Fleet Finance, Inc. v. Jones

Benham, Justice,

dissenting.

I respectfully dissent because I believe that today this court takes a regrettably bold step backwards in spite of legislation, precedent, common sense and public policy to the contrary. Without a doubt chaos will follow in the wake of today’s decision, bringing financial ruin to thousands of households and Georgia will become a safe haven for those desirous of taking unfair advantage of unsuspecting borrowers.

In no way am I unmindful that the issue before the court is one which evokes tremendous emotions on both sides of the issue. However, emotions should be put aside and laws should be interpreted in a way so as not to favor creditor or debtor. The only way to keep the proper balance is for this court to be guided by the rule of law and its fair application to all parties involved. It is the pursuit of this balance that gives rise to my dissent.

1. The majority opinion correctly decides that the result it reaches is not dictated by Norris v. Sigler Daisy Corp., 260 Ga. 271 (392 SE2d 242) (1990); however, even though there is no reliance on Norris, some explanation of that decision is beneficial. Although Nor*235ris mentions spreading as a method to determine the interest rate charged, that was not the issue before the court. Rather, the issue before the court was whether origination fees, points and other charges should be considered as interest under the criminal usury statute, OCGA § 7-4-18. Norris held that such fees are interest and it went on to give an illustration of one of several methods used to figure interest, using the method most favorable to the creditor. It is abundantly clear that the language dealing with spreading in Norris was in no way intended to adopt a spreading approach since spreading was not the issue before the court, and there was preexisting precedent adopting a monthly approach (see Hartsfield Co. v. Fulwiler, 59 Ga. App. 194 (200 SE 309) (1938); Crowe v. State, 44 Ga. App. 719 (162 SE 849) (1931); and Jobson v. Masters, 32 Ga. App. 60 (122 SE 724) (1924)), which Norris neither cited nor disavowed or overruled. Therefore, the use of spreading should be considered only as illustrative of a point and should not be considered as instructive as to the method of computing interest.

2. The majority opinion bases its decision in part on the fact that OCGA § 7-4-18 is a criminal, rather than a civil, statute that is “subject to multiple reasonable interpretations.” In Div. 3, the majority states as follows:

With respect to this issue, we first note that § 7-4-18 is a criminal statute. It thus must be construed strictly against criminal liability and, if it is susceptible to more than one reasonable interpretation, the interpretation most favorable to the party facing criminal liability must be adopted. [Cits.] This rule applies even though a criminal statute is being construed in a civil context. [Cits.]
We conclude that the statute is subject to multiple interpretations and that strictly construing it, we must adopt the one most favorable to Fleet.

I agree with the majority that criminal statutes must be strictly construed and that the same rule applies even when the issue arises in a civil proceeding; however, I disagree with the majority’s conclusion that OCGA § 7-4-18 is ambiguous and thus in need of judicial construction.

The pertinent language of OCGA § 7-4-18 is as follows:

(a) Any person, company, or corporation who shall reserve, charge, or take for any loan or advance of money, or forbearance to enforce the collection of any sum of money, any rate of interest greater than 5 percent per month, either directly or indirectly, by way of commission for advances, discount, *236exchange, or the purchase of salary or wages; by notarial or other fees; or by any contract, contrivance, or device whatsoever shall be guilty of a misdemeanor; . . .
(b) This Code section shall not be construed as repealing or impairing the usury laws now existing but shall be construed as being cumulative thereof.

Focusing on the phrase “per month,” the majority concludes that OCGA § 7-4-18 is ambiguous. However, the Georgia Court of Appeals has several times had the opportunity to expound on the phrase “per month.” In Jobson v. Masters, supra at 65,6 the court stated:

In authorizing an interest charge of 3lA per cent per month that statute deals not with days, but with months; and the word “month,” as therein used, means a calendar month ....

In Hartsfield Co. v. Fulwiler, supra, the Court of Appeals revisited the Small Loan Act. In that case, the lender put forth the argument Fleet Finance is now making: that, despite the statutory language describing the interest rate as “per month,” the lender should be able to “spread” the interest rate over the life of the loan. In no uncertain terms, the appellate court responded:

Can the plaintiff . . . spread his interest rate over a period of [the term of the loan] and arbitrarily divide his interest up for each separate month of the [term] to suit himself, even though in some of these months he charges more than per cent per month, so long as at the expiration of the [term of the loan] he had not charged as interest for the entire [term] a sum total in excess of 3 Vz per cent per month? We think not. This would be allowing the plaintiff to arbitrarily treat the [term of the loan] as the unit of time for the computation of interest, whereas the statute says that the unit of time for the computation of interest is a month, not [the term of the loan], not a year, not five years, not any other time, but a month. [The statute] makes the unit of time for the computation of interest 3V2 per cent per month. No other unit of time for the computation of interest is mentioned in said section. [Emphasis supplied.] [Id. at 195.]

In Crowe v. State, supra, the court affirmed an appeal from a criminal *237conviction for violating § 7-4-18’s predecessor. In that case, Crowe charged and collected $3 per month for an advance of credit of $10, for 12 months. He was convicted of twelve counts of “taking interest greater than five per centum per month . . .” because he had charged and collected interest at a rate of thirty percent per month ($3 on a $10 debt) for twelve months.

For nearly 60 years, the appellate decisions of this State have consistently held that the phrase “per month,” when used in a statute setting an interest rate, meant exactly what it said: “per month.” The language of the statute is clear and unequivocal and is not subject to multiple reasonable interpretations. The statute specifically states that it prohibits “any rate of interest greater than 5 percent per month.” The only reference is to monthly interest. Where no ambiguity exists, there is no need to construe a statute.

I am fearful that the language in the majority opinion indicating that OCGA § 7-4-18 is subject to multiple reasonable interpretations will open the flood gates for challenges to be made to a host of other criminal statutes which are equally as specific as this one. Many criminal laws may very well be thrown into a state of uncertainty by the approach the majority opinion takes. If this court desires to change the law, then it should do so forthrightly and not hinge its decision on some purported ambiguity in the criminal usury statute which is written in a clear and unequivocal manner.

3.1 also take issue with the majority’s ultimate conclusion that appellant’s collection of nonrefundable, non-rebatable interest charges at closing does not constitute conduct made illegal by OCGA § 7-4-18: the reserving, charging, or taking for any loan or advance of money an interest rate that exceeds five percent per month. In the case at bar, Fleet Finance required the borrowers to pay at closing nonrefundable, non-rebatable interest fees ranging from 22 to 27 percent of the principal amounts of the borrowers’ loans. The parties stipulated that these prepaid finance charges were fully earned at closing. The majority endorses amortization of the prepaid interest charges over the life of the loan and can then conclude that the loans involved herein are not usurious under § 7-4-18. However,

[permitting a lender to charge nonrefundable fees upon the execution of a loan, yet amortize the charges over the life of the loan in order to come within a perceived sixty (60%) percent per annum interest limitation (5% per month x 12 mos.), is inherently unfair to the borrower and inconsistent with the purpose of the statute. [In re Evans, 130 B.R. 357, 360 (Bkrtcy. S.D. Ga. 1991).]

Since the prepaid interest accrued immediately and was nonrefund*238able and non-rebatable, it was applicable to the first month of the loan, resulting in an interest rate for the initial month of the loan in excess of five percent. See Hartsfield Co. v. Fulwiler, supra; Crowe v. State, supra; Jobson v. Masters, supra. See also In re Wright, 144 B.R. 943 (Bkrtcy. S.D. Ga. 1992); In re Dent, 130 B.R. 623 (Bkrtcy. S.D. Ga. 1991); In re Evans, supra; Moore v. Comfed Sav. Bank, 777 FSupp. 960 (S.D. Ga. 1991).

Decided June 14, 1993 Reconsideration denied June 25, 1993. Varner, Stephens, Wingfield & Humphries, J. Timothy White, Carolyn Thorn Thurston, King & Spalding, Frank C. Jones, William S. Duffey, Jr., William A. Trotter III, for appellants. Burnside, Wall, Daniel & Ellison, Thomas R. Burnside, Jr., Thompson & Smith, James M. Thompson, Larry I. Smith, Stephen E. Shephard, for appellees. Michael J. Bowers, Attorney General, Beverly B. Martin, Senior Assistant Attorney General, Lefkoff, Duncan, Grimes & Dermer, Joseph Lefkoff, Long, Aldridge & Norman, W. Stell Huie, Jones, Day, Reavis & Pogue, W. Rhett Tanner, Gregory R. Hanhorn, Knox & Zacks, Ted H. Clarkson, Dye, Tucker, Everitt, Wheale & Long, A. *239Rowland Dye, Thomas W. Tucker, John B¡ Long, Hull, Towill, Norman & Barrett, David E. Hudson, Lisa J. Krisher, Steven D. Caley, Paul E. Kauffmann, William J. Brennan, Jr., Arrington & Hollowell, Marvin S. Arrington, Randy C. Gepp, Gary W. Diamond, McCalla, Raymer, Padrick, Cobb & Nichols, Carol V. Clark, Arnall, Golden & Gregory, Hugh W. Gibert, amici curiae.

*2384. Fleet Finance resorted to “an unconventional and innovative method of charging for the use of money” (Moore v. Comfed Sav. Bank, supra at 961) at a rate substantially in excess of five percent per month. The majority opinion condemns the practices of appellant here; however, it states that it is the legislature’s job to correct these “interest-charging practices, which are widely viewed as exorbitant, unethical, and perhaps even immoral. . . .” To that statement I say the legislature has already done its job. If further legislative action is now needed, it is because this court has created confusion where none previously existed. What I seek to do is carry out the legislative mandate which has been clearly set forth since 1908: to declare as illegal those interest rates which exceed five percent per month.7 In doing so we can uphold and respect judicial precedent in place since 1938 and, at the same time, foster better business practices, encourage fair dealings, and heighten the level of professionalism in the financial community.

In Jobson, the court was interpreting the “Small Loan Act,” a statute passed in 1920 which authorized certain licensed persons to charge and collect interest at the rate of 3V2 percent per month on loans of $300 or less. See Ga. L. 1920, p. 215.

“It was the evident purpose of the legislature to make criminal a rate of interest which shocks the moral sense, and to protect the needy from a rate of interest exceeding 5 per .cent per month.” Bennett v. Lowry, 167 Ga. 347, 351 (145 SE 505) (1928). “Interest to the amount of 5 per cent per month certainly ought to satisfy the greediest of money lenders. . . .” King v. State, 136 Ga. 709, 715 (71 SE 1093) (1911).