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Advance America agrees to $8M settlement with Pennsylvania

By Jim Boyle | Feb 12, 2015

HARRISBURG, Pa. (Legal Newsline) - A payday lender accused of overcharging Pennsylvania customers interest rates for its loan program has agreed to pay more than $8 million in restitution to the State, according to the Attorney General's Office.

NCAS of Delaware LLC - doing business as Advance America Cash Advance Centers and Advance America Cash Advance Centers Inc. - agreed to pay restitution, provide an additional $2 million to the Commonwealth and forgive unpaid principal balances of approximately $12 million.

The settlement resolves claims that Advance America illegally provided payday loans, some with interest rates as high as 368 percent.

According to the Attorney General's Office, Advance America offered a loan product called a "Choice Line of Credit" that required consumers to pay a "monthly participation fee." Pennsylvania investigators alleged that the monthly fee was actually interest, which, when properly calculated, meant that the lender charged exorbitant interest rates in violation of Pennsylvania law.

"We maintain that this company disguised its outrageous interest rates as fees, misleading consumers and violating the law," Attorney General Kathleen Kane said. "Payday lending practices adversely impact vulnerable consumers and often force them into a cycle of debt from which many cannot recover."

The Bureau of Consumer Protection claimed in a lawsuit against Advance America that the marketing and sale of the unlawful product violated Pennsylvania's Consumer Protection Law.

That action followed an initial suit by the Pennsylvania Department of Banking and Securities in which the Commonwealth Court declared that the company was required to be licensed under the Consumer Discount Company Act.

In addition to the $8 million in restitution and $12 million in loan forgiveness, Advance America will pay $1.75 million in total costs to the Attorney General's Office and the Department of Banking and Securities, and $250,000 to cover the costs of a third-party administrator to distribute the restitution. Advance America is also enjoined from further violations of the Consumer Protection Law, the Consumer Discount Company Act, and the Loan Interest and Protection Law. The settlement, in the form of a Consent Petition, requires court approval.

Consumer restitution will consist of the total monthly participation fees paid by the consumer, less any principal balance owed by the consumer. Regardless of whether the consumer files a claim for restitution, all unpaid principal balances will be forgiven by Advance America.

According to the settlement, consumers who may be eligible for restitution will be identified through the company's records and do not need to file a consumer complaint.

Affected consumers will receive a letter from the attorney general containing a claim form. In order to be eligible for restitution, consumers must follow the instructions in that letter and submit a completed claim form to the third-party administrator named on the form.

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