OHIO NEIGHBORHOOD FINANCE, INC., D.B.A. CASHLAND, APPELLANT, v. SCOTT, APPELLEE.
No. 2013-0103
Supreme Court of Ohio
Submitted December 10, 2013—Decided June 11, 2014
[Cite as Ohio Neighborhood Fin., Inc. v. Scott, 139 Ohio St.3d 536, 2014-Ohio-2440.]
FRENCH, J.
{1 1} This appeal concerns the continued viability of payday lending in Ohio and raises questions regarding how payday loans fit within Ohio‘s current statutory lending framework.
{1 2} Payday loans are typically small, unsecured, short-term loans, often repayable on the borrower‘s next payday. Ohio Legislative Service Commission, Payday Lending in Ohio, Members Only Brief, Vol. 130, Issue 1 (Jan. 23, 2013), at 1, http://www.lsc.state.oh.us/membersonly/130paydaylending.pdf (accessed June 3, 2014) (“Payday Lending“). The borrower generally writes the lender a check for the full loan amount plus all applicable fеes and interest, postdated to the borrower‘s next payday, or authorizes the lender to electronically debit that amount from the borrower‘s bank account on the borrower‘s next payday. Id.; In re Meadows, 396 B.R. 485, 498 (6th Cir. BAP 2008), fn. 8 (Gregg, J., concurring), quoting Easha Anand, Payday Lenders Back Measures to Unwind State Restrictions, Wall Street Journal (Oct. 28, 2008), A6.
{1 3} To be sure, payday lending is controversial. Proponents argue that payday loans are necessary and less costly than other available alternatives for low-income individuals to cover unexpected expenses. Opponents argue that the high costs of payday loans, combined with their short terms, trap borrowers in a cycle of debt, with borrowers often resorting to additional loans to pay off prior loans. Payday Lending at 1-2.
{1 4}
{1 5} For the reasons we detail below, based on the unambiguous language of
Relevant Background
Mortgage Loan Act
{1 6} The MLA was originally enacted in 1965 and, at that time, applied only to lenders who took second mortgages as security for loans. Am.Sub.H.B. No. 403,
{1 7} MLA loans may be either interest-bearing or precomputed.
{1 8} The MLA does not restrict the amount that can be lent or the duration of the loan.
Check-Cashing Lender Law
{1 9} In 1995, the General Assembly enacted the Check-Cashing Lender Act, former
Short-Term Lender Act
{1 10} The STLA reenacted the bulk of the repealed Check-Cashing Lender Law, but with a number of substantive changes addressing perceived dangers associated with payday lеnding. Ohio Legislative Service Commission, Bill Analysis, Sub.H.B. 545, http://www.legislature.state.oh.us/analysis.cfm?ID=127_HB_545&ACT=AsEnrolled&hf=analyses127/08-hb545-127.htm (accessed June 3, 2014). The STLA reduced the maximum loan amount to $500, imposed a minimum loan term of 31 days, and drastically reduced the interest a lender may charge.
Referendum
{1 11} A referendum challenging the repeal of the Check-Cashing Lender Law was on the ballot as Issue 5 in Ohio‘s November 2008 general election. Issue 5 asked, “Shall Section 3 of H.B. 545 [repealing the Check-Cashing Lender Law] be approved?” Ohio Secretary of State, Ohio Issues Report: State Issue Ballot Information for the November 4, 2008 General Election, at 17, http://www.sos.state.oh.us/sоs/upload/publications/election/Issues_08.pdf (accessed June 3, 2014). Although the explanation of the referendum informed voters that approval of Section 3 would subject all short-term lenders, including check-cashing lenders, to the requirements of the STLA, Issue 5 concerned only the repeal of the Check-Cashing Lender Law and not the enactment of the STLA. Id. at 17. Amici in support of appellee, Rodney Scott, maintain that the payday-lending industry vigorously opposed the repeal and encouraged voters to reject Issue 5. Appellant, Ohio Neighborhood Finance, Inc., d.b.a. Cashland, admits that lenders opposed the repeal because they stood to lose significant revenue if it took effect. Nevertheless, despite efforts to defeat Issue 5, a majority of the electorate approved Issue 5 and the repeal of the Check-Cashing Lender Law. Appellant states that 43 Cashland lending locations in Ohio were closed as a direct result of the repeal.
Facts and Procedural History
{1 13} Appellant was previously a licensed lender under the Check-Cashing Lender Law. Appellant registered as a lender under the MLA in August 2008, after the passage of H.B. 545. Appellant is not registered under the STLA. Appellant admits that the loan product it offers now, purportedly under the MLA, is similar to the loan product it previously offered under the Check-Cashing Lender Law, but it contends that the fees it is able to collect on the MLA prоduct are less than those it collected under the Check-Cashing Lender Law.
{1 14} On December 5, 2008, appellant and appellee executed a customer agreement for a single-installment, $500 loan “governed by the laws of the State of Ohio, including the Mortgage Loan Act.” The customer agreement established the following payment schedule: “One payment in the amount of $545.16 due on 12/19/08 (Payment Date).” The payment amount included a $10 credit-investigation fee and a $30 loan-origination fee. Appellee agreed to repay the principal amount “plus interest at a rate of 25% per annum on the principal outstanding for the time outstanding from the date of this Customer Agreement until paid in full.” Had appellee repaid the loan on time, he would have paid $5.16 in interest. The federal truth-in-lending disclosure in the customer agreement informed appellee that the APR (“[t]he Cost of your credit as a yearly rate“) of his loan was 235.48 percent. As used in this disclosure, the APR includes not only interest but also the other finance charges associated with the loan. Smith v. Anderson, 801 F.2d 661, 663 (4th Cir.1986), citing
{1 15} Appellee defaulted on his loan by not making any payment by December 19, 2008. Appellant filed this action in the Elyria Municipal Court to recover on its loan to appellee.
{1 16} In its complaint, appellant sought to recover the unpaid principal balance on appellee‘s loan, along with interest and fees permitted by the MLA, inсluding a default charge and a returned-check charge. When appellee did not respond, appellant moved for a default judgment of $570.16, plus interest of 25 percent per annum from December 5, 2008. Appellee had paid a total of $35 toward his debt before appellant moved for default judgment.
{1 18} A split panel of the Ninth District Court of Appeals affirmed the municipal court‘s judgment. 9th Dist. Lorain No. 11CA010030, 2012-Ohio-5566, 2012 WL 5994934. The majority held that the MLA does not authorize single-installment loans and that by enacting the STLA, the General Assembly intended to prohibit all loans of short duration outside the confinеs of that act. Id. at ¶ 12. Judge Dickinson dissented, concluding that the single-installment loan here satisfied the MLA‘s definition of “interest-bearing loan” and holding that the General Assembly‘s supposed intent in enacting the STLA was insufficient to override the MLA‘s clear authorization of this type of loan. Id. at ¶ 19, 24. Neither the majority nor the dissent addressed the validity of a 25 percent interest rate under the MLA.
{1 19} This court accepted appellant‘s discretionary appeal. 136 Ohio St.3d 1505, 2013-Ohio-4653, 995 N.E.2d 1209. Although appellee has not appeared before this court, numerous amici have ably presented argumеnt in support of the lower courts’ judgments.
Questions Presented
{1 20} Appellant asks this court to decide whether the MLA permits single-installment, interest-bearing loans and, if so, whether the STLA prohibits MLA registrants from making single-installment loans of short duration. Carefully bearing in mind that we must apply statutory language as enacted by the General Assembly and that we are prohibited from acting in a legislative capacity, we answer the first question in the affirmative and the second question in the negative.
{1 21} We first consider whether the MLA permits single-installment loans. The MLA permits both “interest-bearing” and “precomputed” loans, subject to different requirements as set forth in
{1 22} Our paramount concern in construing a statute is legislative intent. State ex rel. Steele v. Morrissey, 103 Ohio St.3d 355, 2004-Ohio-4960, 815 N.E.2d 1107, ¶ 21. To discern legislative intent, we first consider the statutory language, reading all words and phrases in context and in accordance with rules of grammar and common usage. Id.;
{1 23} When statutory language is unambiguous, we will apply it as written, without resort to additional rules of statutory interpretation or considerations of public policy. Zumwalde v. Madeira & Indian Hill Joint Fire Dist., 128 Ohio St.3d 492, 2011-Ohio-1603, 946 N.E.2d 748, ¶ 23-24, 26. We may employ rules for construing ambiguous language only when a definitive meaning proves elusive, despite a thorough and objective examination of the statutory language. State v. Porterfield, 106 Ohio St.3d 5, 2005-Ohio-3095, 829 N.E.2d 690, ¶ 11. “Otherwise, allegations of ambiguity become self-fulfilling.” Id.
{1 24} The appellate-court majority found the statutory definition of “interest-bearing loan“—and speсifically the requirement that “interest is computed, charged, and collected on unpaid principal balances outstanding from time to time“—ambiguous:
According to [appellant], “from time to time” modifies “unpaid principal balances outstanding[,]” and, therefore, a loan could be interest-bearing
even if it was collected in a single installment. However, “from time to time” could just as readily modify “computed, charged, and collected[,]” which would require interest to be collected in multiple installments. See R.C. 1321.51(F) . In other words, the statute is ambiguous.
2012-Ohio-5566, 2012 WL 5994934, at ¶ 8.
{1 25} In determining whether a statute is ambiguous, we objectively and thoroughly examine the statute, consider each provision in context, and apply ordinary rules of grammar. Porterfield at ¶ 11, citing Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 11; Hedges v. Nationwide Mut. Ins. Co., 109 Ohio St.3d 70, 2006-Ohio-1926, 846 N.E.2d 16, ¶ 24. When we do that here, we discern no ambiguity in
{1 26} It is an accepted rule of construction that in the absence of an expressed contrary intention, referential and qualifying words and phrases refer solely to the last antecedent. Hedges at ¶ 24. Applying that rule, the phrase “from time to time” is an adverbial phrase that modifies the antecedent adjective “outstanding,” which in turn modifies “unpaid principal balances.” The appellate-court majority states that the phrase “from time to time” may also be read as modifying the earlier verbs “computed, charged, and collected” and therefore requires that a lender collect interest at different times and thus in multiple installments. That reading, however, not only imposes a forced construction on the statute, but also ignores this accepted rule of construction. Had the General Assembly intended to require multiple installments for interest-bearing loans, it could have rearranged the statutory language in
{1 27} Appellant‘s loan to appellee satisfies the definition of an interest-bearing loan under
You promise to pay us $500.00 (the Principal Amount of this loan) plus interest at a rate of 25% per annum on the principal outstanding for the time outstanding from the date of this Customer Agreement until paid in
full. Interest shall be computed daily upon the principal balance outstanding by using the simple interest method, assuming a 365-day year.
The agreement expresses the debt as the principal amount, and the interest is computed based upon the principal balance outstanding daily, in accordance with the definition of “interest-bearing loan” in
{1 28} The second question we must consider is whether the STLA prohibits MLA registrants from making payday-style loans even if those loans are otherwise permissible under the MLA. This issue arises because, despite its determination that the MLA does not apply to single-installment loans, the court of appeals’ majority went on to hold that the General Assembly intended, by its repeal of the Check-Cashing Lender Law and its enactment of the STLA, to prohibit any two-week loan. 2012-Ohio-5566, 2012 WL 5994934, at ¶ 12. The majority reasoned that allowing MLA registrants to make two-week, single-installment loans would “nullify the very legislation that is designed to regulate payday-type loans.” Id. at ¶ 11.
{1 29} The arguments made by the amici in support of appellee concern this second question. Amici urge this court to hold that the STLA is the exclusive authority governing payday loans in Ohio and that regardless of how lenders label them, payday loans must comply with the STLA. Thus, even if the MLA generally permits single-installment, interest-bearing loans, amici for appellee maintain that payday loans—short-term, unsecured, single-installment consumer loans—cannot be made under the MLA because they are specifically and exclusively regulated under the STLA.
{1 30} The STLA imposes duties upon a person licensed and “any person required to be licensed” under the act, and it prohibits licensees from engaging in any device or subterfuge to avoid the requirements of the act.
{1 31} In an opinion issued shortly after the enactment of the STLA, the Ohio attorney general recognized that the fact that
{1 32} Appellant is not licensed under the STLA and is, therefore, not entitled to make short-term loans pursuant to the STLA.
{1 33} Nothing in the STLA limits the authority of MLA registrants to make MLA loans. As the attorney general recognized in 2008 Ohio Atty.Gen.Ops. No. 2008-036, at *4, H.B. 545 itself, at least implicitly, recognized the existence of an alternative statutory authority available to lenders previously licensed under the Check-Cashing Lender Law. See H.B. 545, Section 4(B) (requiring a licensee under the Check-Cashing Lender Law who applied for a license under the Small Loan Act for the 2008 licensing period to pay only half the license fee required by
{1 34} In an attempt to paint the STLA as the exclusive statutory authority for payday-typе loans, amici in support of appellee argue that reading the MLA in pari materia with the STLA clarifies the General Assembly‘s intent. In the absence of statutory ambiguity, however, we may not resort to rules of statutory interpretation. See State ex rel. Wolfe v. Delaware Cty. Bd. of Elections, 88 Ohio St.3d 182, 186, 724 N.E.2d 771 (2000) (no need to apply interpretive rules to unambiguous statutory language); State v. Krutz, 28 Ohio St.3d 36, 37-38, 502 N.E.2d 210 (1986) (in pari materia rule applies only when a statute is ambiguous or the significance of its terms is doubtful).
{1 35} Beyond the absence of language in the STLA restricting MLA lenders in any way,
{1 36} The court of appeals’ supposition concerning the legislative intention behind the STLA, emphasized here by amici in support of appellee, cannot override the unambiguous statutory language of
{1 37} In over five years since the enactment of the STLA, the General Assembly has not taken any action to preclude the practice of payday-style lending under the other lending acts in effect prior to the STLA. As we have previously noted, legislative inaction in the face of knowledge of longstanding statutory interpretation may suggest a legislative intent to retain existing law. Maitland v. Ford Motor Co., 103 Ohio St.3d 463, 2004-Ohio-5717, 816 N.E.2d 1061, ¶ 26. Here, the General Assembly‘s acquiescence to the status quo contradicts the court of appeals’ determination that the General Assembly intended the STLA to be the exclusive legislation governing the type of short-term, single-installment loans at issue here.
Conclusion
{1 38} It is not the role of the courts to establish legislative policy or to second-guess policy choices the General Assembly makes. Kaminski v. Metal & Wire Prods. Co., 125 Ohio St.3d 250, 2010-Ohio-1027, 927 N.E.2d 1066, ¶ 61. If the General Assembly intended to preclude payday-style lending of any type except according to the requirements of the STLA, our determination that the legislation enacted in 2008 did not accomplish that intent will permit the General Assembly to make necessary amendments to accomplish that goal now. But the position thаt amici in support of appellee urge upon this court is fraught with legislative
{1 39} In conclusion, we hold that an “interest-bearing loan,” as defined in
{1 40} As a final matter, we note that we do not decide whether the loan described in the customer agreement complies in all respects with the MLA, but only whether appellant, as an MLA registrant, was entitled to make MLA-compliant loans unaffected by the STLA. For example, we do not decide whether the customer agreement‘s requirement of interest at 25 percent per annum, pursuant to
{1 41} For all these reasons, we reverse the judgment of the Ninth District Court of Appeals and remand this matter to the trial court for further proceedings consistent with this opinion.
Judgment reversed and cause remanded.
O‘DONNELL, PFEIFER, LANZINGER, KENNEDY, and O‘NEILL, JJ., concur.
O‘CONNOR, C.J., concurs in judgment only.
PFEIFER, J., concurring.
{1 42} I concur in the majority opinion. I write separately because something about the case doesn‘t seem right.
{1 43} There was great angst in the air. Payday lending was a scourge. It had to be eliminatеd or at least controlled. So the General Assembly enacted a bill, the Short-Term Lender Act (“STLA“),
Zeiger, Tigges & Little L.L.P., John W. Zeiger, and Stuart G. Parsell, for appellant.
Squire Sanders (US), L.L.P., Pierre H. Bergeron, and Cоlter L. Paulson, urging reversal for amicus curiae Ohio Chamber of Commerce.
Vorys, Sater, Seymour & Pease, L.L.P., and Frederick E. Mills, urging reversal for amicus curiae Ohio Council of Retail Merchants.
Sara Bruce, urging reversal for amicus curiae Ohio Automobile Dealers Association.
The Mirman Law Firm, L.L.C., and Joel H. Mirman, urging reversal for amici curiae Norfleet Rives and Daniel Oglevee.
Dreher Tomkies Scheiderer, L.L.P., Darrell L. Dreher, and Elizabeth L. Anstaett, urging reversal for amicus curiae Richard F. Keck.
Legal Aid Society of Cleveland, Julie K. Robie, Katherine B. Hollingsworth, and Thomas Mlakar; Ohio Poverty Lаw Center, L.L.C., and Linda Cook; Southeastern Ohio Legal Services and Melissa Benson; Legal Aid Society of Southwest Ohio, L.L.C., and Nicholas DiNardo; Advocates for Basic Legal Equality, Inc., and Stanley A. Hirtle; and Legal Aid Society of Columbus and Scott Torguson, urging affirmance for amici curiae Legal Aid Society of Cleveland, Legal Aid Society of Columbus, Community Legal Aid Services, Inc., Southeastern Ohio Legal Services, Legal Aid Society of Southwest Ohio, L.L.C., Advocates for Basic Legal Equality, Inc., Legal Aid of Western Ohio, Inc., Ohio Poverty Law Center, L.L.C., ProSeniors, Inc., Coalition on Homelessness and Housing in Ohio, and Catholic Conference of Ohio.
Cannizzaro, Bridges, Jillisky & Streng, L.L.C., and Amy E. Gullifer, urging affirmance for amici curiae Center for Responsible Lending and National Consumer Law Center.