BMO Bank has been accused in a class action lawsuit of improperly applying borrowers' payments towards future payments or interest-only, instead of the principal amount.
The suit alleges that this practice forces customers to pay more than they should over the life of their loans.
The lawsuit was filed by plaintiffs William and Kimberly Newsom who argue that BMO's actions are inconsistent with the terms of their contracts and increase the interest paid by consumers.
According to the complaint, the Newsoms, residents of Smyrna, Delaware, purchased a recreational vehicle in January 2020 through a motor vehicle retail installment sales contract which was immediately assigned to Bank of the West. This bank later merged into BMO Bank.
According to the complaint, the couple regularly made extra payments intended to be applied to the principal amount. However, they allege that BMO allocated these extra payments to future payments or future interest payments unless they called and made the payment over the phone and specified the additional amount was to be applied to principal.
The complaint also mentions similar grievances from other customers found on internet forums. The Newsoms are seeking redress for themselves and other affected customers who were allegedly not informed about how their extra payments were being applied.
The lawsuit was filed Feb. 20 in Cook County Circuit Court. The plaintiffs are represented by attorneys Daniel A. Edelman and Tara L. Goodwin, of the firm of Edelman, Combs, Latturner & Goodwin, of Chicago.