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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. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

  2. "Brain Damage" alright.... The lunatic is on the grass/ The lunatic is on the grass/ Remembering games and daisy chains and laughs/ Got to keep the loonies on the path.... The lunatic is in the hall/ The lunatics are in my hall/ The paper holds their folded faces to the floor/ And every day the paper boy brings more/ And if the dam breaks open many years too soon/ And if there is no room upon the hill/ And if your head explodes with dark forbodings too/ I'll see you on the dark side of the moon!!!

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