CASH AMERICA NET OF NEVADA, LLC, Petitioner v. COMMONWEALTH of Pennsylvania, Department of Banking, and the Honorable Steven Kaplan, in his official capacity as Secretary of Banking of the Commonwealth of Pennsylvania, Respondents.
unknown
Commonwealth Court of Pennsylvania.
July 10, 2009
978 A.2d 1028
Sadly for [child], this abuse that she suffered at the hands of her beloved Uncle Mike Judy is going to remain with her for the rest of her life. All of the king‘s horses and all of the king‘s men can‘t fix that. Finding Mike Judy guilty of the crimes that he committed won‘t completely fix that but your decision today while it can‘t completely fix it, potentially could make it a lot worse. Justice, ladies and gentlemen, is the truth. This is a simple case. This is about a sad little girl that loved-no, she adored her Uncle Mike. She loved him. She trusted him. The family loved him. The family trusted him. And sad for [child] and sad for the entire family, he violated that love and that trust when he violated this little girl. If you believe [child], then you must come back with a verdict of guilty.
N.T. at 365-367.
¶ 28 These comments of the assistant district attorney represented permissible oratorical flair framed expressly with the prosecutor‘s admonition that the case hinged on a credibility determination. A prosecutor is permitted latitude to make argument with oratorical flair. See Chmiel, 889 A.2d at 544. The prosecutor was not diverting the jury from deciding the case on the evidence; rather he was imploring the jury to do so. No relief is warranted.
¶ 29 In sum, the trial court did not abuse its discretion if refusing to grant a mistrial on the basis of prosecutorial misconduct. None of the comments of the assistant district attorney were of the type or kind to have the unavoidable effect to prejudice the jurors by forming in their minds a fixed bias and hostility in such manner as to impeded their ability to weight the evidence objectively and render a true verdict. The allegations of prosecutorial misconduct are without merit. Moreover, the jury was properly instructed that arguments of counsel were not evidence and that it was their task and their task alone to pass upon the credibility of the witnesses. The jury is presumed to have followed such instruction. Commonwealth v. Thompson, 442 Pa.Super. 447, 660 A.2d 68, 76 (1995). No relief is warranted.
¶ 30 Judgment of sentence AFFIRMED. Jurisdiction RELINQUISHED.
David H. Pittinsky, Alan S. Kaplinsky, and Raymond A. Quaglia, PA, for petitioner.
Carter D. Frantz, Harrisburg and Robert L. Byer, Pittsburgh, for respondents.
BEFORE: LEADBETTER, President Judge, McGINLEY, Judge, SMITH-RIBNER, Judge, COHN JUBELIRER, Judge, SIMPSON, Judge, LEAVITT, Judge, and BUTLER, Judge.
OPINION BY Judge SMITH-RIBNER.
This case filed in the Court‘s original jurisdiction concerns the reach of Pennsylvania‘s usury laws in regard to “payday” loans that are made solely by means of the Internet. The Supreme Court has explained: “Payday loans are short-term, high-interest-or-fee loans that are generally secured by a post-dated check or a debit authorization executed by the borrower and, subsequently, presented by the lender after a predetermined period, usually set at two weeks to coincide with the borrower‘s payday.” Pennsylvania Department of Banking v. NCAS of Delaware, LLC, 596 Pa. 638, 641, 948 A.2d 752, 754 (2008). The lending company has no office and no personnel physically present in Pennsylvania.
I
On July 26, 2008, the Secretary of Banking Steven Kaplan published in the
A. [N]o person shall engage or continue to engage in this Commonwealth, either as principal, employe, agent or broker, in the business of negotiating or making loans or advances of money on credit, in the amount or value of twenty-five thousand dollars ($25,000) or less, and charge, collect, contract for or receive interest, discount, bonus, fees, fines, commissions, charges, or other considerations which aggregate in excess of the interest that the lender would otherwise be permitted by law to charge if not licensed under this act on the amount actually loaned or advanced, or on the unpaid principal balances when the contract is payable by stated installments except a domestic business corporation organized under or existing by virtue of the [Business Corporation Law of 1988(BCL),
15 Pa.C.S. §§ 1101 -4161], after first obtaining a license from the Secretary of Banking of the Commonwealth of Pennsylvania in accordance with the provisions of this act.
A person licensed is authorized to negotiate and to make loans under the rates, terms and conditions contained in the CDCA, which can be higher.
The Notice advised that non-depository entities engaged in making such loans at more than 6% that are not already licensed must be licensed by February 1, 2009. Entities that wish to become eligible to engage in such lending must obtain a license. The Notice explained that the Department took the position in prior Interpretive Letters that a non-depository entity without offices of any kind in Pennsylvania or people physically present here and acting on behalf of the entity as principal, employee, agent or broker was not engaged in business “in this Commonwealth” within the meaning of Section 3.A and would not be required to obtain a license. With the rise in Internet-based lending activity it became clear to the Department that Pennsylvania consumers were “being exposed to the very lending practices that the CDCA was enacted to protect them from.” 38 Pa. B. at 3987. The Department therefore determined that its previous position would no longer be followed and that licensing would be required for all such lenders, with a transition period requiring licensing by February 1, 2009.
Cash America Net of Nevada, LLC (Cash America) filed its petition for review in the nature of a complaint in equity on January 8, 2009 seeking to have the Notice declared unlawful and to enjoin Respondents from implementing or enforcing it. It averred that it is a limited liability company existing under the laws of Delaware and that it is qualified to do business in Nevada. Further, it has no personnel physically present in Pennsylvania acting as principal, employee, agent or broker and has no office of any kind in Pennsylvania. It characterized the Notice as a binding norm setting forth a bright-line nondiscretionary rule.
In Count One of its petition Cash America requested a declaration that im-
At a hearing on Cash America‘s request for a preliminary injunction, the parties agreed to file cross motions for summary judgment, and the Department agreed not to enforce the change of policy pending a decision by this Court. The Department first filed an Answer, and its filing included a Counterclaim for Declaratory Judgment alleging that Cash America is a Delaware limited liability company that is licensed by the Nevada Division of Financial Institutions with no offices, employees or agents physically present in Pennsylvania. In Paragraphs 9-12 the Department averred that Cash America makes loans to Pennsylvania residents over the Internet in amounts of the lesser of 25% of the borrower‘s gross monthly income or $750, which are due on the first payday between 8 and 35 days from the date of the loan or, if none, in 14 days. Cash America assesses a finance charge of 25% of the amount borrowed. The annual percentage rate (APR) would be as follows: term 8 days, APR 1140.63%; term 14 days, APR 651.79%; term 35 days, APR 260.71%. Cash America admitted the averments of Paragraphs 9-12 in its Answer. Cash America also admitted earning approximately $20 million from Internet loans to Pennsylvania residents in fiscal years 2007-2008.
The Department asserted that Cash America was violating the CDCA by making covered loans without a license and that because it was not licensed it was prohibited from charging interest, fees, charges or other consideration that aggregate in excess of the annual percentage rate of 6% under Section 201 of the Act commonly known as the Loan Interest and Protection Law (LIPL), Act of January 30, 1974, P.L. 13, as amended,
II
The Court turns first to the procedural issue that Cash America raises, i.e., that the Notice constitutes an invalid regulation because it was not adopted pursuant to the requirements of the Act commonly known as the Commonwealth Documents Law (Documents Law), Act of July 31, 1968, P.L. 769, as amended,
uments Law,
In Pennsylvania Human Relations Commission v. Norristown Area School District, 473 Pa. 334, 350, 374 A.2d 671, 679 (1977), the Supreme Court held that agency action constitutes a regulation, as opposed to a general statement of policy, when it purports to establish a “binding norm.” In Norristown the court explained that a general statement of policy is neither a rule nor a precedent but is merely an announcement to the public of the policy that an agency intends to implement in future rulemakings or adjudications. A properly adopted substantive rule establishes a standard of conduct that has the force of law, and the underlying policy generally is not subject to challenge before the agency. Id. A statement of policy does not establish a binding norm. Id. To determine whether an agency has attempted to establish a binding norm without required procedure, courts consider the plain language of the enactment, the manner in which the agency implemented the provision and whether its discretion is restricted by the provision. R.M. v. Pennsylvania Housing Finance Agency of Commonwealth, 740 A.2d 302 (Pa.Cmwlth. 1999). Citing Eastwood Nursing & Rehabilitation Center v. Department of Public Welfare, 910 A.2d 134 (Pa.Cmwlth.2006), Cash America submits that the Notice is a regulation: it provides that out-of-state lenders must be licensed, is not phrased in terms of future rulemakings and leaves no leeway as to licensure.
The Department counters that it issued the Notice under its authority pursuant to Section 202.D of the Department of Banking Code, Act of May 15, 1933, P.L. 565, as amended,
The Court accepts the Department‘s position on this issue. Although Cash America insists that the Department‘s prior interpretations were correct, it concedes that they were contained in interpretive letters. The Department states that no principle of administrative law prevents an agency from reconsidering its interpretation of a statute that it enforces. The Department does not claim that its new interpretation is binding on the courts or even the Department. The manner of adopting the change was consistent with the Department‘s authority to enforce the CDCA through interpretive letters, and it reserved some discretion. The Notice therefore represents a statement of policy. See Insurance Fed‘n of Pennsylvania, Inc. v. Insurance Department, 929 A.2d 1243 (Pa.Cmwlth.2007) (holding that agency notice was statement of policy that interpreted existing law), aff‘d, 970 A.2d 1108 (Pa. 2009).
III
Cash America argues on its substantive challenge that Section 3.A clearly and unambiguously excludes from the CDCA‘s purview an out-of-state lender with no principal, employee, agent, broker or office in Pennsylvania. Cash America submits that the phrase “either as principal, employe, agent or broker” is a modifier to the immediately preceding phrase “in this Commonwealth.” Thus if a lender does not have a “principal, employe, agent or broker” in Pennsylvania, then the lender is not “in this Commonwealth.” Cash America contends that this is the only interpretation that gives meaning to all of the act‘s words. See Lee Publ‘ns, Inc. v. Dickinson School of Law, 848 A.2d 178 (Pa.Cmwlth.2004) (stating that if possible courts must construe a law to give effect to all provisions so that all words have meaning and none are treated as surplusage);
In addition, Cash America notes that when the CDCA was enacted in 1937 the Commerce Clause of the United States Constitution was interpreted by the United States Supreme Court to prohibit states from imposing licensure or other requirements on out-of-state businesses. It quotes Crutcher v. Kentucky, 141 U.S. 47, 58 (1891), which invalidated a statute requiring in-state agents of out-of-state companies to obtain a license before doing business in Kentucky, even though the agent was located in Kentucky and did substantial intrastate business, and stated that “a state law is unconstitutional and void which requires a party to take out a license for carrying on interstate commerce....” While the Com-
The Department‘s initial brief first asserts that Pennsylvania has authority to apply its laws to Cash America, quoting Aldens, Inc. v. Packel, 524 F.2d 38, 43 (3d Cir.1975) (holding that “Pennsylvania‘s interest in the rates which its residents pay for the use of money for purchase of goods delivered into Pennsylvania” justified application of the Goods and Services Installment Sales Act to an Illinois company with no physical presence in the Commonwealth). Moreover, it contends, Cash America is violating the LIPL by charging exorbitant interest greatly in excess of 6% annual interest, which is the maximum permitted for loans under $50,000 in general by Section 201(a),
The Department‘s purpose is to protect Pennsylvania citizens “from being exploited at the hands of unscrupulous individuals seeking to circumvent the law at the expense of unsuspecting borrowers who may have no other avenue to secure financial backing....” Smith v. Mitchell, 420 Pa.Super. 137, 616 A.2d 17, 20 (1992). Section 101 of the LIPL,
The Department argues in its initial brief Section III that Cash America is violating the CDCA by lending to Pennsylvania residents without a license. Section 3.B,
The Department asserts that the requirement that the lender engage in business “in this Commonwealth” is analogous to language in the statute known as Penn-
Although the Department did not specifically address in its initial brief the language in Section 3.A of the CDCA deemed by Cash America to be crucial, the Department focuses on this in its reply brief Section I, B. It notes that words and phrases are to be construed according to the rules of grammar and to their common and approved usage.
The Department also argues that the remedial purpose of the CDCA, its legislative history and Department experience support application of the CDCA to Cash America. Its central purpose is to protect borrowers “against extortionate interest charges” for “loans of comparatively small amounts, since the business of making such loans profoundly affects the social life of the community.” Equitable Credit & Discount Co. v. Geier, 342 Pa. 445, 453, 455, 21 A.2d 53, 57, 58 (1941). Remedial statutes “are to be liberally construed to effect their objects.” O‘Rourke v. Department of Corrections, 566 Pa. 161, 177, 778 A.2d 1194, 1203 (2001).5
IV
The parties offer essentially opposite interpretations of Section 3.A of the CDCA. Although the Department formerly endorsed a contrary interpretation of that section, the Court is convinced that the Department‘s current interpretation is the correct one. First, Cash America‘s interpretation of the language of Section 3.A is based almost entirely on its insistence that the phrase “either as principal, employe, agent or broker” modifies only the preceding phrase “in this Commonwealth[.]” The Court agrees that in the full context, however, “no person shall engage or continue to engage in this Commonwealth, either as principal, employe, agent or broker, in the business of negotiating or making loans [of a specified nature],” the phrase modifies and defines “person” who engages in the business of making specified loans rather than modifying and limiting the meaning of “in this Commonwealth.” The Department‘s point is well taken that this language expands coverage of the act to encompass employees, agents and brokers in the same manner that the CDCA applies to charges and fees beyond interest.
Cash America contends that arguments based upon the Pennsylvania Long Arm Statute are irrelevant because this case does not present the question of whether the exercise of jurisdiction over a nonresident by Pennsylvania courts was constitutionally permissible. In its reply brief, Cash America does not dispute that the Commonwealth would have authority to apply its law to Cash America if the legislature intended to do so. The issue is whether it in fact intended to do so.
Cash America argues that the legislature could not have intended to reach out-of-state lenders with no physical presence
Cash America decries the Department‘s citation to NCAS on the basis that the lender involved there had many in-state offices. The opinion in that case, however, expresses forcefully the Supreme Court‘s view of payday lending as essentially a predatory lending practice and also observes throughout the text of the opinion the methods used by usurious lenders, often involving subterfuge, to attempt to circumvent fundamental public policy. The Supreme Court noted the well-established principle articulated over 100 years ago in Earnest v. Hoskins, 100 Pa. 551 (1882), that the Commonwealth‘s public policy prohibits usurious lending, and it cited a decision entered almost 70 years ago in Geier, holding that it is well settled in constitutional law that the regulation of interest rates is a subject within the police power of the state particularly when it comes to cases involving small loans, which profoundly affect the social life of the community.6
Pursuant to
ORDER
AND NOW, this 10th day of July, 2009, the Court denies the application for summary relief filed by Cash America Net of Nevada, LLC. The Court grants the application for summary relief filed by the Department of Banking and the Secretary of Banking, and it declares that Cash America‘s operations are in violation of the Consumer Discount Company Act and the Act known as the Loan Interest and Protection Law.
Respectfully, I dissent. Simply, the initiative of the Department of Banking (Department) to abolish the business of payday loans in Pennsylvania has not been authorized by statute.
The Consumer Discount Company Act1 (CDCA) does not authorize the Department‘s initiative. Section 3.A provides, in relevant part, as follows:
On and after the effective date of this act, no person shall engage or continue to engage in this Commonwealth, either as principal, employe, agent or broker, in the business of negotiating or making loans or advances of money on credit, in the amount or value of twenty-five thousand dollars ($25,000) or less, and charge, collect, contract for or receive interest, discount, bonus, fees, fines, commissions, charges, or other considerations which aggregate in excess of the interest that the lender would otherwise be permitted by law to charge if not licensed under this act on the amount actually loaned or advanced, or on the unpaid principal balances when the contract is payable by stated installments[,] except a domestic business corporation organized under or existing by virtue of the Business Corporation Law of this Commonwealth, after first obtaining a license from the Secretary of Banking of the Commonwealth of Pennsylvania in accordance with the provisions of this act.
Cash America, a Delaware-based company licensed by Nevada, does not have a physical presence in Pennsylvania; it makes payday loans available on its website and without geographical boundaries. A borrower, whether in Pennsylvania or in some other state, must surf the Internet to find Cash America and enter into a loan transaction with it. Once on the Cash America website, the borrower must open an account and fill out an application in order to enter into a loan transaction. By clicking on a box entitled “Rates and Terms,” the borrower identifies his or her
In their amici curiae brief, Community Legal Services and the Pennsylvania AFL-CIO point out that Pennsylvanians, and other consumers who apply for a payday loan from Cash America, do so at their peril. First, payday loans are costly, compared to traditional loans.3 Second, amici point out that payday lending can set a trap for the financially vulnerable and unwary who may find themselves in a no-exit cycle of debt. Specifically, by using a paycheck to repay a loan, the payday borrower is left with too little remaining in the paycheck to meet ongoing obligations. The borrower then enters into another payday loan. Soon, instead of living paycheck to paycheck, these borrowers find themselves living payday loan to payday loan.
In July 2008, the Department issued a “Notice to those Engaging or Considering Engaging in Nonmortgage Consumer Lending to Pennsylvania Residents” (Notice), 38 Pa. Bull. 3986 (2008). The Notice stated that
nonmortgage consumer lending to Pennsylvania residents by any means, including by means of the internet or by mail, constitutes engaging in such business “in this Commonwealth” as contemplated by Section 3.A of the Consumer Discount Company Act (CDCA) (
7 P.S. § 6203.A ).
Id. The Notice explained that the Department had retreated from
[its] prior position, [that] such an entity would not be required to obtain a license under the CDCA to originate nonmortgage consumer loans by means of the Internet or mail to residents of this Commonwealth in which the charges exceeded 6% simple interest per annum, provided that the entity was licensed or otherwise authorized under the entity‘s home state law to engage in this type of lending activity.
Id. The Department‘s Notice did not refer specifically to “payday loans,” but it did advert to the need to protect Pennsylvania residents from “certain Internet lending practices.” Given these “practices,” the Notice concluded that
the Department is convinced that a change in policy is warranted, and licensing under the CDCA should be required for all nondepository entities ... lending to Pennsylvania residents in which the charges exceed 6% simple interest per annum.4
Id. (emphasis added). A change in policy may well be warranted, and amici make a compelling argument that payday lending should be regulated. However, this “change in policy” requires legislation.
Cash America asserts that it cannot make loans to Pennsylvania residents under the limits of the CDCA, should the Department‘s new policy become effective. Cash America Brief at 16. Accordingly, the Department‘s “new policy,” as affirmed by the majority, puts Cash America out of business in Pennsylvania.
First, in 1937, when the CDCA was enacted, the jurisprudence of the United States Supreme Court prevented the States from regulating interstate loans under the then-current theory that such action by the States would violate the Commerce Clause in the United States Constitution.
Second, the Department‘s 2008 interpretation of the CDCA gives no effect to the words “principal, employe, agent or broker” that appear in Section 3.A. It is axiomatic that “[t]he Legislature cannot be deemed to intend that its language be superfluous and without import.” Robinson v. Abington Education Association, 492 Pa. 218, 234 n. 16, 423 A.2d 1014, 1022 n. 16 (1980) (quotation omitted). By using the language “in this Commonwealth, either as principal, employe, agent or broker,” the legislature was referring to intrastate transactions.
Third, although the CDCA has been amended numerous times, the language of Section 3.A was never amended to extend the reach of the CDCA to out-of-state lenders. Our Supreme Court has explained that when the legislature amends a statute but does not revise or repeal an agency‘s interpretation of it, this is evidence that the legislature has acquiesced in the interpretation and that the interpretation is, in fact, the one the legislature intended. Gilligan v. Pennsylvania Horse Racing Commission, 492 Pa. 92, 99, 422 A.2d 487, 491 (1980).
Indeed, the legislature could have easily amended the CDCA to apply to interstate transactions. For example, the Goods and Services Installment Sales Act,6 the Pennsylvania Securities Act of 19727 and the Debt Management Services Act8 all include provisions which specifically make those statutes applicable to transactions
Fourth, the Department‘s interpretation gives no meaning to the requirement that the lender be a “domestic business corporation organized under ... the Business Corporation Law of this Commonwealth....”
no person shall engage ... in the business of ... making loans ... and charge ... in excess of the interest that the lender would ... be permitted by law to charge if not licensed ... except a domestic business corporation ... after first obtaining a license....
Id. This language cannot be squared with the possibility that the CDCA regulates interstate lending. Section 3.A requires the lender seeking a license to be organized as a Pennsylvania corporation; this is a requirement that could only be imposed on a Pennsylvania lender. Otherwise, compliance would require the out-of-state lender to set up a Pennsylvania subsidiary, which would violate the Dormant Commerce Clause.
The Department contends that the fact that the Internet did not exist in 1937 should not have any bearing on the construction of the CDCA. I agree with this premise. The Internet is only one of several means of interstate communication. Others include mail, telephone and telegraph, which did exist in 1937. However, the Department uses the Internet as a smokescreen to obscure the words in Section 3.A that can only be understood to limit the scope of the CDCA to intrastate loan transactions.
For example, acknowledging that the CDCA addresses those who do business “in this Commonwealth” as a “principal, employe, agent or broker,” the Department explains that Cash America is doing business in Pennsylvania as a principal. By this logic, Cash America, a Nevada-licensed lender, is present electronically in Pennsylvania. If that is so, then the loan transaction is an intrastate transaction, with both the lender and borrower “in this Commonwealth.” This circular conclusion underscores the fact that Section 3.A was never intended to apply to interstate loans.
In short, it is irrelevant that Cash America is making loans by means of the Internet. The point is that the CDCA does not, and was never intended to, apply to interstate transactions, whether effected by the mail, by telephone or by the Internet. The Department has not thought through the issues presented by the language of Section 3.A.10 The legislature needs to amend the CDCA to expand its scope to interstate consumer loan transac-
Indeed, our Supreme Court has cautioned against an agency ushering in a new regulatory regime that is directly contrary to a long-standing prior regulatory position, without authorizing legislation. In Malt Beverages Distributors Association v. Pennsylvania Liquor Control Board, Pa., 974 A.2d 1144 (2009), our Supreme Court refused to uphold the issuance of a retailer‘s license to Sheetz to sell take-out beer. It explained:
While a policy determination in this regard may well be accomplished by our legislature, it is not our role to sanction such a momentous transformation. Uniontown Newspapers, Inc. v. Roberts, 576 Pa. 231, 839 A.2d 185, 194 (2003) (providing that policy considerations do not lie with the courts, but are reserved for the legislative body to resolve.)
Id., at 1154 (emphasis added). Likewise, the “momentous transformation” sought here by the Department of Banking should be accomplished by the legislature and not by the courts.
As a final point, the relief ordered by the majority exceeds the bounds of a declaratory judgment action. The majority “declares that Cash America‘s practice of making payday loans to Pennsylvania residents is not authorized by the laws of this Commonwealth and that such lending specifically violates the CDCA and [the Loan Interest and Protection Law].” Majority op. at 1038. The Department agreed to delay the effective date of its enforcement initiative date until this Court decided whether the Department‘s Notice correctly construed the CDCA, so Cash America cannot be in violation of a yet-to-be initiated enforcement action. Further, it is a misdemeanor to violate the licensing requirements of the CDCA. The judgment of the majority, as stated, prejudges the out-
The issues surrounding payday loans should be presented to the legislature. The legislature can then decide what is best for Pennsylvania residents and determine whether to outlaw entirely or to regulate payday lending practices. Legislation is the means necessary to usher in the “change in policy” sought by the Department as well as amici curiae. For the Department to outlaw payday loans by administrative fiat violates the long-standing principle that an “administrative agency can only exercise those powers which have been conferred upon it by the Legislature in clear and unmistakable language.” Aetna Casualty and Surety Co. v. Insurance Department, 536 Pa. 105, 118, 638 A.2d 194, 200 (1994) (citation omitted).
I would grant Cash America‘s Application for Summary Relief.
Judge COHN JUBELIRER and Judge SIMPSON join in this dissent.