month in Supplemental Security Income benefits; and their combined monthly income was $3,653.00. (Id.)
Plaintiffs further allege that Moore also instructed Elizabeth to show that she and her mother, Louise, had graduated from high school, despite the fact that this was not true. (2nd. Am. Compl. ¶ 32.) Rather, Elizabeth attended school into the tenth grade and her mother attended school into the fourth grade and never learned to read or write very well. (Id.)
The loan application also indicated that Plaintiffs had been referred to The Loan Center by Hunter. (2nd. Am. Compl. ¶ 33.)
Based on the meeting and representations made by Moore, Elizabeth agreed to proceed with the refinancing of her existing mortgage with The Loan Center. (2nd. Am. Compl. ¶ 35.) Plaintiffs entered into a written agreement entitled Loan Brokerage Disclosure Statement, Loan Brokerage Agreement, and Borrower Information Document (hereinafter "Loan Brokerage Agreement") with The Loan Center for a $95,200.00 loan on February 23, 1999. (Id. ¶ 27; Ex. A.) Elizabeth signed the appropriate forms for both herself and her mother, Louise, knowing that both the employment and school information contained in the loan application was false. (Id. ¶ 30-32, 36.)
The Loan Center submitted Plaintiffs' loan application to EquiCredit as part of the underwriting process. (2nd. Am. Compl. ¶ 56.) Along with the loan application, The Loan Center submitted what Plaintiffs allege are false documents including 1997 and 1998 W-2 forms, two pay stubs, a completed Request for Verification of Employment form signed by the purported service manager of Elizabeth's stated employer (i.e., M & M Cleaning), and a typed, but unsigned loan application showing Elizabeth's purported base pay for 1998, all of which corroborated the false income and employment information in Plaintiffs' loan application.*fn1 (Id. ¶¶ 37, 56; Exs. C, D, E, F & G.) Plaintiffs allege that all of the defendants knew, or reasonably should have known, that this information was untruthful and inaccurate and that the loan would not have been approved based on Plaintiffs' actual earnings. (Id. ¶ 39.) Plaintiffs thus contend that they would not have qualified for the loan, but for The Loan Center's misconduct in fabricating qualifications and creating income that did not exist and but for EquiCredit's purposeful overlooking of those qualifications and relying solely on the fact that Plaintiffs' home was worth more than the amount loaned. (Id. ¶¶ 39, 56.)
Plaintiffs did not have any direct contact with EquiCredit during the loan closing and EquiCredit ultimately approved the loan. (2nd. Am. Compl. ¶ 56.) Plaintiffs allege that EquiCredit deliberately failed to independently verify Elizabeth's alleged employment information. (Id. ¶ 57.) For instance, EquiCredit should have known that Elizabeth could not be receiving Social Security disability benefits while simultaneously earning the amount of wages reported on her loan application. (Id.) In addition, Plaintiffs contend that EquiCredit relied on a credit report concerning Elizabeth that it knew was either false or incomplete because it showed that she had an "A" credit score of 645 and was employed at Breyer Molding (her employer when she purchased her home in 1984). (Id. ¶ 58.) Moreover, the credit report failed to substantiate that Elizabeth was currently employed at M & M Cleaning and failed to reveal that she was delinquent on her then existing mortgage with Security National Bank. (Id.)
On May 27, 1999, Moore and a representative of the title company went to Plaintiffs' home for the closing, at which time Plaintiffs and The Loan Center entered into a loan and a mortgage secured by Plaintiffs' property. (2nd. Am. Compl. Exs L, M & O.) At the closing, the defendants presented them with various papers to sign. (Id. ¶ 62.) Plaintiffs, who had limited educations, aver that they were unsophisticated borrowers who had difficulty reading and understanding such complex financial documents. (Id. ¶ 63.) Plaintiffs thus allege that the defendants took advantage of their limited educations. (Id. ¶ 64.)
At the closing, Plaintiffs received a HUD-1 settlement statement which they signed. (2nd. Am. Compl. ¶ 65; Ex. L.) The settlement proceeds were disbursed on or about June 2, 1999, at which time The Loan Center received its broker's fee in the amount of $6,350.00, the amount shown on the HUD-1 settlement statement. (Id. ¶ 76; Ex. L.) Plaintiffs allege, however, that as part of defendants' scheme to defraud Plaintiffs, The Loan Center and EquiCredit manipulated the broker's fee by adjusting it from its initial amount of $9,520.00 (shown earlier on the Loan Brokerage Agreement) to $6,664.00 to $6,350.00 so that EquiCredit could avoid providing Plaintiffs with federally-required Home Owners Equity Protection Act ("HOEPA") loan disclosures. 12 U.S.C. § 1639. (Id. ¶¶ 48-50, Exs. A, L, P, Q.) Plaintiffs thus contend that defendants falsely portrayed the broker's fee so that the combination of points and fees fell just below 8 percent (i.e., 7.97 percent) of the total loan in order to eliminate the additional disclosures required for "high rate" loans, which are triggered when points and fees exceed 8 percent of the total loan amount.*fn2 (Id. ...