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Check-Cashing Firm Sued by Pa. for Loan Activity
By Joseph N. DiStefano, Inquirer Staff Writer
The Pennsylvania Banking Department has sued a national chain of check-cashing centers, alleging it is illegally charging hard-pressed borrowers
$150 a month for a $500 line of credit.

Advance America Cash Advance Centers, of Spartanburg, S.C., "is not licensed" to make the loans under Pennsylvania law, the department
argued in the lawsuit filed in Commonwealth Court on behalf of the state by Robert L. Byer and John J. Soroko of the Philadelphia-based law firm
Duane Morris L.L.P.

Without a license, Advance America cannot charge more than 6 percent interest under state law, according to the suit. The $500 loans are priced
at 5.98 percent. But the banking department says the additional $150 monthly fees also qualify as interest under state law. Because the fees are
far more costly to the borrower than the interest, the total would exceed the state's limits on loans by unlicensed lenders.

"We're in the process of reviewing the complaint," said Jamie Fulmer, spokesman for Advance America.

Fulmer said Banking Department officials had already said they believed the program violated state laws. But Advance America believes the
program is legal, and "will vigorously defend our position," he added. "The products and services we offer present a rational, cost-competitive
offer." The company has supported efforts to pass a Pennsylvania law that would make payday lending easier. The state asked the court for an
injunction that would stop the company from making the loans.

Advance America began making the loans in June, four months after the company said the Federal Deposit Insurance Corp. had ordered banks to
stop financing the chain's previous "payday cash advance" program, which offered similar terms. The state had only limited powers to regulate
those loans because they were made through Advance America by out-of-state banks. The new loans were financed directly by Advance America,
according to the suit.  The lawsuit was ordered by acting Banking Secretary Victoria Reider, according to spokeswoman Heather Tyler. Reider took
over the department this year from A. William Schenck III, who quit to start a bank of his own.

Schenck was an outspoken critic of payday-lending practices, but had been criticized by some consumer advocates for seeking to get lenders to
comply with the law voluntarily instead of taking legal action against them.
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Contact staff writer Joseph N. DiStefano at 215-854-5957