Every licensee under this chapter may lend any sum of money not exceeding $3,000.00 for a period of 36 months and 15 days or less and may charge, contract for, collect, and receive interest and fees and may require the fulfillment of conditions on such loans as provided in this Code section:
provided, however, that any such insurance shall be reasonably related to the type and value of the property insured and to the amount and term of the loan and shall be obtained from an insurance company authorized to conduct such business in the State of Georgia and at rates lawfully filed by such company with the Commissioner of Insurance and through a regular insurance agent licensed by the Commissioner of Insurance; provided, further, that the amount of life, health, or accident insurance required as security for loans made under this chapter shall not exceed the amount of the loan, including charges, to be secured; and the premiums on such insurance required of the principal party obligated shall be limited to premiums reasonably based upon reliable actuarial experience and sound insurance practice; and the Commissioner of Insurance is authorized and directed to promulgate rules and regulations to effectuate this provision related to insurance obtained by the borrower in accordance with the spirit and intent thereof. It shall be the duty of the Commissioner of Insurance to determine and promulgate by rule and regulation the rates and maximum premiums permissible to be charged for life, health, and accident insurance required as security for a loan made under this chapter and to make regulations incident thereto necessary to effectuate the same; such premiums, when thus established and as changed from time to time in the manner aforesaid, shall be the maximum effective and permissible charges under this paragraph. Premiums paid or to be paid pursuant to the authority of this paragraph shall not constitute interest. The insurance company in turn may pay to the party writing the insurance policy sold in connection with the loan a fee or commission in an amount which is reasonable in relationship to the transaction and in no event in excess of the amount of fee or commission customarily paid within the industry where comparable insurance is sold in a transaction not involving credit, as determined by the Commissioner of Insurance;
(Ga. L. 1904, p. 79, §§ 10, 12; Civil Code 1910, §§ 3458, 3459, 3461; Ga. L. 1920, p. 215, §§ 13, 14; Code 1933, §§ 25-213, 25-214, 25-216, 25-301, 25-313, 25-315, 25-317; Ga. L. 1935, p. 394, § 1; Ga. L. 1955, p. 431, § 15; Ga. L. 1964, p. 288, § 5; Ga. L. 1975, p. 393, §§ 2, 3; Ga. L. 1977, p. 288, § 1; Ga. L. 1980, p. 509, §§ 1, 3; Code 1981, §7-3-14; Ga. L. 1981, p. 621, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 2001, p. 205, § 1; Code 1981, §7-3-11, as redesignated by Ga. L. 2020, p. 156, § 2/SB 462; Ga. L. 2020, p. 493, § 7/SB 429.)
The 2020 amendments. The first 2020 amendment, effective June 30, 2020, redesignated Code Section 7-3-14 as present Code Section 7-3-11, and substituted "lend" for "loan" near the beginning of the introductory paragraph; in the last sentence of paragraph (2), substituted "obtains" for "makes" and "from" for "with; rewrote the ending undesignated paragraph of paragraph (3), which read: "provided, however, that any such insurance shall be reasonably related to the type and value of the property insured and to the amount and term of the loan and shall be obtained from an insurance company authorized to conduct such business in the State of Georgia and at rates lawfully filed by such company with the Commissioner of Insurance and through a regular insurance agent licensed by the Commissioner of Insurance; provided, further, the amount of life, health, or accident insurance required as security for loans made under this chapter shall not exceed the amount of the loan, including charges, to be secured; and the premiums on such insurance required of the principal party obligated shall be limited to premiums reasonably based upon reliable actuarial experience and sound insurance practice; and the Commissioner is authorized and directed to promulgate rules and regulations to effectuate this provision in accordance with the spirit and intent thereof. It shall be the duty of the Commissioner from time to time under the foregoing direction, after public hearing in the manner provided in subsection (b) of Code Section 7-3-7, to determine and promulgate the rates and maximum premiums permissible to be charged for life, health, and accident insurance required as security for a loan made under this chapter and to make regulations incident thereto necessary to effectuate the same; such premiums, when thus established and as changed from time to time in the manner aforesaid, shall be the maximum effective and permissible charges under this paragraph. Premiums paid or to be paid pursuant to the authority of this paragraph shall not constitute interest. The insurance company in turn may pay to the party writing the insurance policy sold in connection with the loan a fee or commission in an amount which is reasonable in relationship to the transaction and in no event in excess of the amount of fee or commission customarily paid within the industry where comparable insurance is sold in a transaction not involving credit, as determined by the Commissioner;"; and substituted "Code Section 7-3-14" for "Code Section 7-3-17" in the second sentence of paragraph (5). The second 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted "provided, further, that the amount" for "provided, further, the amount" at the beginning of the second proviso of the undesignated ending paragraph in paragraph (3). See Editor's notes at the beginning of this chapter for applicability.
Editor's notes.- Former Code Section 7-3-11, concerning failure to begin business or suspending activities after license issued, was repealed by Ga. L. 2020, p. 156, § 2/SB 462, effective June 30, 2020. The former Code section was based on Ga. L. 1964, p. 288, § 3; Ga. L. 1989, p. 14, § 7.
Law reviews.- For article, "Acceleration Clauses in Georgia: Consumer Installment Contracts and the Federal Truth-In-Lending Act," see 27 Mercer L. Rev. 969 (1976). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).
JUDICIAL DECISIONSANALYSIS
General Consideration
Editor's notes.
- In light of subsections (g) and (h) of O.C.G.A § 7-3-29, decisions rendered prior to amendment of that section by Ga. L. 1980, p. 1784, §§ 1, 2 have been included in the annotations for this Code section.
Purpose.
- In enacting O.C.G.A. § 7-3-14 (now O.C.G.A. § 7-3-11), the General Assembly was concerned with the possible exorbitant and unmerited exaction of profits by the original lender in a renewal or refinancing. Although there is nothing to indicate that the General Assembly specifically considered the "anti-competition" problem, the clear thrust and underlying policy of this legislation is to provide some protection to debtors in small loan transactions, while there is no indication that solicitude for second lenders was even a minor policy consideration. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).
Policy consideration underlying usury laws.
- Purpose of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) is to define and prevent usury. One consideration underlying the usury laws is that a creditor should not avail oneself of the necessitous condition of one's debtor to exact burdensome and oppressive terms. Securities Inv. Co. v. Pearson, 111 Ga. App. 761, 143 S.E.2d 36 (1965).
Loan may not exceed three years.
- It is immaterial whether interest is charged for less than 24 months (now 36 months and 15 days); former Code 1933, § 25-315 plainly stated that the loan may not exceed two years (now three years, 15 days). Abrams v. Commercial Credit Plan, Inc., 128 Ga. App. 520, 197 S.E.2d 384 (1973).
Section prohibits loans to a borrower which exceed $3,000.00.
- When a statute provides that every licensee thereunder may loan any sum of money not exceeding $3,000.00 it means that the company cannot be a creditor to any particular person, firm, or corporation at any one time for an amount in excess of this maximum. It may make any number of loans, so long as the debtors are different persons. Securities Inv. Co. v. Pearson, 111 Ga. App. 761, 143 S.E.2d 36 (1965).
When state law is inconsistent with truth in lending law.- State law is inconsistent with requirements of truth in lending law if it requires creditor to make disclosures different from those required by federal law as to form, content, terminology, or time of delivery. Blalock v. Aetna Fin. Co., 511 F. Supp. 33 (N.D. Ga. 1980).
Use of out-of-state banks by loan companies.
- Loan companies were not entitled to declaratory judgment relief on the companies' claim that the companies were not in violation of the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., for certain practices the companies were allegedly engaged in because the companies were using an out-of-state bank to make the companies' loans through that bank, and, thus, were not subject to the Act as the industrial loan commissioner had not ruled on whether the practice of using an out-of-state bank exempted the companies from the Act, which meant the companies had not exhausted the administrative remedies before seeking judicial relief. USA Payday Cash Advance Ctrs. v. Oxendine, 262 Ga. App. 632, 585 S.E.2d 924 (2003).
Refinancing by original lender.
- In a refinancing by an original lender, when both sides must agree to an extension of credit and the lender presumably is not losing profits, there is no reason to depart from the general mandate of O.C.G.A. §§ 7-3-14 and7-3-15 (see now O.C.G.A. §§ 7-3-11 and7-3-12). The law already provides for "add on" interest, earned uniformly on the entire original amount of the loan, without regard to installment reductions in the outstanding balance. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).
Renewal by original lender less costly than by second lender.- Law distinguishes between original and second lenders with the result that a renewal or refinancing by an original lender is less costly than if effected by a second lender. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).
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).
Cited in Robbins v. Welfare Fin. Corp., 95 Ga. App. 90, 96 S.E.2d 892 (1957); Haire v. Allied Fin. Co., 99 Ga. App. 649, 109 S.E.2d 291 (1959); Robinson v. Colonial Disct. Co., 106 Ga. App. 274, 126 S.E.2d 824 (1962); Brown v. Quality Fin. Co., 112 Ga. App. 369, 145 S.E.2d 99 (1965); Coile v. Finance Co. of Am., 221 Ga. 863, 148 S.E.2d 328 (1966); Clark v. Liberty Loan Corp., 116 Ga. App. 213, 156 S.E.2d 535 (1967); Johnson v. Public Fin. Corp., 126 Ga. App. 557, 191 S.E.2d 334 (1972); Roberts v. Allied Fin. Co., 129 Ga. App. 10, 198 S.E.2d 416 (1973); Cullers v. Home Credit Co., 130 Ga. App. 441, 203 S.E.2d 544 (1973); Cook v. First Nat'l Bank, 130 Ga. App. 587, 203 S.E.2d 870 (1974); Sellers v. Alco Fin., Inc., 130 Ga. App. 769, 204 S.E.2d 478 (1974); Gray v. Quality Fin. Co., 130 Ga. App. 762, 204 S.E.2d 483 (1974); Douglas v. Dixie Fin. Corp., 139 Ga. App. 251, 228 S.E.2d 144 (1976); HFC v. Middlebrooks, 139 Ga. App. 224, 228 S.E.2d 204 (1976); Jones v. Community Loan & Inv. Corp., 544 F.2d 1228 (5th Cir. 1976); Wiggins v. Liberty Loan Corp., 143 Ga. App. 46, 237 S.E.2d 418 (1977); Childs v. Liberty Loan Corp., 144 Ga. App. 715, 242 S.E.2d 354 (1978); Southern Disct. Co. v. Ector, 152 Ga. App. 244, 262 S.E.2d 457 (1979); Gresham v. Termplan, Inc., 480 F. Supp. 149 (N.D. Ga. 1979); Shelley v. Liberty Loan Corp., 153 Ga. App. 47, 264 S.E.2d 537 (1980); Chrysler Credit Corp. v. Cooper, 7 Bankr. 537 (Bankr. N.D. Ga. 1980); Moore v. HFC, 160 Ga. App. 339, 287 S.E.2d 72 (1981); Gresham v. Termplan, Inc., 648 F.2d 312 (5th Cir. 1981); State Farm Mut. Auto. Ins. Co. v. Bates, 542 F. Supp. 807 (N.D. Ga. 1982); Aetna Fin. Co. v. Brown, 172 Ga. App. 537, 323 S.E.2d 720 (1984); Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011).
Interest
Former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) was mandatory as to interest on contracts repayable over more than 18 months. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642, 53 L. Ed. 2d 250 (1977).
Advance discounts of interest.
- O.C.G.A. § 7-3-14 (see now O.C.G.A. § 7-3-11) does not provide a flexibility period for loans qualifying for the advance discount and a loan due in 18 months and 15 days exceeds the limit authorized by the statute. United States Life Credit Corp. v. Johnson, 161 Ga. App. 864, 290 S.E.2d 280 (1982).
Note on which interest was deducted in advance void.
- When in suit by licensee against borrower the note attached to the petition shows that the loan was for a period exceeding 18 months and shows on the loan's face that interest was deducted in advance rather than added to the loan, such deduction resulted in a charge exceeding that authorized in former Code 1933, § 25-315 and rendered the note void. Community Fin. Co. v. Lloyd, 114 Ga. App. 230, 150 S.E.2d 845 (1966).
Interest included in loan cannot be discounted in advance.
- When the maximum interest for the 24-month note had already been calculated and included in the loan it could not be discounted in advance, and an attempt to accelerate and claim unearned interest on otherwise unmatured installments was usurious and an instrument authorizing its collection is void. Lawrimore v. Sun Fin. Co., 131 Ga. App. 96, 205 S.E.2d 110 (1974) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Starting point of a loan is the date of execution regardless of when the first payment is made or when the interest begins to run; a lender could not legally discount interest on a loan in advance under O.C.G.A. § 7-3-14 (now O.C.G.A. § 7-3-11), though the loan contract required repayment over an 18-month period, when the first monthly installment was due more than a month after the execution of the loan. Brown v. Termplan, Inc., 693 F.2d 1047 (11th Cir. 1982).
Former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) allowed interest to be charged only on an amount that was borrowed. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Lender's options and duty regarding collection of loan fee and basic interest.
- Lender has option with respect to how loan fee is collected and with respect to how basic interest is collected on loans repayable in 18 months or less, but must add on interest for loans repayable over a period in excess of 18 months. In this latter instance the basic interest fee will never be required to be denoted as prepaid finance charge, while in the two former instances it will depend on how lender collects the loan fee and/or basic interest. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642, 53 L. Ed. 2d 250 (1977).
Loan violated section.
- Loan instrument violated former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) by calculating and including more than the maximum interest which could be charged for a 24-month (now 36-month) period. Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353, 217 S.E.2d 613 (1975).
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 (now Georgia Installment 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 them 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).
Maximum interest rate calculated on total amount financed plus loan fee is not usurious. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642, 53 L. Ed. 2d 250 (1977).
Collection of unearned interest is not per se improper under Georgia law. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978).
Notes complying with section.
- Notes providing for pro rata rebate of interest upon default and acceleration comply with O.C.G.A. § 7-3-14 (now O.C.G.A. § 7-3-11). Scroggins v. Whitfield Fin. Co., 157 Ga. App. 655, 278 S.E.2d 411 (1981).
Loan Fee
Limitation on loan fees.
- There is a limit on the loan fees an original lender can charge when part or all of a prior loan is repaid and has made no similar provision for a second lender. There is no reason to believe that the General Assembly evaluated its priorities in a different fashion in enacting O.C.G.A. § 7-3-14 (now O.C.G.A. § 7-3-11). Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).
Misleading listing in disclosure statement.- Disclosure statement with two identical subheadings labelled "LOAN FEE," under which two different amounts were listed, violated the federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., because there was no indication that the prepaid finance charge was the total of these two items. Varner v. Century Fin. Co., 738 F.2d 1143 (11th Cir. 1984).
Lender is not obligated to disclose the sum of four and eight percent fees. Carroll v. Termplan, Inc., 476 F. Supp. 727 (N.D. Ga. 1979).
Paragraph (2) is permissive as to time loan fee is collected and the repayment period is immaterial. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642, 53 L. Ed. 2d 250 (1977).
Method of determination.
- While O.C.G.A. § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) provides a two-tier computation for determining the maximum allowable loan fee, nothing requires that the loan fee actually charged be determined by this method, nor is a licensee required to disclose the method of computing the loan fee. Briscoe v. First Nat'l Bank & Trust Co., 167 Ga. App. 886, 307 S.E.2d 767 (1983).
Fee exceeded that allowed by act.
- Including interest in computational base used to calculate loan fee on note of more than 18 months results in fee exceeding that permitted by this act. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Lender may charge interest on loan fees.
- Since lender is entitled to fees for making loan, and does not receive the fees at that time, but by means of installment payments during the term of the loan, the lender is entitled to charge interest thereon. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Interest on amount borrowed not includable in computational base for loan fee.
- Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., does not permit lenders to charge borrowers interest on interest by including interest on an amount borrowed in a computational base used to calculate the loan fee to be paid by borrowers. Sanders v. Liberty Loan Corp., 153 Ga. App. 859, 267 S.E.2d 286 (1980), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Fee authorized under former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) constitutes prepaid finance charge within meaning of Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., and Regulation Z, 12 C.F.R. § 226.8. Grubb v. Oliver Enters., Inc., 358 F. Supp. 970 (N.D. Ga. 1972).
Loan fees must be disclosed.- In Georgia, a consumer lender may exact loan fees of not more than eight percent of first $600.00 of face amount of contract plus four percent of any excess, and such charges, if made, must be disclosed in truth in lending disclosure statements as a prepaid finance charge. Ector v. Southern Disct. Co., 499 F. Supp. 284 (N.D. Ga. 1980).
Acceleration clause not providing for rebate of unearned charges is usurious and note, security deed, and foreclosure thereunder are null and void. Clyde v. Liberty Loan Corp., 249 Ga. 78, 287 S.E.2d 551 (1982).
Face Amount of Contract
Face amount of contract means amount borrower must borrow to obtain amount desired. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980); Carter v. Swift Loan & Fin. of Columbus, Inc., 148 Ga. App. 358, 251 S.E.2d 379 (1978), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660, 261 S.E.2d 649 (1979), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980); Ector v. Southern Disct. Co., 484 F. Supp. 654 (N.D. Ga. 1979).
Face amount of contract means amount borrowed in both paragraphs (1) and (2) of former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11). FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Face amount of contract may be determined by adding together amounts of all constituent discounted elements that the debtor must borrow in order to have the amount the debtor desires in hand or, assuming all elements have been calculated properly, by taking the final payback figure and subtracting therefrom the amount of all nondiscounted elements. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Calculation of face amount of contract or amount borrowed.
- Face amount of contract or amount borrowed may be determined by striking from total payback figure amount of interest to be paid under contract and amount of monthly maintenance charge. Carter v. Swift Loan & Fin. of Columbus, Inc., 148 Ga. App. 358, 251 S.E.2d 379 (1978), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660, 261 S.E.2d 649 (1979).
Phrase "FAC, face amount of contract" has the same meaning in both O.C.G.A. § 7-3-14(1) and (2) (now O.C.G.A. § 7-3-11) which is amount necessary for borrower to borrow in order to obtain amount desired. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Amount of loan fee is a constituent element of FAC, face amount of contract under both O.C.G.A. § 7-3-14(1) and (2) (now O.C.G.A. § 7-3-11). Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Amount borrowed in discount loans includes principal and interest.
- Amount borrowed equals total payback figure only for discount loans in which both principal and interest are borrowed. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Amount necessary to borrow does not include interest.
- When note is for more than 18 months, the amount necessary for the borrower to borrow does not include interest on the note. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Interest on Georgia Industrial Loan Act (now Georgia Installment Loan Act) loan of greater than 18 months is not discounted and it is therefore not necessary for the debtor to borrow nondiscounted interest in order to obtain the amount the debtor desires in hand; thus, the amount of that nondiscounted interest does not become an element of computational (FAC) face amount of contract base from which either interest or a loan fee is calculated. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Interest discounted in advance is computational element.
- When interest on Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., loan of 18 months or less is discounted or deducted in advance and it therefore becomes necessary for the debtor to "borrow" discounted interest in order to obtain total amount the debtor desires in hand, amount of that discounted interest becomes element of computational (FAC) face amount of contract base from which interest under O.C.G.A. § 7-3-14(1) (now O.C.G.A. § 7-3-11(1)) and a loan fee under § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) are derived. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
When loan is repayable in 18 months or less and when interest is discounted, the "face amount" of the contract is also synonymous with the total payback amount of the loan. Briscoe v. First Nat'l Bank & Trust Co., 167 Ga. App. 886, 307 S.E.2d 767 (1983).
Interest is not borrowed on nondiscount loans.
- Interest is not borrowed on nondiscount loans; thus, amount borrowed equals the total payback figure minus interest. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401, 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980).
Maintenance charge is not element of computational face amount.
- Maintenance charge under O.C.G.A. § 7-3-14(5) (now O.C.G.A. § 7-3-11(5)) "for each month in the term of the loan contract" is not a discountable element which can be deducted in advance so as to constitute an amount which the debtor has to borrow in order to obtain an amount the debtor desires in hand and, therefore, it does not become an element of computational face amount of contract base. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Inclusion of nondiscountable interest in face amount of contract computational base results in excessive loan fee. Lee v. Beneficial Fin. Co., 159 Ga. App. 205, 282 S.E.2d 770 (1981).
Acceleration of Interest
Acceleration clauses are not per se invalid. Bragg v. HFC, 140 Ga. App. 75, 230 S.E.2d 55 (1976).
Acceleration clause providing for any required refund of interest is valid.
- Language of loan contract to effect that default will render entire sum remaining at once due and payable is objectionable as permitting recovery of unearned interest; when, however, a complementing clause is added, limiting accelerated sum to such amount less any required refund of interest, the usurious objection no longer applies. Bragg v. HFC, 140 Ga. App. 75, 230 S.E.2d 55 (1976).
When acceleration clause renders note usurious, note is unenforceable.
- If effect of an acceleration clause is to render note as a whole usurious, the note is unenforceable in Georgia courts. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Acceleration clause which includes unearned interest voids the contract.
- Acceleration clause in Industrial Loan Act (now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq., contract which upon default permits collection of entire balance due on contract without excluding unearned interest is violative of act and voids contract. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389, 268 S.E.2d 433 (1980) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
When acceleration of a debt, combined with a claim of unearned interest, renders obligation usurious, the obligation becomes void under provisions of the Industrial Loan Act (now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Provision rendering remaining installments immediately due and payable renders obligation usurious.
- Provision rendering all remaining installments at once due and collectible is a contract for collection of usurious interest which voids the obligation. Allen v. Alco Fin., Inc., 131 Ga. App. 545, 206 S.E.2d 547 (1974) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Acceleration clause enforceable unless rendering note usurious.
- Acceleration clause not providing for rebate of unearned interest is enforceable absent finding that clause, as applied, renders note violative of state usury laws. Once such finding has been made, however, the note becomes void. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Usurious collection voids obligation whether or not creditor attempts enforcement.
- Provision in note authorizing usurious collection alone is sufficient to void obligation, even when creditor does not attempt enforcement. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Acceleration clause which includes unearned interest is void.
- Under Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., loan agreement which provided that the lender, under certain conditions, could accelerate payment of entire unpaid balance of loan, including unearned interest, is void, not merely voidable; lender has no legally enforceable right to recover either principal or interest. Pinkett v. Credithrift of Am., Inc., 430 F. Supp. 113 (N.D. Ga. 1977) (decided prior to 1980 amendment of § 7-3-29 (now O.C.G.A. § 7-3-50)).
Lender may not accelerate unearned interest if the lender wishes to recover principal and earned interest. Bragg v. HFC, 140 Ga. App. 75, 230 S.E.2d 55 (1976) (decided prior to 1980 amendment of § 7-3-29).
Insurance
Insurance charges authorized under former Code 1933, § 25-315(3) (see now O.C.G.A. § 7-3-11) do not render loan usurious. McDonald v. G.A.C. Fin. Corp., 115 Ga. App. 361, 154 S.E.2d 825 (1967).
Subparagraph (3)(B) applies only to credit insurance.
- O.C.G.A. § 7-3-14(3)(B) (now O.C.G.A. § 7-3-11) applies only to insurance purchased "as security on any loan," i.e., credit insurance. Dixon v. S & S Loan Serv. of Waycross, Inc., 754 F. Supp. 1567 (S.D. Ga. 1990).
Section does not prohibit writing of level term life insurance on loans made under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Mason v. Service Loan & Fin. Co., 128 Ga. App. 828, 198 S.E.2d 391 (1973).
Effect of accelerating debt on insurance coverage.
- In the absence of any requirement that a lender cancel credit insurance coverage upon acceleration of a debt, there is no violation of the Industrial Loan Act (now Georgia Installment Loan Act) (ILA), O.C.G.A. § 7-3-1 et seq., when a lender, pursuant to properly drafted loan documents and in accord with the ILA, accelerates a debt but does not refund insurance premiums on insurance coverage still in effect. Williams v. Charter Credit Co., 179 Ga. App. 721, 347 S.E.2d 635 (1986).
Late Charges
Former Code 1933, § 25-315(4) (see now O.C.G.A. § 7-3-11) specified the only penalty which may be collected for late payment. Lewis v. Termplan, Inc., 124 Ga. App. 507, 184 S.E.2d 473 (1971).
OPINIONS OF THE ATTORNEY GENERAL
Former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11(1)) applied to banks since the statute set the maximum loan fee by regulating when the fee may be charged. 1980 Op. Att'y Gen. No. 80-116.
Section incorporated into National Bank Act and Chapter 7-1 of this title.
- Effect of 12 U.S.C. § 85 and former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-292) was incorporation by reference into National Bank Act and Financial Institutions Code (see now O.C.G.A. § 7-1-1 et seq.) respectively, those provisions of this chapter dealing with interest and fees which could be charged on certain designated types of loans. 1979 Op. Att'y Gen. No. 79-33.
Bank may again charge loan fees authorized by O.C.G.A. § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) if loan with maturity date in excess of six months made pursuant to the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., is renewed after the loan has been in existence in excess of six months. 1982 Op. Att'y Gen. No. 82-43.
Legislative intent regarding borrower's insurance.
- Language of former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) made clear the legislative intent that insurance must be for the borrower's benefit; the borrower's insurance would, therefore, cover not only the amount owing on the loan, but also any equity the borrower might have in the property insured. 1963-65 Op. Att'y Gen. p. 131.
Licensee cannot charge borrower for insurance policy-writing fee.
- No statutory provision permits licensee to charge borrower for policy-writing fee; language of former Code 1933, § 25-315(3) clearly prohibited any charge in connection with insurance obtained as security on a loan other than actual established premium, and former Code 1933, §§ 25-214, 25-216, and 25-313 (see now O.C.G.A. § 7-3-12) clearly prohibits any charges other than those set out in this chapter. 1963-65 Op. Att'y Gen. p. 428.
Late charge not considered interest and fees.
- Late charge under former Code 1933, § 25-315(4) (see now O.C.G.A. § 7-3-11), being a penalty assessment for failure to meet payment when due, was not considered as interest and fees and was not limited by 5 percent per month maximum which can be charged as interest and fees under former Code 1933, § 25-315(1) and (2). 1957 Op. Att'y Gen. p. 158.
"Loan" synonymous with "note."- "Loan" in this context should be interpreted as synonymous with "note," and thus two 90-day periods may not be cumulated to allow additional loan fee on second renewal. 1980 Op. Att'y Gen. No. 80-116.
Interest charge for partial 30-day periods permissible.- So long as interest of 10 percent per annum is not exceeded, banks may charge interest for partial 30-day periods. 1980 Op. Att'y Gen. No. 80-116.
If a second imposition of fee permitted by O.C.G.A. § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) would result in a violation of usury provisions of O.C.G.A. § 7-4-18 such a second imposition would be illegal. 1982 Op. Att'y Gen. No. 82-43.
Calculation of refund of unearned maintenance charges.
- Calculation of a refund of unearned maintenance charges in connection with the prepayment or refinancing of a loan transaction is to be determined by the "Rule of 78s" as required by O.C.G.A. § 7-3-14(5) (now O.C.G.A.7-3-11). 1990 Op. Att'y Gen. No. 90-45.
RESEARCH REFERENCES
Am. Jur. 2d.
- 44B Am. Jur. 2d, Interest and Usury, § 156 et seq. 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 1 et seq., 46 et seq.
C.J.S.- 47 C.J.S., Interest and Usury; Consumer Credit, §§ 428 et seq., 436, 444, 445.
ALR.
- Usury: expenses or charges incident to loan of money, 21 A.L.R. 797; 53 A.L.R. 743; 63 A.L.R. 823; 105 A.L.R. 795; 52 A.L.R.2d 703.
Construction, application, and effect of provisions of small loan acts regarding fees, charges, in addition to interest, 143 A.L.R. 1323.
Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.
Usury: expenses or charges incident to loan of money, 52 A.L.R.2d 703.
Taking or charging interest in advance as usury, 57 A.L.R.2d 630.
Construction and application of provision of small loan statute limiting time period for loan contracts, 58 A.L.R.2d 1263.
What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.
Right of holder of commercial paper to interest or finance charges applicable to period after acceleration of maturity of obligation because of debtor's default, 63 A.L.R.3d 10.
Validity and construction of provision imposing "late charge" or similar exaction for delay in making periodic payments on note, mortgage, or installment sale contract, 63 A.L.R.3d 50.
Reformation of usurious contract, 74 A.L.R.3d 1239.
Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort action, 40 A.L.R.4th 147.
Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.