Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations
Section Content

Upcoming Events

Filter

Subscribe to our InfoBytes Blog weekly newsletter for news affecting the financial services industry.

  • Florida District Court of Appeal holds contract for used car not covered by state usury law

    Courts

    On April 25, a Florida District Court of Appeal held that a Florida usury law did not apply to the purchase of a used car because the contract for purchase was a retail installment sales contract covered under the Florida Motor Vehicle Retail Sales Finance Act (the Finance Act). According to the opinion, a consumer filed a lawsuit against a used car seller and a lender claiming violations of Florida’s general usury law, which prohibits interest of more than 18 percent per year, because the contract for purchase of a used car had a 27.81 percent interest rate. In affirming the trial court’s decision to grant summary judgment for the car seller and lender, the appeals court found that the contract for purchase met the state’s definition of a retail installment sales contract and,  therefore, was governed by the Finance Act (which both the seller and lender were licensed under) rather than the general usury statute. Additionally, because the car was financed over a four-year period, the appeals court found that the finance charge per year was permissible under the Finance Act at $16.48 for every $100. The court also held that the general usury law did not apply to a contract to secure the price of personal property sold, as opposed to a contract for the “loan of money.”

    Courts State Issues Auto Finance Interest Rate Usury Consumer Finance

    Share page with AddThis
  • Illinois Attorney General sues online “pension sale” installment lender

    Lending

    On April 19, the Illinois Attorney General announced a lawsuit against a Nevada-based installment loan company alleging the company made illegal installment loans without a license. According to the press release, the Illinois Attorney General alleges that the company markets high rate installment loans in exchange for payments from a consumer’s pension benefits in violation of Illinois law. In addition, the Attorney General claims that the company illegally advertised its loans and concealed high finance charges from consumers and, in some instances, continued to withdraw money from accounts after consumers attempted to cancel the agreement. The Attorney General is seeking the contracts to be voided, an injunction against the behavior, restitution for consumers, and civil money penalties.

    Lending State Issues Installment Loans Pension Benefits Interest Rate State Attorney General

    Share page with AddThis
  • Tennessee amends interest rate legislation

    Lending

    On March 23, the Governor of Tennessee signed HB 1944, which amends lending provisions of the Tennessee Code Annotated to change the application of interest rates to the amount financed instead of the total amount of the loan with regard to certain loans made by Tennessee industrial loan and thrift companies. The following interest rate requirements under present Tennessee law now apply to the amount financed: (i) under $100, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 18 percent per annum; (ii) between $100 and $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 30 percent per annum; (iii) greater than $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 24 percent per annum; and (iv) for open-end credit plans, a maximum effective rate of 24 percent per annum applies to the principal or on the unpaid balance due after maturity. HB 1944 is effective immediately and applies to loans made on or after March 23.

    Lending State Issues Interest Rate Consumer Finance Usury State Legislation

    Share page with AddThis
  • Colorado judge rules FDIA does not completely preempt state usury claims against a non-bank

    Courts

    On March 21, the U.S. District Court for the District of Colorado held that the Federal Deposit Insurance Act (FDIA) does not completely preempt a Colorado state regulator’s claims that a non-bank lender violated state law and remanded the case back to state court. The underlying action results from charges brought by the administrator of Colorado’s Uniform Consumer Credit Code against a non-bank lender – which the administrator argues is the “true lender” of loans issued by a New Jersey-chartered bank – for allegedly overcharging interest and other fees in violation of state law. In granting the motion to remand, the court noted that the administrator sufficiently alleged the non-bank was the “true lender” of the loans in question as the non-bank provided the website through which customers apply for the loans, determined the criteria for marketing the loans, decided which applications receive loans, and purchased the loans within two days after they were made by the New Jersey bank. The district court concluded that while courts are split as to banks, because the true lender of the loans was a non-bank, complete preemption by FDIA does not apply even though the non-bank lender has a “close relationship” with a state or national bank. The district court also stated that whether the non-bank is a “true lender” is “not relevant to the issues of complete preemption, which determine whether remand is warranted.”

    Courts Preemption State Issues Usury Interest Rate Nonbank True Lender FDIA

    Share page with AddThis
  • Payday lender settles with California DBO for interest rate cap avoidance

    State Issues

    On March 12, the California Department of Business Oversight (DBO) announced a $160,000 settlement with the California subsidiary of a payday lender for allegedly adding improper fees to installment loan principle amounts in order to avoid the California Finance Law’s (CFL) interest rate cap. The settlement resulted from a DBO examination in which the DBO issued a finding that: (i) the lender failed to exclude fees payable to the California DMV when calculating the principal amount of certain vehicle title loans; (ii) excluding the DMV fees, the bona fide principal amount of the loans at issue was less than $2,500; and (iii) the loans were, therefore, subject to the CFL interest rate cap on loans with a principal amount of less than $2,500, which was exceeded on 591 loans. Without admitting to any wrongdoing, the lender agreed to pay an administrative penalty of approximately $78,000 to the DBO and to refund approximately $82,000 to allegedly affected borrowers.

    State Issues Settlement Payday Lending Vehicle Title Interest Rate DBO

    Share page with AddThis