Prohibition on Loans of Less Than $3,000.00; Exceptions; Penalty for Violations

  1. Law
  2. Georgia Code
  3. Crimes and Offenses
  4. Payday Lending
  5. Prohibition on Loans of Less Than $3,000.00; Exceptions; Penalty for Violations

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  1. It shall be unlawful for any person to engage in any business, in whatever form transacted, including, but not limited to, by mail, electronic means, the Internet, or telephonic means, which consists in whole or in part of making, offering, arranging, or acting as an agent in the making of loans of $3,000.00 or less unless:
    1. Such person is engaging in financial transactions permitted pursuant to:
      1. The laws regulating financial institutions as defined under Chapter 1 of Title 7, the "Financial Institutions Code of Georgia";
      2. The laws regulating state and federally chartered credit unions;
      3. Article 13 of Chapter 1 of Title 7, relating to Georgia residential mortgages;
      4. Chapter 3 of Title 7, the "Georgia Installment Loan Act";
      5. Chapter 4 of Title 7, relating to interest and usury;
      6. Chapter 5 of Title 7, "The Credit Card and Credit Card Bank Act," including financial institutions and their assignees who are not operating in violation of said chapter; or
      7. Paragraph (2) of subsection (a) of Code Section 7-4-2 in which the simple interest rate is not greater than 16 percent per annum;
    2. Such loans are lawful under the terms of:
      1. Article 1 of Chapter 1 of Title 10, "The Retail Installment and Home Solicitation Sales Act";
      2. Article 2 of Chapter 1 of Title 10, the "Motor Vehicle Sales Finance Act"; or
      3. Part 5 of Article 3 of Chapter 12 of Title 44, relating to pawnbrokers;
    3. Subject to the provisions of paragraph (4) of subsection (b) of this Code section, such person is a bank or thrift chartered under the laws of the United States, a bank chartered under the laws of another state and insured by the Federal Deposit Insurance Corporation, or a credit card bank and is not operating in violation of the federal and state laws applicable to its charter; or
    4. Such loan is made as a tax refund anticipation loan. In order to be exempt under this paragraph the tax refund anticipation loan must be issued using a borrower's filed tax return and the loan cannot be for more than the amount of the borrower's anticipated tax refund. Tax returns that are prepared but not filed with the proper government agency will not qualify for a loan exemption under this paragraph.
  2. Subject to the exceptions in subsection (a) of this Code section, this Code section shall apply with respect to all transactions in which funds are advanced to be repaid at a later date, notwithstanding the fact that the transaction contains one or more other elements. Without limiting the generality of the foregoing, the advance of funds to be repaid at a later date shall be subject to this Code section, notwithstanding the fact that the transaction also involves:
    1. The cashing or deferred presentment of a check or other instrument;
    2. The selling or providing of an item, service, or commodity incidental to the advance of funds;
    3. Any other element introduced to disguise the true nature of the transaction as an extension of credit; or
    4. Any arrangement by which a de facto lender purports to act as the agent for an exempt entity. A purported agent shall be considered a de facto lender if the entire circumstances of the transaction show that the purported agent holds, acquires, or maintains a predominant economic interest in the revenues generated by the loan.
    1. A payday lender shall not include in any loan contract made with a resident of this state any provision by which the laws of a state other than Georgia shall govern the terms and enforcement of the contract, nor shall the loan contract designate a court for the resolution of disputes concerning the contract other than a court of competent jurisdiction in and for the county in which the borrower resides or the loan office is located.
    2. An arbitration clause in a payday loan contract shall not be enforceable if the contract is unconscionable. In determining whether the contract is unconscionable, the court shall consider the circumstances of the transaction as a whole, including but not limited to:
      1. The relative bargaining power of the parties;
      2. Whether arbitration would be prohibitively expensive to the borrower in view of the amounts in controversy;
      3. Whether the contract restricts or excludes damages or remedies that would be available to the borrower in court, including the right to participate in a class action;
      4. Whether the arbitration would take place outside the county in which the loan office is located or any other place that would be unduly inconvenient or expensive in view of the amounts in controversy; and
      5. Any other circumstance that might render the contract oppressive.
  4. Any person who violates subsection (a) or (b) of this Code section shall be guilty of a misdemeanor of a high and aggravated nature and upon conviction thereof shall be punished by imprisonment for not more than one year or by a fine not to exceed $5,000.00 or both. Each loan transaction shall be deemed a separate violation of this Code section. Any person who aids or abets such a violation, including any arbiter or arbitration company, shall likewise be guilty of a misdemeanor of a high and aggravated nature and shall be punished as set forth in this subsection. If a person has been convicted of violations of subsection (a) or (b) of this Code section on three prior occasions, then all subsequent convictions shall be considered felonies punishable by a fine of $10,000.00 or five years' imprisonment or both.

(Code 1981, §16-17-2, enacted by Ga. L. 2004, p. 60, § 3; Ga. L. 2005, p. 60, § 16/HB 95; Ga. L. 2020, p. 156, § 9/SB 462.)

The 2020 amendment, effective June 30, 2020, substituted "Georgia Installment Loan Act" for "Georgia Industrial Loan Act" in subparagraph (a)(1)(D).

Law reviews.

- For annual survey of law of business associations, see 56 Mercer L. Rev. 77 (2004).

JUDICIAL DECISIONS

Constitutionality.

- Trial court did not err in rejecting both the defendants' equal protection and vagueness challenges to O.C.G.A. § 16-17-1 et seq., after the defendants were charged with violating O.C.G.A. § 16-17-2, as both the defendants, as in-state lenders, were not similarly situated with out-of-state banks designated in O.C.G.A. § 16-17-2(a)(3), and hence were subject to state regulation restricting high interest rates on loans, whereas the out-of-state banks were not; the Georgia legislature had a rational basis for creating a class based on those in-state payday lenders who were subject to state regulation, and moreover the prohibition against payday loans in whatever form transacted was sufficiently definite to satisfy due process standards. Glenn v. State, 282 Ga. 27, 644 S.E.2d 826 (2007).

Construction concerning interstate commerce.

- Georgia Supreme Court concludes that the Payday Lending Act, O.C.G.A. § 16-17-1, specifically subsection (d), including the statement that payday lending does not encompass loans that involve interstate commerce, is merely a legislative finding of fact to which the Court is not bound; to exempt loans that involve interstate commerce from the prohibitions of the Act would create such a contradiction and absurdity as to demonstrate that the Georgia legislature did not mean it to create such a limitation. W. Sky Fin., LLC v. State of Ga. ex rel. Olens, 300 Ga. 340, 793 S.E.2d 357 (2016).

District court correctly found that forum selection clauses in class borrowers' payday lending agreements were unenforceable as against Georgia public policy in the borrowers' suit alleging usury violations because the Payday Lending Act (PLA), O.C.G.A. § 16-17-1 et seq., articulated a clear public policy against enforcing such clauses as a remedy for those aggrieved by predatory lenders, and interpreting the statute to exclude any loans involving interstate commerce would have made the PLA virtually meaningless. Davis v. Oasis Legal Fin. Operating Co., LLC, 936 F.3d 1174 (11th Cir. 2019).

Sale/leaseback transactions deemed illegal payday loans.

- Sale/leaseback transactions engaged in by consumer cash advance businesses violated the anti-payday lending statute, O.C.G.A. § 16-17-1 et seq., and the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., since the state proved that the purported lease back of personal property to the consumer was not based on the actual appraised market value of the personal property but directly corresponded to the loan amount; the state proved that the businesses were requiring customers to be released from the loan agreement by paying the principal amount advanced to the customers plus a 25 to 27 percent fee, which amounted to an annual percentage rate of 650 to 702 percent. Clay v. Oxendine, 285 Ga. App. 50, 645 S.E.2d 553 (2007), cert. denied, No. S07C1247, 2007 Ga. LEXIS 556 (Ga. 2007).

Limitations period.

- Supreme Court of Georgia is not persuaded that the Georgia legislature intended the period of limitation for bringing an enforcement action pursuant to the Payday Lending Act, O.C.G.A. § 16-17-1 et seq., to be governed by the one-year limitation period for forfeiture actions pursuant to the usury laws; instead, the Court concludes the remedies set forth in the Payday Lending Act are governed by the 20-year statute of limitation set forth in O.C.G.A. § 9-3-1. W. Sky Fin., LLC v. State of Ga. ex rel. Olens, 300 Ga. 340, 793 S.E.2d 357 (2016).

Summary judgment properly denied.

- In a class action suit seeking to hold a lender liable for payday loans, the trial court did not err in concluding that genuine issues of material fact existed as to whether the lender was the true lender of the loans made after May 14, 2004, because evidence was presented sufficient to create a genuine issue of material fact regarding whether the lender actually received only a 49 percent economic interest for the lender's services and even if the lender did so, whether the lender nevertheless, by contrivance, device, or scheme, attempted to avoid the provisions of O.C.G.A. § 16-17-2(a). Ga. Cash Am. v. Greene, 318 Ga. App. 355, 734 S.E.2d 67 (2012).

Funding agreements were investment contracts, not loans.

- After the defendants entered into separate funding agreements with the plaintiffs, the defendant's motion to dismiss a putative class action for damages premised on violations of the Georgia Industrial Loan Act (GILA), O.C.G.A. § 7-3-1 et seq., was properly granted, but the defendant's motion with regard to the Payday Lending Act (PLA), O.C.G.A. § 16-17-1 et seq., was improperly denied as the funding agreements were not loans, but rather were investments in the plaintiffs' litigation, because the repayment requirement was completely contingent upon the recovery of proceeds from the plaintiffs' related legal claims; thus, instead of being loans that were regulated by the GILA and the PLA, the funding agreements were investment contracts to which the GILA and the PLA did not apply. Cherokee Funding LLC v. Ruth, 342 Ga. App. 404, 802 S.E.2d 865 (2017), aff'd, 304 Ga. 574, 820 S.E.2d 704 (2018).

Cited in Davis v. State, 326 Ga. App. 279, 754 S.E.2d 815 (2014).


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