Pennsylvania Sues Payday Lender
HARRISBURG, Pa. -- Pennsylvania has sued Advance America, the nation's largest payday lending chain to shut down what the state has alleged is the chain's latest attempt to get around a crackdown by federal banking regulators on banks funding payday lending operations.
The suit charges that Advance America has used a corporation based in Delaware to offer something called the "Choice Line of Credit" to consumers in Pennsylvania in June. The suit said that Advance America charges a monthly participation fee of $149.95 per month and that this allows consumers to borrow up to $500 per month at an APR of 5.98% and with a minimum monthly payment of $20.
"Under this outrageous product, a person who borrows $500 and makes minimum monthly payments ends up paying back more than $4,000 over about two years," said Pennsylvania Governor Ed Rendell in a prepared statement. "Advance America may not be making payday loans in Pennsylvania anymore, but they are still trying to take advantage of hard-working, hard-pressed families," he added.
In its suit, the Pennsylvania Department of Banking sought to have the court explicitly declare that the monthly participation fee to be against Pennsylvania law and to enjoin Advance America from charging the fee.