Payday Lender Violated Consumer Law, Court Says

PHILADELPHIA (CN) - Payday lender Advance America Cash Advance Center violated the Consumer Discount Company Act by charging a $149.95 monthly fee on a $500 line of credit, the Pennsylvania Supreme Court ruled.

The lender argued that the fixed "participation fee" does not violate the law's 6 percent interest cap on loans of $25,000 or less.

The state high court rejected that argument and agreed with the lower court that the "fee" was simply an interest rate in disguise. The monthly fee, coupled with the 5.98 percent interest on the $500 line of credit, violated consumer law.

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