HARRISBURG, Pa., Oct. 22 /PRNewswire-USNewswire/ -- The Pennsylvania Supreme Court has unanimously confirmed the authority of the Department of Banking to protect consumers from payday lenders, including out-of-state operators soliciting business from Pennsylvanians online.
In the case, Cash America Net of Nevada v. Commonwealth of Pennsylvania, the court agreed with the department that the Consumer Discount Company Act and the Loan Interest and Protection Law apply to loans made to Pennsylvania consumers over the Internet. These laws make it unlawful for unlicensed lenders anywhere to provide Pennsylvania residents with the short-term, small amount loans typically referred to as "payday loans." Payday loan customers are usually charged annual interest rates of several hundred percent, far in excess of loans made under Pennsylvania law.
"Payday lending is a scourge that takes advantage of financially strained individuals and traps them in a downward spiral of poverty and debt," said Secretary of Banking Steve Kaplan. "We will continue to utilize all of our resources to protect Pennsylvanians from this trap regardless of where the lender may reside."
Prior to 2008, the department had considered payday lenders not physically located in Pennsylvania to be outside the purview of state law. However, with the growing prevalence of Internet-based lending activity, the department realized that Pennsylvania consumers were being exposed to the very lending practices that state law had sought to eliminate.
The department changed its policy in a July 2008 notice to lenders advising them that they needed to be licensed to do business in Pennsylvania and, if they wanted to sell their products to Pennsylvanians, their lending practices would have to conform to state law. The department has since conducted ongoing investigations – many responding to consumer complaints – and issued cease-and-desist orders to out-of-state and foreign companies attempting to do business with Pennsylvania consumers.
Pennsylvanians can consider the Better Choice alternative to payday loans. Information about the Better Choice program can be found at www.pacreditunions.com/betterchoice.html.
Consumers can also file complaints and ask questions about payday lending or other financial transactions by calling the Department of Banking Office of Consumer Services at 1-800-PA-BANKS.
Media contact: Ed Novak, 717-783-4721
SOURCE Pennsylvania Department of Banking