HARRISBURG, Pa. -- In a sharp setback for payday lenders, thePennsylvania Supreme Court has upheld a lower court ruling thatAdvance America, the nation's largest payday lender, violated thestate's Consumer Discount Company Act subjecting the firm to returnof consumer funds.

The state's Department of Banking, as plaintiff against AdvanceAmerica in a September 2006 suit, maintained the firm under its"Choice Line of Credit" product was providing lines of credit toborrowers without a license and with interest and fees in excess ofstate law.

In a statement issued Friday, Secretary of Banking Steve Kaplansaid that the department will seek restitution on behalf ofPennsylvania customers of Advance America. The exact amount beingsought is still to be determined "after we calculate borrowers andthe loans made," said a spokeswoman.

"We're pleased that the court has ruled in favor of Pennsylvaniaconsumers, many of whom were wrongly charged hundreds, potentiallyeven thousands, of dollars," said Kaplan. "This decision paves theway for the banking department to pursue restitution for thesevictims."