Janet LIVINGSTON, et al., Plaintiffs, v. FAST CASH USA, INC., et al., Defendants. Kelli R. Wallace, et al., Plaintiffs, v. Advance America Cash Advance Centers of Indiana, Defendants.
Nos. 94S00-0010-CQ-609, 94S00-0010-CQ-610
Supreme Court of Indiana.
Aug. 16, 2001.
753 N.E.2d 572
Policy considerations point in the same direction. I see no compelling reason to allow the civil defendant to waive a statute of limitations defense but not the criminal defendant. A criminal defendant, like a civil defendant, should not be able to sit on a statute of limitations defense until long after trial is completed. The result is a waste of taxpayer funds and court time. The statute of limitations defense is not a claim that the defendant did not commit the crime. Rather, it is a claim that the prosecution should not be permitted to go forward for policy reasons extraneous to this defendant and the crime with which he is charged. Many other more fundamental constitutional and statutory rights are accorded the criminal defendant, but most of these rights may be waived, either affirmatively or by the failure to assert them. There is no reason why the failure to assert a statute of limitations defense should be treated more favorably. See Wild, 551 F.2d at 424-25 (reasoning that, like the right to be represented by counsel or the right not to be put twice in jeopardy, the statute of limitations defense should be waivable). The State, as well as society at large, has a substantial interest in the prosecution of crimes, regardless of when they occurred. Requiring a statute of limitations defense to be asserted in a timely manner will encourage a defendant with a valid defense to raise it promptly. It will also avoid the situation where the State mistakenly neglects to prove the date of the offense and the defendant says nothing hoping to capitalize on that blunder on appeal.
In this case, affirming the conviction obviously sets the defendant up for an ineffective assistance of counsel claim, and the end result of my view may be the same as the majority‘s. The same will presumably be true in other cases unless the failure to raise the defense can be shown to have been the result of a plausible defense strategy. But requiring the defense to be asserted will encourage counsel to present it, and should discourage wasted court proceedings. For these reasons, I respectfully dissent.
DICKSON, J., concurs.
Judy L. Woods, Bose McKinney & Evans LLP, Indianapolis, IN, James A. Chareq, Lovells, Washington, DC, Attorneys for Defendants.
Steven C. Shockley, Maggie L. Smith, Sommer & Barnard, PC, Indianapolis, IN, Attorneys for Amicus Curiae.
Case Summary
This cause comes to us as a certified question from the United States District Courts for the Southern District of Indiana, Indianapolis and Terre Haute Divisions, and for the Northern District of Indiana, Hammond Division. Pursuant to
Facts and Procedural History
The certified question arises from numerous cases pending in the federal courts. A majority of the defendants are lenders who are in the business of making small, short-term, single-payment, consumer loans generally referred to as “payday” loans. Some of the defendants are collection agencies or attorneys who do not make loans but represent lenders in actions to collect from borrowers who have defaulted on their loan obligations.1 The loan amounts range from $50 to $400 and extend for a period of less than thirty days. Lenders contract for and receive as a finance charge an amount equal to or less than the minimum loan finance charge permitted by
Although the details vary from person to person as well as from lender to lender, typically a payday loan works as follows. The borrower applies for a small loan and gives the lender a post-dated check in the amount of the loan principal plus a finance charge. Depending on the lender, the finance charge varies from $15 to $33. In return, the lender gives the borrower a loan in cash with payment due in a short period of time, usually two weeks. When the loan becomes due, the borrower either repays the lender in cash the amount of the loan plus the finance charge, or the lender deposits the borrower‘s check. If the borrower lacks sufficient funds to pay the loan when due, then the borrower may obtain a new loan for another two weeks incurring another finance charge.
Acting on behalf of themselves and a putative class of borrowers, plaintiffs allege that Lenders violated Indiana law by contracting for and receiving the minimum loan finance charge permitted by
Discussion
The 1968 Uniform Consumer Credit Code was originally adopted by this State‘s Legislature in 1971 and is referred to as the Indiana Uniform Consumer Credit Code (“IUCCC“). Rates on loan finance charges for supervised loans2 are gov-
The loan finance charge, calculated according to the actuarial method, may not exceed the equivalent of the greater of the following: [] the total of [] thirty-six percent (36%) per year on that part of the unpaid balances of the principal which is three hundred dollars ($300)....
In turn, subsection 3-508(7) dictates in relevant part:
With respect to a supervised loan not made pursuant to a revolving loan account, the lender may contract for and receive a minimum loan finance charge of not more than thirty dollars ($30).4
The parties agree that a fifteen-day loan of $200 with a minimum loan finance charge of $33 represents an APR of interest totaling 402%. However, according to Lenders, subsection 3-508(7) is an exception to subsection 3-508(2). Relying on various tenets of statutory construction Lenders contend they are entitled to receive from a borrower a minimum loan finance charge in any amount up to $33 even if the charge exceeds the maximum APR of 36%. We rely on similar tenets but reach a different conclusion.
Where a statute has not previously been construed, the express language of the statute controls the interpretation and the rules of statutory construction apply. Ind. State Fair Bd. v. Hockey Corp. of America, 429 N.E.2d 1121, 1123 (Ind.1982). We are required to determine and effect the legislative intent underlying the statute and to construe the statute in such a way as to prevent absurdity and hardship and to favor public convenience. Superior Constr. Co. v. Carr, 564 N.E.2d 281, 284 (Ind.1990). In so doing, we should consider the objects and purposes of the statute as well as the effects and repercussions of such an interpretation. State v. Windy City Fireworks, Inc., 600 N.E.2d 555, 558 (Ind.Ct.App.1992), adopted by 608 N.E.2d 699.
Before the 1971 adoption of the IUCCC, the Indiana Legislature had passed an array of lending and usury laws. Replaced by the IUCCC, many had been in existence before the turn of the century.5 One such statute, commonly referred to as the “petty loan” statute, was specifically designed to “provide for a limited and uniform rate of interest upon small loans for short terms.” Cotton v. Commonwealth Loan Co., 206 Ind. 626, 628, 190 N.E. 853, 855 (1934); Pub.L. No. 167-1913, §§ 1-5, 1913 Ind. Acts 457-60. Unlike
The early version of subsection 3-210 also supports the view that the IUCCC anticipated loans for longer than a week or two. In 1971 for example, in the case of prepayment for a loan in excess of $75, a lender was allowed to receive a minimum loan finance charge provided it did not exceed $7.50 or the finance charge contracted for. See
Subsection 3-508 has been amended three times since 1971. However, each amendment has referred to the prepayment subsection 3-210. At present, subsection 3-508 as well as subsection 3-2106 works substantially the same as it has always worked: a lender is allowed to charge up to the amount specified in subsection 3-508(7), limited by the total finance charge that was originally provided for in the contract. Hence, a two-week $200 loan still generates $2.77 in maximum interest. The principal difference between the 1971 version of subsection 3-508 and the current version is that the minimum loan finance charge is now $33 for loans up to $300. If subsection 3-508(7) represents an exception to subsection 3-508(2), as Lenders contend, then there would exist an even greater anomaly today than that which would have existed under the 1971 version of the statute. Specifically, if Lenders are correct, then they would be entitled to receive $2.77 for a two-week loan paid at the end of the term, but
Lenders complain that reading the statute inconsistent with their own interpretation either renders subsection 3-508(7) a nullity or treats it as mere surplusage. We disagree. Subsection 3-508(7) would be rendered a nullity or mere surplusage only if subsection 3-508(2) can be read as anticipating short term loans. As we have attempted to demonstrate, we do not believe that is the case. In essence these statutes simply do not work very well when applied to short-term payday type loans. By contrast, subsections 3-508(2) and (7) work together harmoniously for loans of at least a year. For example, a $200 one-year loan would entitle the lender to $72 in interest if the loan were paid at the end of the term. In the event of prepayment—even after one day—the lender would be entitled to a minimum loan finance charge of $33. This seems to make sense. Even though the lender would not receive the full amount of interest originally anticipated, the lender is still afforded a modest but reasonable return on an investment and also allowed to recoup administrative costs associated with setting up a small loan. Only because Lenders have made a business decision to offer short-term payday loans are they faced with a dilemma which in their view justifies a $33 minimum loan finance charge. See Reply Br. of Def. at 6 (complaining “annual rates of interest do no not adequately compensate the lender.“). This Court can offer Lenders no refuge. Even if short term payday loans were never contemplated by the IUCCC, they are nonetheless subject to and controlled by that statute. Accordingly, Lenders may contract for and receive a loan finance charge of not more than $33 as set forth in subsection 3-508(7) provided the resulting APR does not exceed the interest limit established by 3-508(2) or Indiana‘s loan-sharking statute.7
Conclusion
We conclude that the minimum loan finance charges for supervised loans provided for in
DICKSON and SULLIVAN, JJ., concur.
BOEHM, J., concurs with separate opinion.
SHEPARD, C.J., dissents with separate opinion.
BOEHM, Justice, concurring.
I agree with the majority‘s answer to the certified question. I offer additional support for their answer. In capsule form,
As I see it, the issue is whether the $33 minimum loan finance charge provided by subsection 508(7) is collectible if it exceeds the loan finance charge allowed under subsection 508(2) for the loan as written for its full term. I think it is not. If a loan is prepaid, subsection 210(2) authorizes the collection of the “minimum loan finance charge, as if earned, not exceeding the loan finance charge contracted for.” In this context, I take “as if earned” to mean the loan charge prorated to the date of prepayment. Similarly, the “loan finance charge contracted for” in subsection 210(2) is the amount of loan finance charge that would be collected if the loan were held to its full term. That amount, for a “supervised loan,” is capped by subsection 508(2). Thus, in the prepayment context, the minimum charge is capped by the “loan finance charge contracted for,” and the full $33 cannot lawfully be collected if it exceeds that amount.
Given this limitation in the prepayment of a loan that is within the allowable finance charges, it would be more than anomalous to permit the full $33 to be collectible in the case of a loan that carries a finance charge vastly in excess of the allowable charges. By way of example, a lender who makes a $100 loan for six months may lawfully collect a loan finance charge of $18 when the loan is repaid in full at the end of the six-month term ($18 is 36% per annum on $100 for one half year). Because subsection 210(2) limits the prepayment minimum charge to “the loan charge contracted for,” only $18—not the $33 minimum charge provided in subsection 508(7)—is collectible if this loan is prepaid, say at three months when only $9 is “earned.” The payday lender nevertheless contends it can collect $33 for a two-week loan of the same amount. This result seems to fly in the face of the statutory scheme.
Another way to make the same point is to say that subsection 210 provides for recovery of a minimum charge on prepayment even if that charge exceeds the initially contracted charge prorated to the date of prepayment. Subsection 508(7) sets the amount of the minimum charge, but it does not constitute an independent exception to the limits imposed by subsection 508(2) on the loan charge authorized in the loan to full term. Simply put, I agree with the Court that the Uniform Consumer Credit Code (UCCC) is based on an assumption, but it is not the assumption that loans are necessarily for at least one year. Rather, I think the legislation assumes lawful loans, i.e. it assumes a lender cannot initially contract for a loan finance charge greater than the limits imposed by subsection 508(2).
Although this line of reasoning is less than fully clear from the language of the statute, I think it is the only sensible way to read these intertwined provisions. First, it is notable that subsection 508(2)
The only conclusion I can reach from this is that the court is quite clearly correct in concluding that payday loans were not contemplated at all by the drafters of the IUCCC. This view of the structure of the act is fully consistent with the history of consumer credit legislation outlined by the majority. In oversimplified terms, the legal environment of the 1960s did not contemplate the revolving credit lines that are now familiar to everyone and form the basis of the credit cards most consumers use routinely. Usury laws, small loan acts and similar legislation presented significant legal issues to credit forms that, although very useful to a consumer economy, require more than 8% simple interest charges and do not fit into fixed payment schedules. The UCCC and its Indiana version were drafted to address these emerging forms of consumer finance. They assumed the problems of that day and assumed transactions in the then known forms, but they did not contemplate doing away altogether with regulation of excessive charges.
Subsection 508(7)—the provision the defendants rely on—has been in the IUCCC since 1982. Its function—to permit recovery of initial loan processing costs in case of prepayment—is perfectly plausible and consistent with the overall scheme of the statute. We are told payday loans first appeared in this state in 1994. That fortifies my view that the statute assumes that a loan will be written in compliance with the loan finance charge limits of subsection 508(2), and that the minimum charges will be allowed only to the extent they do not exceed the amounts collectible under a lawful loan held to full term.
My confidence in this reading is bolstered because I think the logic of the defendants’ position produces demonstrably absurd results. The same arguments advanced to justify a $33 minimum charge for a two-week loan of $100 equally justify a $33 charge for a two-minute loan of $1. I find that result clearly not within the contemplation of the legislature. There must be a bright line between permissible and impermissible lending practices. The only line that seems to me to make sense, and the only one suggested by the statute itself, is the one plaintiffs propose: the initial term of the loan must be sufficient to support the minimum charge consistent with the limitations of subsection 508(2).
It also seems to me that the justifications offered by payday lenders do not hold water. The costs of setting a loan up on the lender‘s books, etc., are cited as the basis for a minimum charge. This makes sense in the context of a loan that is initially contemplated to carry a finance charge allowed by subsection 508(2). But ease of making the loan, lack of paperwork, and the lender‘s assumption of cred-
Finally, defendants point to the traditional arguments against regulation and in favor of free election of choices afforded in the marketplace. But it seems clear to me that the legislature has chosen in the IUCCC to prohibit some lending practices and to restrict the parties’ ability to contract for whatever is agreed. In short, it is very clear that some forms of lending practices are prohibited, and the only question is whether payday loans are among the practices proscribed by the statute. For the reasons given above, I conclude they are. I agree that the “multiple contracts” provision referred to by the Chief Justice may also be relevant to the ultimate issues in this case, but because the federal court declined to certify that question, I express no view as to it.
SHEPARD, Chief Justice, dissenting.
I read subsection 508(7) to mean what it says, in straightforward terms: “With respect to a supervised loan not made pursuant to a revolving loan account, the lender may contract for and receive a minimum loan finance charge of not more than thirty dollars ($30).”1
I think subsection 508(2) limiting annual interest and subsection 508(7) permitting a minimum finance charge were adopted by the legislature on the premise that the two would work together like this: a lender can charge no more than 36% per year, but if the loan period is so short or the loan so small that this rate might produce just a few dollars, a minimum of $33 may be charged. This harmonizes both provisions by treating subsection 508(7) as an exception to subsection 508(2), and it makes $33 a true “minimum loan finance charge” using the common meaning of the words.
The majority concludes that subsection 508(7) comes into play only in the event of loan prepayments, because it is referenced in § 210 (“Rebate Upon Prepayment“). Although subsection 508(7) does perform this additional function, I still find its primary purpose in its plain language. If the legislature had intended to permit a minimum loan finance charge but limit it to prepayment situations, surely the logical approach would have been to state the minimum charge, in dollars, in the prepayment section and eliminate subsection 508(7) entirely, or at least to clarify this limitation in subsection 508(7).
This is not to say that the legislature contemplated allowing lenders to collect $33 every two weeks on what is for all practical purposes one continuing loan.
It has been awhile since we last encountered a statute in such serious need of revision. Our federal cousins might take comfort in knowing that, like them, we found the task of parsing its various provisions very difficult (but had nowhere else to send out for help).
No. 45S03-0011-PC-708.
Supreme Court of Indiana.
Aug. 20, 2001.
Notes
Upon prepayment in full of a consumer loan, refinancing, or consolidation, other than one (1) under a revolving loan account, if the loan finance charge earned is less than any permitted minimum loan finance charge (IC § 24-4.5-3-2-1(6) or IC § 24-4.5-3-508(7)) contracted for, whether or not the consumer loan financing, or consolidation is precomputed, the lender may collect or retain the minimum loan finance charge, as if earned, not exceeding the loan finance charge contracted for.
A person who, in exchange for the loan of any property, knowingly or intentionally receives or contracts to receive from another person any consideration, at a rate greater than two (2) times the rate specified in IC § 24-4.5-3-508(2)(a)(i), commits loan-sharking, a Class D felony.