Ameriquest Mortgage Co., a leading lender to people with poor credit, has agreed to pay $8.7 million to Pennsylvania consumers to settle charges it used bait-and-switch and other predatory lending tactics to cheat and dupe customers into paying higher interest rates and fees.

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The multistate payout, totaling $325 million to 49 states and the District of Columbia, was the second-largest federal consumer protection settlement in history, the Pennsylvania attorney general's office said in making the announcement yesterday.

Ameriquest, a so-called "subprime" lender based in Orange, Calif., also was accused of manipulating appraisals and encouraging customers to inflate income levels so they could borrow more than they otherwise could afford.

Ameriquest denied any wrongdoing, but agreed to change its business practices to better disclose loan terms, fees and penalties and to overhaul its appraisal practices. The changes must be implemented by May 2007.

The settlement, which still must be approved by the courts, ends a two-year investigation by the Pennsylvania Department of Banking and state attorney general's office triggered by complaints from more than 200 consumers.

The settlement covers customers who obtained loans from January 1999 to December 2005. During that time, Ameriquest originated more than 24,000 mortgages and debt consolidation loans in Pennsylvania.

Consumers entitled to money will be contacted by the state, Attorney General Tom Corbett said. More information is available at www.attorneygeneral.gov.

An independent monitor will oversee Ameriquest for the next five years to make sure it is complying with settlement terms, Mr. Corbett said.

He said Ameriquest cooperated throughout the investigation and already has implemented many reforms.