Lemelledo v. Beneficial Management Corp. of America

Jeanne C. Lemelledo (plaintiff) applied for a $2,000 loan from Beneficial Management Corp. of America (Beneficial) (defendant), a licensed insurance provider subject to insurance and banking regulations. After her loan was approved, Lemelledo noticed that the amount financed was approximately $2,538, with $335 being included for credit-insurance premiums. Prior to this disclosure, Lemelledo did not know she was purchasing credit insurance on the loan. Lemelledo paid off the loan except for the $335 insurance charge. Beneficial sued Lemelledo to collect the unpaid amount but withdrew the case. Lemelledo filed a lawsuit against Beneficial in state court, alleging that Beneficial violated New Jersey’s consumer-fraud act by requiring borrowers to purchase credit insurance. Lemelledo reasoned that credit insurance is often unnecessary for borrowers and benefits lenders by increasing the principal amount of a loan, thus increasing the interest that a lender will be paid. Lemelledo also alleged that Beneficial’s actions violated New Jersey’s usury statute. Beneficial moved to dismiss Lemelledo’s claims. With regard to the claim under the consumer-fraud act, Beneficial argued that as a highly regulated business, it was not subject to the consumer-fraud act. The trial court granted Beneficial’s motion and dismissed Lemelledo’s claims. Lemelledo appealed.