CHICAGO — A federal judge has dismissed a suit by USAA against an Illinois payday loan service alleging that it was responsible for over $3 million USAA lost in a fraudulent check-cashing scheme by third parties.
USAA Federal Savings filed a lawsuit in 2016 against PLS Financial Services Inc. claiming the company was negligent in protecting its bank members' financial and personal information. As a result, its system was vulnerable to third parties creating fraudulent checks with the stolen information. USAA argued PLS was in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA).
USAA is headquartered in Illinois, providing financial services to U.S. military personnel and veterans. PLS offers check cashing and payday lending at around 300 retailers across the nation, including Illinois.
In October 2012, the federal government and PLS settled a case after PLS was accused of not properly protecting its customers' personal information. In the settlement, PLS agreed to develop a better security system and be more diligent in protecting customer information.
However, security issues continued for PLS, USAA said. It was revealed not long after that settlement that a PLS employee was providing third parties access to its computer systems. Those third parties were creating counterfeit checks with the information available to them, assisted by the employee. USAA alleged it cashed more than 2,000 counterfeit checks cashed, costing USAA more than $3 million.
USAA argued that even though PLS is not a bank, it should be held to the same standards as other financial servicing institutions. The judge, however, said, in Illinois there is no common law duty to safeguard personal information, dismissing USAA's negligence claim. In addition, the court rejected USAA's claim of violations of the ICFA because it could not specific violations under the law.
The decision was delivered by U.S. District Judge Sara L. Ellis.
USAA was represented by attorneys with the firm of Dykema Gossett PLLC, of Chicago.
PLS was defended by the firm of Kaplan Saunders Valente & Beninati LLP, of Chicago.