Pennsylvania State Capitol building in Harrisburg. Photo: Shutterstock

Pennsylvania Attorney General Josh Shapiro on July 24 announced a settlement with Think Finance, a national online payday lender, and an associated private equity firm for allegedly engineering a $133 million illegal online payday loan scheme that targeted as many as 80,000 Pennsylvania consumers.

According to a statement from Shapiro's office, the settlement will void all remaining balances on the illegal loans. Pennsylvania is one of the leading creditors that negotiated this comprehensive settlement with Think Finance as part of its bankruptcy plan, which is pending approval before the U.S. Bankruptcy Court for the Eastern District Court of Pennsylvania.

In late 2014, the Pennsylvania Office of Attorney General sued Think Finance Inc. and various affiliated entities, claiming that from 2011 to 2014, three websites operated by Think Finance—Plain Green Loans, Great Plains Lending and Mobiloans—allowed borrowers to sign up for loans and lines of credit while charging effective interest rates as high as 448%. Payday loans, which typically charge interest rates higher than 200 or 300%, are illegal in Pennsylvania.

Shapiro said these actions were in violation of several Pennsylvania laws, including the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

None of the defendants admitted liability or wrongdoing.

“This is a model of how aggressive enforcement by one state can lend itself to nationwide relief for consumers,” Shapiro said. “The settlement will provide relief to approximately 80,000 Pennsylvanians who fell victim to the $133 million payday loan scheme engineered by Think Finance and its affiliates, as well as to consumers across the country who were also affected. Our Bureau of Consumer Protection will hold accountable anyone who tries to exploit Pennsylvania consumers by charging illegal interest rates.”

In addition to voiding all remaining balances on the illegal loans, the settlement will enable borrowers who repaid more than the loan principal and the lawful interest rate of 6% to share proportionately in a multimillion-dollar fund created by the settlement.

The Pennsylvania lawsuit spurred private litigation in other states and has precipitated the national settlement. The Consumer Financial Protection Bureau also sued Think Finance, and has been a “strong partner,” the OAG said in its statement.