(Ga. L. 1904, p. 79, § 14; Ga. L. 1920, p. 215, §§ 13, 17, 18; Code 1933, §§ 25-217, 25-313, 25-317, 25-9902; Ga. L. 1935, p. 394, § 2; Ga. L. 1955, p. 431, § 20; Ga. L. 1978, p. 1033, § 1; Ga. L. 1980, p. 1784, §§ 1, 2; Code 1981, §7-3-29; Ga. L. 1989, p. 14, § 7; Ga. L. 2004, p. 60, § 1; Code 1981, §7-3-50, as redesignated by Ga. L. 2020, p. 156, § 2/SB 462.)
The 2020 amendment, effective June 30, 2020, redesignated former Code Section 7-3-29 as present Code Section 7-3-50, and rewrote this Code section, which read: "(a) Any person who shall make loans under this chapter without first obtaining a license or who shall make a false statement under oath in an application for a license under this chapter or who shall do business while the license of such person under this chapter is suspended or revoked shall be guilty of a misdemeanor; and any contract made under this chapter by such person shall be null and void.
"(b) Except as otherwise provided in this chapter, any duly licensed lender who fails to comply with this chapter in connection with a loan under this chapter shall be liable to the borrower or borrowers thereon for a single penalty in an amount equal to twice the amount of all interest and loan fees charged said borrower or borrowers on the most recent loan made by the lender to said borrower or borrowers; provided, however, that the liability under this subsection shall not be less than $100.00.
"(c) A lender duly licensed under this chapter has no liability under subsection (b) of this Code section if, within 15 days after discovering an error or violation and prior to the institution of an action under this Code section or the receipt of written notice of the error or violation, the lender notifies the person concerned of the error or violation and makes whatever adjustments in the appropriate account are necessary to ensure that such person will not be required to pay charges in excess of those permitted by this chapter.
"(d) A lender may not be held liable in any action brought under this Code section for a violation of this chapter if the lender shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide clerical or typographical error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.
"(e) A claim of violation of this chapter against a duly licensed lender may be asserted in an individual action only and may not be the subject of a class action under Code Section 9-11-23 or any other provision of law. A claim of violation of this chapter against an unlicensed lender may be asserted in a class action under Code Section 9-11-23 or any other provision of law.
"(f) If a contract is made in good faith in conformity with an interpretation of this chapter by the appellate courts of this state or in a rule or regulation officially promulgated by the Commissioner after public hearings, no provision in this Code section imposing any penalty shall apply, notwithstanding that, after such contract is made, such rule or regulation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
"(g) Any lender duly licensed under this chapter who shall knowingly and willfully with intent to defraud a borrower make a contract in violation of this chapter shall be guilty of a misdemeanor, and the contract so made shall be null and void.
"(h) No person may, more than one year after April 9, 1980, assert or contend offensively or defensively in any court that a contract predating April 9, 1980, is null and void or is illegal, void, invalid, or not good consideration for a renewal or refinanced contract. This subsection is a statute of repose and limitation, barring such remedies, and only such remedies, as of that date; provided, however, that after that date a borrower or borrowers on a contract predating April 9, 1980, shall be entitled to the appropriate penalty provided under subsections (a) through (g) of this Code section, but such right to said penalty shall not in any way adversely affect the validity of any renewal or refinanced contract." See Editor's notes at the beginning of this chapter for applicability.
Law reviews.- For article surveying 1976 to 1977 developments in application of the Industrial Loan Act (now Georgia Installment Loan Act), see 29 Mercer L. Rev. 41 (1977). For article surveying Georgia cases in the area of trial practice and procedure from June 1977 through May 1978, see 30 Mercer L. Rev. 239 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article surveying Georgia cases in the area of commercial law from June 1979 through May 1980, see 32 Mercer L. Rev. 11 (1980). For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982). For article on 2004 amendment of this Code section, see 21 Ga. St. U.L. Rev. 59 (2004). For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821, 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974).
Cross references.- Illegal payday loans, § 16-17-1 et seq.
JUDICIAL DECISIONSANALYSIS
General Consideration
Editor's notes.
- In light of the similarity of the statutory provisions, and in light of subsection (h) of O.C.G.A. § 7-3-50, decisions rendered prior to amendment of this Code section by Ga. L. 1980, p. 1784, §§ 1, 2 have been included in the annotations for this Code section.
Construction.- This law, being in derogation of common law, must be strictly construed. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).
Georgia courts have strictly construed the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) since its provisions are in derogation of common law. Moore v. Beneficial Fin. Co., 158 Ga. App. 535, 281 S.E.2d 293 (1981).
Forfeitures and penalties are not favored and statutes relating to them must be strictly construed, and in manner as favorable to person against whom forfeiture or penalty would be exacted as is consistent with fair principles of interpretation. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).
Section does not discourage judicial or other interpretation of chapter.
- O.C.G.A. § 7-3-29 (now O.C.G.A. § 7-3-50) evinces a recognition on the part of the General Assembly that the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., is ambiguous in certain sections. It in no way discourages judicial or other valid authority from seeking interpretations of that Act which further its purpose, despite prior inconsistent interpretations. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).
Contracts violating act are null and void.- As originally enacted, this section provided that contracts violating this act were null and void. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).
The 1978 additions to the penalty provision did not eliminate the null and void language. In describing the purpose of these additions, the General Assembly stated that the former provisions (see now O.C.G.A. § 7-3-50(f)) were intended to exempt from certain penalties contracts made in reliance upon certain rules, regulations, or interpretations of the act. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).
Legislative intent.
- Payday Lending Act, 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., specifically O.C.G.A. § 7-3-50, establish the Georgia General Assembly's intent to preserve class actions as a remedy for those aggrieved by payday lenders. Enforcing the class action waiver in this contractual action would undermine the purpose and spirit of Georgia's statutory scheme; therefore, the class action waiver was unenforceable. Davis v. Oasis Legal Fin. Operating Co., LLC, 936 F.3d 1174 (11th Cir. 2019).
Recovery of principal in action on "null and void" loan contract.
- Lender as licensee may recover principal amount of loan in action solely on loan contract when such contract is considered "null and void" under O.C.G.A. § 7-3-50 as a result of inclusion of usurious amount of interest even though a lender does not seek recovery of principal in cause of action for money had and received. United States Life Credit Corp. v. Johnson, 248 Ga. 852, 287 S.E.2d 1 (1982).
"Null and void" provision does not work penalty of forfeiture of principal as well as interest. Moore v. Beneficial Fin. Co., 158 Ga. App. 535, 281 S.E.2d 293 (1981).
Former provisions (see now O.C.G.A. § 7-3-50(f)) did not bear upon method of enforcement but rather conforms with general purpose of penalty provision to deter lender abuse. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).
Chapter is applicable to loan contracts, not merely notes.
- Statutory language of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) refers to loan contracts and not merely notes. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).
Subsection (c) of section cannot be retroactively applied to sanction loan fees which are excessive and which were contained in loan contracts made before the March 14, 1978, effective date of section. 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).
Interaction of Industrial Loan Act and Truth-in-Lending Act.
- Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) penalties do not condition or limit application of federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).
Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., provide separate remedies for separate wrongs. The former limits what a lender subject to its provisions can charge for use of its money; the latter is designed to penalize and deter an independent wrong arising from nondisclosure. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).
Lenders violating Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., are subject to penalties of both. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).
Charge of notary fee is a violation of Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and entitles borrower to have contract declared null and void. Motor Fin. Co. v. Harris, 150 Ga. App. 762, 258 S.E.2d 628 (1979).
Violation of chapter's regulations subject lender to administrative penalties; loan remains enforceable.
- Loans which violate the Industrial Loan Act (see now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., were void under former Code 1933, §§ 25-217, 25-313, 25-317, and 25-9902 (see now O.C.G.A. § 7-3-50); United States Courts of Appeals have held that violations of the regulations subject lender only to administrative penalties, and that the loan remains enforceable. Robinson v. Central Loan & Fin. Corp., 609 F.2d 170 (5th Cir. 1980) (decided prior to 1980 amendment of this section).
Borrower may only recover money paid which exceeds actual cash advance.
- Borrower may only recover moneys paid to the lender under contracts violative of the Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., in excess of cash actually advanced to the borrower. Motor Fin. Co. v. Harris, 150 Ga. App. 762, 258 S.E.2d 628 (1979) (decided prior to 1980 amendment of this section).
No recovery permitted on loan which is usurious on face.
- If note or loan contract made under Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) shows on its face that it is infected with usury it is absolutely void and there can be no recovery on it. Robinson v. Colonial Disct. Co., 106 Ga. App. 274, 126 S.E.2d 824 (1962) (decided prior to 1980 amendment of this section).
Amendment of complaint.
- When creditor demanded usurious interest, amendment to the creditor's complaint does not erase objection of usuriousness. Liberty Loan Corp. v. Childs, 140 Ga. App. 473, 231 S.E.2d 352 (1976), cert. dismissed, 239 Ga. 220, 236 S.E.2d 373 (1977).
Good faith offer by lender suing on loan which violated Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) to amend complaint to correct excessive time price differential had no effect on penalty provisions. Douglas v. Dixie Fin. Corp., 139 Ga. App. 251, 228 S.E.2d 144 (1976).
Forfeiture of interest, but not principal.
- Lender who violates the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) shall forfeit all interest and other charges, but not the principal sum advanced to borrower. Southern Disct. Co. v. Ector, 246 Ga. 30, 268 S.E.2d 621 (1980); United States Life Credit Corp. v. Johnson, 161 Ga. App. 864, 290 S.E.2d 280 (1982).
Forfeiture of interest and other charges may be avoided. Southern Disct. Co. v. Ector, 246 Ga. 30, 268 S.E.2d 621 (1980) (decided prior to 1980 amendment of this section).
Cited in Securities Inv. Co. v. Pearson, 111 Ga. App. 761, 143 S.E.2d 36 (1965); 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); Community Fin. Co. v. Lloyd, 114 Ga. App. 230, 150 S.E.2d 845 (1966); Colter v. Consolidated Credit Corp., 115 Ga. App. 408, 154 S.E.2d 713 (1967); Colter v. Consolidated Credit Corp., 116 Ga. App. 520, 157 S.E.2d 812 (1967); Lewis v. Termplan, Inc., 124 Ga. App. 507, 184 S.E.2d 473 (1971); Abrams v. Commercial Credit Plan, Inc., 128 Ga. App. 520, 197 S.E.2d 384 (1973); Patman v. General Fin. Corp., 128 Ga. App. 836, 198 S.E.2d 371 (1973); Mason v. Service Loan & Fin. Co., 128 Ga. App. 828, 198 S.E.2d 391 (1973); Roberts v. Allied Fin. Co., 129 Ga. App. 10, 198 S.E.2d 416 (1973); Garrett v. G.A.C. Fin. Corp., 129 Ga. App. 96, 198 S.E.2d 717 (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); Lawrimore v. Sun Fin. Co., 131 Ga. App. 96, 205 S.E.2d 110 (1974); Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282, 205 S.E.2d 526 (1974); G.A.C. Fin. Corp. v. Hardy, 232 Ga. 632, 208 S.E.2d 453 (1974); Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353, 217 S.E.2d 613 (1975); Carreker v. National Diversified, Inc., 135 Ga. App. 511, 218 S.E.2d 117 (1975); Hughes Motor Co. v. First Nat'l Bank, 136 Ga. App. 295, 220 S.E.2d 782 (1975); HFC v. Raven, 136 Ga. App. 424, 221 S.E.2d 488 (1975); Dukes v. HFC, 137 Ga. App. 474, 224 S.E.2d 107 (1976); Moore v. American Fin. Sys., 236 Ga. 610, 225 S.E.2d 17 (1976); Credithrift of Am., Inc. v. Mason, 143 Ga. App. 793, 240 S.E.2d 158 (1977); Southern Disct. Co. v. Heide, 144 Ga. App. 481, 241 S.E.2d 599 (1978); Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190, 243 S.E.2d 266 (1978); Shaver v. Aetna Fin. Co., 148 Ga. App. 740, 252 S.E.2d 684 (1979); Sapp v. ABC Credit & Inv. Co., 243 Ga. 151, 253 S.E.2d 82 (1979); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660, 261 S.E.2d 649 (1979); Layton v. Liberty Loans, 152 Ga. App. 504, 263 S.E.2d 167 (1979); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409, 263 S.E.2d 220 (1979); Plant v. Blazer Fin. Servs., Inc., 598 F.2d 1357 (5th Cir. 1979); Gainesville Fin. Servs., Inc. v. McDougal, 154 Ga. App. 820, 270 S.E.2d 40 (1980); Southern Disct. Co. v. Ector, 155 Ga. App. 521, 271 S.E.2d 661 (1980); Sanders v. Liberty Loan Corp., 156 Ga. App. 628, 276 S.E.2d 49 (1980); Whitfield v. Termplan, Inc., 651 F.2d 383 (5th Cir. 1981); Aetna Fin. Co. v. Brown, 172 Ga. App. 537, 323 S.E.2d 720 (1984); Harlow v. Walton Loan Corp., 174 Ga. App. 311, 329 S.E.2d 616 (1985); Ford Motor Credit Co. v. London, 175 Ga. App. 33, 332 S.E.2d 345 (1985).
Acceleration of Interest
Acceleration clauses are not per se invalid. Bragg v. HFC, 140 Ga. App. 75, 230 S.E.2d 55 (1976).
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).
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 this section).
Acceleration clause which includes unearned interest voids the contract.
- Provision for acceleration of unearned interest is a contract authorizing collection of more than is provided or approved by the Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and thus authorizes a result contrary to its terms, and is in violation of the Act; thus, the loan is void. Frazier v. Courtesy Fin. Co., 132 Ga. App. 365, 208 S.E.2d 175 (1974);(decided prior to 1980 amendment of this section).
When acceleration of a debt, combined with a claim of unearned interest, renders obligation usurious, the obligation becomes void under the provisions of the Industrial Loan Act, (see 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 this section).
Acceleration clause in Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) contract which upon default permits the collection of entire balance due on contract without excluding unearned interest, is violative of the 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 this section).
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 1980 amendment of this section).
Invalid acceleration clause in security agreement portion of contract voids obligation.- Provision found in security agreement portion of loan contract providing for acceleration of unaccrued interest voids contract notwithstanding presence of valid acceleration provision in note portion of contract. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).
Provision authorizing usurious collection voids obligation even though not enforced.- Provision in note authorizing usurious collection alone is sufficient to void obligation even when the 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 this Code section).
Accelerated unearned interest usurious.
- When the plaintiff accelerated and claimed unearned interest on unmatured installments, this amount was usurious. Liberty Loan Corp. v. Childs, 140 Ga. App. 473, 231 S.E.2d 352 (1976), cert. dismissed, 239 Ga. 220, 236 S.E.2d 373 (1977).
RESEARCH REFERENCES
Am. Jur. 2d.
- 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 34 et seq.
C.J.S.- 47 C.J.S., Interest and Usury; Consumer Credit, § 460 et seq.
ALR.
- Constitutionality of statutes regulating the business of making small loans, 69 A.L.R. 581; 125 A.L.R. 743; 149 A.L.R. 1424.
Doctrine of in pari delicto as applied to borrower seeking affirmative relief from loan contract made in violation of small loan act, 142 A.L.R. 644.
Usury as affected by acceleration clause, 66 A.L.R.3d 650.
What constitutes Truth in Lending Act violation which "was not intentional and resulted from bona fide error not withstanding maintenance of procedures reasonably adapted to avoid any such error" within meaning of § 130(c) of Act (15 USCA § 1640(c)), 153 A.L.R. Fed. 193.
Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.