For the first time, the Pennsylvania Supreme Court has addressed the important issue of whether, and to what extent, Pennsylvania's Loan Interest and Protection Law (Act 6) may be used as the basis for claims that do not involve the loan or use of money.

In Roethlein v. Portnoff Law Associates, the court found that Act 6, which is a usury statute, could not serve as a basis for a plaintiff class of taxpayers to challenge allegedly unlawful charges imposed upon them by a private tax collector. Consequently, the court vacated a class action judgment of $2.3 million that had been awarded by the trial court to the plaintiff class.

Portnoff Law Associates serves as a private tax collector for a number of Pennsylvania municipalities and school districts seeking payment of overdue real estate taxes. For each delinquent account, Portnoff would add a $35 fee, labeled an "administrative cost," to cover the costs of opening a file and sending the notice of delinquency to the taxpayer.

A class action was filed against Portnoff by a taxpayer from Allentown alleging that the fee was excessive and violated Section 502 of Act 6. That Act, titled "Usury and excess charges recoverable," states that a person who has paid a rate of interest or a charge on a loan or for use of money in excess of that allowed under Pennsylvania law may recover triple the amount of the excess interest or charges.

The trial court found in favor of the plaintiff class, awarding $1.058 million in compensatory damages and $1.288 million in attorneys' fees and expenses. On appeal, the Commonwealth Court affirmed, finding that Act 6 applied even though the allegedly excessive charges were not imposed in a loan transaction. It stressed that the title of Section 502 of Act 6 is "Usury and excess charges recoverable," and this provision allows recovery by a person who has paid "charges prohibited or in excess of those allowed by … law."

However, the Pennsylvania Supreme Court unanimously reversed. It declared that "the language of the preamble to Act 6, its definitional sections, and its substantive provisions clearly demonstrate that Act 6 is a usury law, designed to protect borrowers . . ." Accordingly, the court concluded that "the plain language of Section 502 does not support a cause of action to challenge costs, unless those costs are incurred in connection with the loan or use of money." For that reason, Act 6 "does not provide a separate cause of action by which delinquent taxpayers may recover improperly imposed fees."

Although the Portnoff decision held that the allegedly excessive fee imposed in connection with the collection of delinquent real estate taxes did not give rise to a claim under Act 6, it remains clear that any excessive charges imposed in connection with the extension of credit, even if they are not “interest,” are encompassed by the Act.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, or Burt M. Rublin at 215.864.8116 or rublin@ballardspahr.com.


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