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Appeals court rules on payday-loan interest

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Even though the Indiana Court of Appeals concluded a business that provides cash advances waived its claim of right to recover for breach of contract, the judges still considered whether the company could recover a payment with more than 300 percent interest tacked on to it.

In Payday Today Inc. v. Anne Defreeuw, No. 71A05-0804-CV-253, Payday Today sued Anne Defreeuw in small claims court for fraud and treble damages after a post-dated check she gave in return for a cash advance bounced because the account was closed. Payday sought more than $2,000 in treble damages, attorney fees, and court costs, as well as another $2,100 to represent the 325.89 percent interest rate it believed it was charging over the 84 bi-weekly periods when the original $200 loan was unpaid.

The trial court ordered Defreeuw to pay the nearly $2,000 in damages and court costs but didn't order payment on the interest. It wasn't until trial that Payday asserted it was entitled to damages for both fraud and breach of contract, so the trial court understandably only ruled on the fraud claim because Defreeuw didn't have timely notice of the company's intent to recover under both theories, wrote Senior Judge Betty Barteau.

Despite the waiver, the Court of Appeals decided to address Payday's ability to recover the interest.

"The nature of this type of proceedings involving a loan to a destitute borrower makes it unlikely that a borrower will ever be able to participate in the appellate process," wrote the senior judge.

The appellate judges examined usury laws and Indiana's Uniformed Consumer Credit Code - Small Loans chapter, which was passed in 2002. The IUCCC instituted an annual interest rate set at the annual limit of 36 percent and in Livingston v. Fast Cash, USA, Inc., 753 N.E.2d 572, 575 (Ind. 2001), the Indiana Supreme Court held small payday loans were governed by the IUCCC's limitation on usurious interest rates and by Indiana's loan-sharking statute. The Small Loans Act says finance charges made on small loans are exempt from the statutory limit on a loan finance charge of 36 percent and the statutory definition of loan sharking, which happens when someone receives an annual percentage rate of more than 72 percent.

The Small Loans statute under which Payday claims it's protected from usury laws conflicts with statutory law and the common law stated in Livingston, wrote the senior judge. It appears Payday believes the Small Loan Act frees it from the usury and loan-sharking statutes, but the judges disagreed.

"Credit crises are, in large part, the result of poor borrowing choices, limited loan availability, and unconscionable interest charges. In view of these public policy considerations, we do not believe our legislature intended to free lenders to assess the unconscionable interest rate sought by Payday against Defreeuw," wrote Senior Judge Barteau.

Although the Small Loans Act doesn't explicitly cap the APR on loans, given its derogation of both statutory and common law, it can't authorize "an astronomical deviation from established law," she wrote.

The Court of Appeals also examined the contract between Payday and Defreeuw and ruled its "Promise to Pay" section doesn't require her to pay any annualized interest rate. If Payday wants to collect interest, it has to include that interest as part of the agreement.

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  1. Such things are no more elections than those in the late, unlamented Soviet Union.

  2. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  3. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  4. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  5. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

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