ILNews

Appeals court rules on payday-loan interest

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. The fee increase would be livable except for the 11% increase in spending at the Disciplinary Commission. The Commission should be focused on true public harm rather than going on witch hunts against lawyers who dare to criticize judges.

  2. Marijuana is safer than alcohol. AT the time the 1937 Marijuana Tax Act was enacted all major pharmaceutical companies in the US sold marijuana products. 11 Presidents of the US have smoked marijuana. Smoking it does not increase the likelihood that you will get lung cancer. There are numerous reports of canabis oil killing many kinds of incurable cancer. (See Rick Simpson's Oil on the internet or facebook).

  3. The US has 5% of the world's population and 25% of the world's prisoners. Far too many people are sentenced for far too many years in prison. Many of the federal prisoners are sentenced for marijuana violations. Marijuana is safer than alcohol.

  4. My daughter was married less than a week and her new hubbys picture was on tv for drugs and now I havent't seen my granddaughters since st patricks day. when my daughter left her marriage from her childrens Father she lived with me with my grand daughters and that was ok but I called her on the new hubby who is in jail and said didn't want this around my grandkids not unreasonable request and I get shut out for her mistake

  5. From the perspective of a practicing attorney, it sounds like this masters degree in law for non-attorneys will be useless to anyone who gets it. "However, Ted Waggoner, chair of the ISBA’s Legal Education Conclave, sees the potential for the degree program to actually help attorneys do their jobs better. He pointed to his practice at Peterson Waggoner & Perkins LLP in Rochester and how some clients ask their attorneys to do work, such as filling out insurance forms, that they could do themselves. Waggoner believes the individuals with the legal master’s degrees could do the routine, mundane business thus freeing the lawyers to do the substantive legal work." That is simply insulting to suggest that someone with a masters degree would work in a role that is subpar to even an administrative assistant. Even someone with just a certificate or associate's degree in paralegal studies would be overqualified to sit around helping clients fill out forms. Anyone who has a business background that they think would be enhanced by having a legal background will just go to law school, or get an MBA (which typically includes a business law class that gives a generic, broad overview of legal concepts). No business-savvy person would ever seriously consider this ridiculous master of law for non-lawyers degree. It reeks of desperation. The only people I see getting it are the ones who did not get into law school, who see the degree as something to add to their transcript in hopes of getting into a JD program down the road.

ADVERTISEMENT