WASHINGTON - A federal judge in Pennsylvania has ruled that fees for tax refund anticipation loans comply with Truth-in-Lending and usury laws.

U.S. District Court Judge Edmund V. Ludwig dismissed charges by two consumers that Mellon Bank of Delaware and H&R Block violated the consumer protection laws when they charged $29 for a refund loan.

In an 11-page memorandum on Aug. 2, the judge said bankers do not need to make Truth-in-Lending disclosures until they issue the loan. The consumers had argued that disclosures should be made during the application process.

The judge also said the $29 charge is a fee governed by the National Bank Act. That law supersedes state usury rules, permitting federally chartered institutions to charge fees to out-of-state customers.

This is the third court to rule in favor of lenders on this issue. The federal appeals court in Richmond, Va., and a district court in Chicago made similar findings during the past year.

Tax refund loans have grown in popularity over the past few years as more consumers file their income tax forms electronically.

Banks, for a fee, give consumers what amounts to a tax refund within a few days of their filing a return. The "refund" is actually a loan, however. The taxpayer authorizes the Internal Revenue Service to pay the refund to the bank.

Banking industry advocates praised both parts of the judge's decision.

"I'm glad the court said it was a fee," said Paul H. Schieber, a partner at Blank, Rome, Comisky & McCauley in Philadelphia. "That is appropriate because otherwise no one would make the product available, because no one can make money off the interest rate for a two-week loan."

The judge had no choice on the Truth-in-Lending claim, said Robert A. Cook, a partner at Venable, Baetjer and Howard in Baltimore. "There is no reason why they should be found to have violated the act," Mr. Cook said.

But he said he understands that consumers become frustrated after they read the Truth-in-Lending disclosure, which shows the annual percentage rate for a $29 fee is in the double digits.

Consumers should redirect their anger toward the lawmakers, he said.

"It is more a question that on policy grounds, Congress or the Federal Reserve Board might want to reconsider the actual regulation to see if it accurately reflects the cost to consumers."

The decision could have an unintended consequence, said Alan Kaplinsky, a partner at Ballard, Spahr, Andrews & Ingersoll in Philadelphia. The Pennsylvania Supreme Court currently is debating whether credit card fees violate state usury laws, the same legal issue this court confronted.

"It is a case that is helpful in connection with the credit card litigation because it supports the lengthy line of authority that says interest rates can be exported as fees," he said.

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