(Ga. L. 1908, p. 83, §§ 1, 2; Civil Code 1910, §§ 3444, 3445; Penal Code 1910, § 700; Code 1933, §§ 57-117, 57-9901; Ga. L. 1983, p. 1146, § 5; Ga. L. 2000, p. 1526, § 1; Ga. L. 2014, p. 213, § 2/HB 824.)
Editor's notes.- Ga. L. 2014, p. 213, § 3/HB 824, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of February 19, 2014."
Law reviews.- For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978). For note, "State-Imposed Interest Rate Ceilings and Home Equity Loan Scandal in Georgia," see 11 Ga. St. U.L. Rev. 591 (1995). For comment on Zink v. Davis Fin. Co., 61 Ga. App. 39, 5 S.E.2d 588 (1939), see 2 Ga. B.J. 57 (1940). 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
Former Code 1933, § 57-117 (see now O.C.G.A. § 7-4-18) was not designed to repeal or impair existing usury laws. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Former Code 1933, §§ 57-102 and 57-117 (see now O.C.G.A. §§ 7-4-1 and7-4-18) were to be construed and applied as one law. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Effect of violation of statute.
- Loan violative of O.C.G.A. § 7-4-18 is illegal, with the result that the lender forfeits the interest but may collect the principal. Norris v. Sigler Daisy Corp., 260 Ga. 271, 392 S.E.2d 242 (1990).
Construed with § 7-4-2. - O.C.G.A. § 7-4-18 has its own definition of interest which prevails over the definition of interest set forth in O.C.G.A. § 7-4-2(a)(3). Moore v. Comfed Sav. Bank, 908 F.2d 834 (11th Cir. 1990).
Construed with § 44-12-131. - There is no conflict between O.C.G.A. §§ 7-4-18 and44-12-131 since what is authorized by the pawnshop statute is a combination of charges up to 25% per month, not the imposition of interest alone at a rate of 25% per month. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 654 (Bankr. S.D. Ga. 1995).
O.C.G.A. § 44-12-131, not O.C.G.A. § 7-4-18, governs pawnshop transactions. Glinton v. And R, Inc., 271 Ga. 864, 524 S.E.2d 481 (1999).
O.C.G.A. § 44-12-131, the pawnshop statute, and O.C.G.A. § 7-4-18 are in conflict and cannot be reconciled. Hooks v. Cobb Ctr. Pawn & Jewelry Brokers, Inc., 241 Ga. App. 305, 527 S.E.2d 566 (1999).
Amount of interest on a pawn transaction was regulated by O.C.G.A. § 7-4-18 and was not governed by the five percent limit imposed on general loans by the usury statute. Hooks v. Cobb Ctr. Pawn & Jewelry Brokers, Inc., 241 Ga. App. 305, 527 S.E.2d 566 (1999).
Charges included in interest.
- Whether an origination fee is considered a "commission for advances," part of "other fees," or a "contrivance" or "device," it is within the scope of the word "interest" as it is used in O.C.G.A. § 7-4-18. That being so, it is considered interest and not principal for the purpose of deciding whether a loan violates that section. Norris v. Sigler Daisy Corp., 260 Ga. 271, 392 S.E.2d 242 (1990).
Charging a nonrebatable, prepaid finance charge may result in a rate of interest greater than five percent for the first month of the loan; if so, this violates O.C.G.A. § 7-4-18. Evans v. Avco Fin. Servs. of Ga., Inc., 130 Bankr. 357 (Bankr. S.D. Ga. 1991).
"Per month."- Phrase "per month" implies an average. Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).
O.C.G.A. § 7-4-18 prohibits loans with interest rates in excess of five percent "per month." It does not forbid a lender from collecting or accruing the right to collect more than five percent interest "in any month." Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).
Despite the decision in Johnson v. Fleet Finance, Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), the bankruptcy court disagreed that "per month" implied a monthly average, stating that the legislature required that a criminal usury analysis be on a "per month" basis; however, since the most recent expression of the law by the district court specifically overruled a prior decision of a bankruptcy court within the district, Johnson, supra, the bankruptcy court was bound by that district court decision. Wright v. Transamerica Fin. Servs., Inc., 144 Bankr. 943 (Bankr. S.D. Ga. 1992).
Rate of interest per month must be calculated based upon the ratio of total interest paid to the total number of months in the loan. Fleet Fin., Inc. v. Jones, 263 Ga. 228, 430 S.E.2d 352 (1993).
Amortization of initial charges.- Initial charges in the form of discount points and other interest charges during the first month of the loan should be amortized over the life of the loan to calculate what interest rate was charged "per month." Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).
Nonrefundable points and origin fees.
- O.C.G.A. § 7-4-18 cannot be construed so as to attribute nonrefundable points and origination fees to the first month of a loan when those items are actually paid over the life of the loan. Fleet Fin., Inc. v. Jones, 263 Ga. 228, 430 S.E.2d 352 (1993).
Legislative intent to protect needy by criminal statute.
- 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 by criminal statute from a rate of interest exceeding five percent per month. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Availability of civil remedies.
- Because the wife of the debtor company's president provided the debtor with two short term loans at monthly interest rates of 27.6 percent and 41.45 percent, respectively, the trustee for the debtor was entitled to recover the amount the debtor paid in interest under O.C.G.A. § 7-4-18. Ogier v. Johnson (In re Healing Touch, Inc.), Bankr. (Bankr. N.D. Ga. May 6, 2005).
Section intended to enhance civil penalties.
- Design of former Code 1933, § 57-117 was still to condemn usury, and when usury reached such proportions as more than 5 percent per month, to enhance existing penalties of civil forfeitures by adding criminal penalty of misdemeanor, which would attach and apply to person of usurer. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Sole purpose of section.
- Sole purpose of Ga. L. 1908, p. 83, §§ 1 and 2 is to make it penal to reserve, charge, or take interest for use of money in excess of five percent per month under any contract when the relation of debtor or creditor is created or survives. Jackson v. State, 5 Ga. App. 177, 62 S.E. 726 (1908); Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Section does not authorize five percent per month interest.
- Former Code 1933, §§ 57-101 and 57-117 (see now O.C.G.A. §§ 7-4-2 and7-4-18) considered as they must be with former Code 1933, § 57-101 (see now O.C.G.A. § 7-4-1) do not authorize a regularly licensed pawnbroker who lends money on personal property which is taken into the pawnbroker's actual physical possession and stored by the pawnbroker, to charge interest on money so advanced at a rate of five percent per month. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
Application of rule that change in law does not change transaction's usurious nature.
- Rule that change in the law will not change the usurious character of a transaction applies only to renewals of an originally usurious transaction, and is not applicable when separate purchases are made on an open account, resulting in an entirely new indebtedness. Gold Kist, Inc. v. McNair, 166 Ga. App. 66, 303 S.E.2d 290 (1983).
Interest rate not in excess of maximum.
- Trial court did not err by rejecting a debtor's argument that a lender's temporary acceptance of lowered payments without waiving full payment transformed the loan into a usurious transaction because the interest rate of the loan was not in excess of the maximum applicable legal rate of five percent per month under O.C.G.A. § 7-4-18(a). Latimore v. Vatacs Group, Inc., 317 Ga. App. 98, 729 S.E.2d 525 (2012).
In a suit by a lender on a note and guaranties, the note's postdefault interest rate was only three percent higher than the predefault rate of five percent, so the total rate of eight percent per year was well within the legal limit of 60 percent and was permissible under O.C.G.A. §§ 7-4-2(a)(1)(B) and7-4-18(a). MMA Capital Corp. v. ALR Oglethorpe, LLC, 336 Ga. App. 360, 785 S.E.2d 38 (2016).
Class action certification.
- In a suit challenging the bank's overdraft fees, the trial court did not abuse the court's discretion in certifying the class because the legality of fees required the examination of a common set of terms in identical form contracts that applied to all members of the putative class as the claims arising from an interpretation of form agreements were classic cases for treatment as a class action. SunTrust Bank v. Bickerstaff, 349 Ga. App. 794, 824 S.E.2d 717 (2019), cert. denied, No. S19C1080, 2019 Ga. LEXIS 862 (Ga. 2019).
Cited in Patterson v. Moore, 146 Ga. 364, 91 S.E. 116 (1917); Bennett v. Lowry, 167 Ga. 347, 145 S.E. 505 (1928); Crowe v. State, 44 Ga. App. 719, 162 S.E. 849 (1932); Zink v. Davis Fin. Co., 61 Ga. App. 39, 5 S.E.2d 588 (1939); Peoples Bank v. Mayo, 61 Ga. App. 877, 8 S.E.2d 405 (1940); Knight v. State, 64 Ga. App. 693, 14 S.E.2d 225 (1941); Public Fin. Corp. v. State, 67 Ga. App. 635, 21 S.E.2d 476 (1942); Jarvis v. State, 69 Ga. App. 326, 25 S.E.2d 100 (1943); Walker v. State, 73 Ga. App. 20, 35 S.E.2d 391 (1945); Gersh v. Peacock, 89 Ga. App. 57, 78 S.E.2d 543 (1953); Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir. 1976); Cohen v. Northside Bank & Trust Co., 207 Ga. App. 536, 428 S.E.2d 354 (1993); Williams v. Powell, 214 Ga. App. 216, 447 S.E.2d 45 (1994); Fryer v. Easy Money Title Pawn, Inc., 172 Bankr. 1020 (Bankr. S.D. Ga. 1994); Ransom v. Fleet Fin., Inc., 219 Ga. App. 817, 466 S.E.2d 686 (1996); Orix Credit Alliance, Inc. v. CIT Group/Equipment Fin., Inc., 230 Bankr. 213 (Bankr. M.D. Ga. 1998); S & A Indus. v. Bank Atlanta, 247 Ga. App. 377, 543 S.E.2d 743 (2000); Bell v. Instant Car Title Loans (In re Bell), 279 Bankr. 890 (Bankr. N.D. Ga. 2002); Johnson v. Speedee Cash of Columbus, Inc. (In re Johnson), 289 Bankr. 251 (Bankr. M.D. Ga. 2002); Douglas v. Bigley, 278 Ga. App. 117, 628 S.E.2d 199 (2006); Clay v. Oxendine, 285 Ga. App. 50, 645 S.E.2d 553 (2007); Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011).
Constitutionality
Section not a constitutional deprivation of rights.
- Former Civil Code 1910, §§ 3444 and 3445 did not violate the Constitution of this state; nor did it violate the ninth or fourteenth amendments to the Constitution of United States. King v. State, 136 Ga. 709, 71 S.E. 1093 (1911).
Former Code 1933, § 57-117 (see now O.C.G.A. § 7-4-18) was not violative of the Constitution of the United States on ground that it was a deprivation of the lender's rights. Atterberry v. State, 212 Ga. 778, 95 S.E.2d 787 (1956).
Application
O.C.G.A. § 7-4-18 applies only to loans of money and is inapplicable to credit purchases. Gold Kist, Inc. v. McNair, 166 Ga. App. 66, 303 S.E.2d 290 (1983).
Substance of transaction controls in determining legality.
- When profit received by money lender, by whatever name it may be called, and whether lawful on its face or not, is in reality a contrivance or device to obtain amount greater than lawful interest, and is made with intent to violate usury laws, the transaction is illegal, and name by which it is called is altogether immaterial. Tribble v. State, 89 Ga. App. 593, 80 S.E.2d 711 (1954).
Effect of "loan fee".- When the combination of the simple interest charged on a loan during the first month of the loan and a nonrebatable "loan fee," which attached upon the signing of the note, resulted in a total interest charge in the first month of the loan which exceeded five percent, the loan was usurious. Dent v. Associates Equity Servs. Co., 130 Bankr. 623 (Bankr. S.D. Ga. 1991).
Whether contract is mere scheme to evade usury laws is jury question.
- When controlling question is whether contracts for purchase of stock by borrowers named in indictments were bona fide contracts for value received, or whether the contracts were mere schemes and devices to evade usury laws, this question is one of fact, and is for the jury to determine. Southern Loan & Inv. Co. v. State, 68 Ga. App. 75, 22 S.E.2d 108 (1942).
Question whether one intended to exact usury under cover of contrivance or device, or whether charge alleged in contract was a bona fide one for value received, is for jury to determine in prosecutions on charges relating to taking of usurious interests. Tribble v. State, 89 Ga. App. 593, 80 S.E.2d 711 (1954).
Absolute sale of property is not included within terms of Ga. L. 1908, p. 83, §§ 1, 2. Jackson v. State, 5 Ga. App. 177, 62 S.E. 726 (1908).
Section does not impair right to sell and assign choses in action arising ex contractu.
- Right to purchase salary or wages of another, right of latter to sell their salary or wages, and right to charge greater rate of discount on such purchases than five percent are not affected. King v. State, 136 Ga. 709, 71 S.E. 1093 (1911); Ison Co. v. Atlantic C.L.R.R., 17 Ga. App. 459, 87 S.E. 754 (1916).
Loan with fixed monthly payments and no threat of default.
- Loans which had fixed payments every month, gave no threat of default at closing by the deduction of points and origination fees, gave no threat of default through high interest charges in any given month, and required a set amount of interest every month under the 5 percent permitted by law did not violate the intent of O.C.G.A. § 7-4-18. Fleet Fin., Inc. v. Jones, 263 Ga. 228, 430 S.E.2d 352 (1993).
Purchaser of interest in promissory note at discount.
- When the borrower had full use of the funds it borrowed originally, the discounted sale of the note did not raise the issue of usury, even though the borrower argued that the purchaser improperly prevented it from sharing in the benefits derived from the discount and the borrower could recover the unpaid loan origination fee. First Alliance Bank v. Westover, Inc., 222 Ga. App. 524, 474 S.E.2d 717 (1996).
Assignment of wages are not unlawful unless connected with usurious loan. Jackson v. Johnson, 157 Ga. 189, 121 S.E. 230 (1924).
Former Civil Code 1910, §§ 3444 and 3445 (see now O.C.G.A. § 7-4-18) did not make unlawful a transaction wherein there was a charge by way of commission for advances, discount, exchange, or fees, or purchase of salary or wages, unless connected with a loan and directly or indirectly constituting all or part of reservation, charge, or taking, for loan or advance of money, or forbearance to enforce collection of sum of money, a rate of interest greater than 5 percent per month. King v. State, 136 Ga. 709, 71 S.E. 1093 (1911).
Series of transactions under guise of wage assignments constituted usury.
- Series of transactions under guise of successive assignments of wages, which constituted a scheme and device for purpose of evading laws against usury, by which sum of $20.00 was loaned to the defendant at interest in sum of $4.00 payable every two weeks, necessarily was usury. Jackson v. Bloodworth, 41 Ga. App. 216, 152 S.E. 289 (1930).
Former Civil Code 1910, §§ 3444 and 3445 did not attempt to annul contracts violating the contract's provisions. West v. Atlanta Loan & Sav. Co., 22 Ga. App. 184, 95 S.E. 721 (1918); Citizens Bank v. N.C. Hoyt & Co., 25 Ga. App. 222, 102 S.E. 837 (1920).
Usurious contracts as misdemeanor.
- Fact that the charging or taking of interest in excess of five percent per month is made a misdemeanor, punishable by fine and imprisonment, does not render the mortgage absolutely void since laws of this state provide for status of usurious contracts, including mortgages. Croom v. Jordan, 20 Ga. App. 802, 93 S.E. 538 (1917).
Charge for procuring insurance to extent of loan not counted as interest.
- Lender may by contract with borrower obtain insurance to protect former from loss to the extent of the loan, and charge cost of procuring such insurance to the borrower, and such cost cannot be counted as interest charged for money loaned. Peebles v. State, 87 Ga. App. 649, 75 S.E.2d 35 (1953).
Effect of assignment of insurance policy to lender who is also insurer.
- Good faith assignment of insurance policy by borrower to lender does not render transaction usurious merely because of fact that it is taken out with lender which is itself an insurance company, if it does not appear that premium charge was excessive or that borrower was compelled as condition precedent to loan to make a tie-in purchase of insurance with company advancing loan. Tribble v. State, 89 Ga. App. 593, 80 S.E.2d 711 (1954).
Attorney's fees in bankruptcy proceedings.- Creditor which violated the Georgia criminal usury statute could only recover the principal. The attorney's fees provision of the note, security agreement, and deed to secure debt were unenforceable and, therefore, under § 506 of the Federal Bankruptcy Code, 11 U.S.C. § 506, there was no enforceable provision for recovery of attorney's fees. Dent v. Associates Fin. Servs., Inc., 137 Bankr. 78 (Bankr. S.D. Ga. 1992).
Pawnbrokers.
- O.C.G.A. § 7-4-18 is applicable to pawn brokers by the clear direct reference to pawnbrokers in the statute and the plain language of the statute. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 322 (Bankr. S.D. Ga. 1995).
Pawnshop charge which included a 23% service charge for the customer's use of the pawned automobile, the risk to the lender of that continued use, checking and processing the title to the automobile apparently in addition to an itemized title fee charged under the contract, verifying insurance on the automobile, and making a log for the sheriff's department, constituted interest rather than pawnshop charges since it did not reimburse specific expenses actually incurred by the pawnbroker in connection with the transaction. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 322 (Bankr. S.D. Ga. 1995).
OPINIONS OF THE ATTORNEY GENERAL
If a second imposition of fee permitted by O.C.G.A. § 7-3-14(2) (see now O.C.G.A. § 7-3-11) 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.
RESEARCH REFERENCES
Am. Jur. 2d.
- 44B Am. Jur. 2d, Interest and Usury, § 300 et seq.
C.J.S.- 47 C.J.S., Interest and Usury; Consumer Credit, § 402 et seq.
ALR.
- Right to have usurious payments made on previous obligation applied as payment of principal on renewal, 13 A.L.R. 1244.
Validity of agreement to pay interest on interest, 37 A.L.R. 325; 76 A.L.R. 1484.
Usury as affected by repayment, or borrower's option to repay, loan before maturity, 130 A.L.R. 73; 75 A.L.R.2d 1265.
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.
Provision for interest after maturity at a rate in excess of legal rate as usurious or otherwise illegal, 28 A.L.R.3d 449.
Reformation of usurious contract, 74 A.L.R.3d 1239.
Practice of exacting usury as a nuisance or ground for injunction, 83 A.L.R.2d 848.
Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.
Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.
Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort actions, 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.