## Facts

- Jeanne C. Lemelledo sought a $2,000 consumer loan from Beneficial to pay her daughter’s college tuition.
- At closing, Beneficial presented a loan contract for $2,538.47 and issued a check to Lemelledo for $2,203.19; the difference was listed as amounts paid to others on her behalf, consisting of credit property, credit disability, and credit life insurance premiums.
- Lemelledo alleged Beneficial’s “loan packing” practice increased loan principal by adding insurance products the borrower did not want, and that Beneficial implicitly led her to believe the loan would not be made without purchasing the insurance.
- Although a disclosure form stated credit insurance was not required and could be obtained elsewhere, Lemelledo claimed Beneficial’s sales presentation effectively coerced or misled her into buying it.
- Lemelledo promptly repaid the $2,203.19 amount, but Beneficial later sent payment coupons for insurance premiums plus interest; she paid two and refused the remainder.
- Beneficial filed and then voluntarily dismissed a collection action; Lemelledo filed a putative class action alleging violations of the New Jersey Consumer Fraud Act (CFA) and New Jersey usury laws.

## Issues

1. Whether the New Jersey Consumer Fraud Act applies to a lender’s loan-packing practices involving credit insurance, despite the lender and products being subject to banking and insurance regulation.
2. Whether including credit-insurance premiums in the loan principal renders the transaction usurious under New Jersey law.

## Decision

- The New Jersey Supreme Court affirmed reinstatement of the CFA claim and held the CFA applies to alleged loan packing by a regulated lender absent an express statutory exemption or a demonstrated direct conflict with a specific regulatory scheme.
- The Court held the complaint adequately pleaded CFA violations based on allegations of deceptive or coercive practices and an inflated principal amount through unwanted insurance products.
- The dismissal of the usury claim remained undisturbed (the Appellate Division had affirmed that dismissal).

## Legal Principles

- The CFA is remedial and construed broadly to protect consumers from unconscionable commercial practices and deceptive conduct.
- Regulated status does not categorically exempt a defendant from CFA liability; overlapping regulation does not, by itself, preempt the CFA.
- CFA remedies may supplement sector-specific administrative regimes; displacement requires clear legislative intent or a specific, direct conflict with an affirmative regulatory authorization.
- At the pleading stage, optional-insurance disclosures do not necessarily defeat a CFA claim if the alleged sales conduct could still be deceptive or coercive.
- Charges for ancillary products such as credit insurance are not automatically treated as disguised interest for usury purposes solely because they increase the amount financed.

## Conclusion

The court held that consumer lenders selling credit insurance may be sued under the New Jersey Consumer Fraud Act for alleged loan-packing practices, even in a heavily regulated setting, unless the Legislature has expressly exempted the conduct or a direct conflict with a specific regulatory authorization is shown; the usury theory was rejected.


Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 696 A.2d 546 (1997)