concurring.
I agree with the majority's answer to the certified question. I offer additional support for their answer. In capsule form, *578the plaintiffs contend that the provision in subsection 508(7) 1 permitting a minimum finance charge of $33 per loan does not apply to a payday loan if the loan's annual interest rate exceeds the APR permitted under subsection 508(@). The "Payday Lenders" respond that this view renders subsection 508(7) surplusage. The plaintiffs counter that claim by saying that subsection 508(7) permits collection of a minimum $33 loan finance charge in the case of a prepaid loan, assuming the loan was for a time period for which a $33 loan finance charge would be lawful under subsection 508(2), but does not validate a minimum charge that is in excess of the subsection 508(2) limits calculated over the initial term of the loan.
As I see it, the issue is whether the $38 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 86% 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 $83 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, ie. 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) *579does not provide that the loan finance charge may be "the greater of the minimum finance charge" or the percentages allowed under (a) and (b) of that subsection. If it meant what the lenders contend in this case, that would be a much simpler way to provide a fixed dollar minimum loan charge irrespective of the term or amount of the loan. But subsection 508(2) does not do that. Rather, it allows the loan finance charge to be "the greater of" the percentages in (a) or (b). Separately, subsection 508(7) provides the amount of the minimum charge, in the case of a supervised loan,2 that is then incorporated into the provisions of subsection 210(2) dealing with prepayment.
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*580it risk are cited as economic reasons justifying payday loans. These justifications are somewhat inconsistent with those offered to explain the minimum charge in the first place. To return to the two-minute loan of $1, presumably that business would be highly profitable despite the large uncollectible receivables generated by assumption of any and all credit risks and extremely informal lending practices. At that rate of return a prudent lender would shovel money out the door as fast as it could and hope for the best on the costs of business represented by default rates, credit risks, poor documentation, ete. Although that example is unrealistic, the payday lending practices seem only quantitatively, not qualitatively, different from this extreme. The rates charged by the lender here-hundreds of percent per year-would seem to justify the same willy nilly lending.
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 TIUCCC 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.
. All statutory references are to Indiana Code 24-4.5-3.
. Indiana Code subsection 24-4.5-3-201(6) supplies the minimum charge to be incorporated into subsection 210(2) in the case of an unsupervised "consumer loan not made pursuant to a revolving loan account."