Case Title: State, Department of Business & Industry v. TitleMax of Nevada, Inc.

Citation: 137 Nev. Adv. Op. No. 55

Docket Number: 

State: nevada

Court: Nevada Supreme Court

Date: 2021-09-23T00:00:00Z

Document:
ane

187 Nev., Advance Opinion 55
IN THE SUPREME COURT OF THE STATE OF NEVADA

‘THE STATE OF NEVADA, No. 79224
DEPARTMENT OF BUSINESS AND

INDUSTRY, FINANCIAL

INSTITUTIONS DIVISION, FILED
Appellant,

vs. SEP 23 2021
‘TITLEMAX OF NEVADA, INC., A comes yeh
DELAWARE CORPORATION, pepeee
Respondent. cher oer

 

Appeal from a district court summary judgment in a
declaratory relief action. Eighth Judicial District Court, Clark Count

 

Jerry A. Wiese, Judge.
Affirmed in part and reversed in part.

Aaron D. Ford, Attorney General, Heidi J. Parry Stern, Solicitor General,
David J. Pope, Chief Deputy Attorney General, and Vivienne Rakowsky,
Deputy Attorney General, Carson City,

for Appellant.

Lewis Roca Rothgerber Christie LLP and Daniel F. Polsenberg, Joel D.

Henriod, and Malani D. Kotchka-Alanes, Las Vegas,
for Respondent.

BEFORE THE SUPREME COURT, CADISH, PICKERING, and
HERNDON, JJ.

r- 271509

 
a

OPINION

By the Court, PICKERING, J.:

NRS 604A.5065 to NRS 604A.5089 regulate title loans, a
financial product for which a lender “[cJharges an annual percentage rate of
more than 35 percent” and “[rlequires the customer to secure the loan” via
title to their vehicle (excluding purchase-money security interests). NRS
604A.105. While NRS 604A.5074(1) generally limits the permissible
duration of the original term of a title loan to 30 days, NRS 604A.5074(3)
extends the permissible duration to “up to” 210 days, provided that the title
loan meets the requirements delineated in that subsection; as relevant here,
such loans (210-day title loans) cannot be subject to “any extension.” NRS
{604A.5074(3Xc) (the extension prohibition). NRS 604A.5076(1) (the FMV
limitation) separately limits the permissible amount of any title loan to the
“fair market value” of the securing vehicle,

With regard to these two limitations, in this appeal the Nevada
Department of Business and Industry, Financial Institutions Division (FID)
argues that (1) a refinance qualifies as a species of extension within the
‘meaning of the extension prohibition and is therefore a prohibited practice
for 210-day title loans; and (2) a lender must calculate interest and other

 

costs and fees along with the principal loan amount into the FMV limitation
for all title loans. FID asks that we reverse the district court's order
granting summary judgment in favor of TitleMax and declaratory relief to
the contrary. On the first point, we agree with FID—the unambiguous
language of NRS 604A.065 (defining “extension”) includes a refinance such
that the extension prohibition reaches the practice at issue here. As to the
second, we agree with TitleMax and the district court; the text of the FMV
limitation demonstrates that only the principal loan amount is included as

 

 
part of that calculation. Accordingly, we affirm in part and reverse in part
as follows.
i

Respondent TitleMax of Nevada, Inc., is a licensed lender
offering title loans to its customers; appellant FID regulates that practice
to ensure compliance with NRS Chapter 604A, including those sections laid
out above. At issue in this appeal are TitleMax's 210-day title loans, on
which interest accrues daily. Despite the extension prohibition in NRS
604A.5074(3Xc), TitleMax regularly offers borrowers on 210-day title loans
the opportunity to “refinance,” whereby the parties effectively agree to
extend the period in which the title loan’s principal amount is amortized for
another 210 days in exchange for the borrower paying off the interest then
owed. With regard to the FMV limitation, TitleMax limits the principal
amount loaned to the fair market value of the vehicle in question, but it
does not include the daily accruing interest or other associated fees and
costs in the calculation of that upper limit.

In 2018, FID conducted an examination of TitleMax's practices
and issued several Records of Examination (ROEs). As relevant to this
appeal, the 2018 ROEs stated that (1) TitleMax’s “refinances” were actually
“extensions” that violated the extension prohibition, and (2) TitleMax had
underwritten several loans that exceeded the fair market value of the
securing vehicle because, as FID subsequently explained, FID believes
‘TitleMax should account for “[t}he total amount the borrower must pay back
includling] the principal, interest, and fees” in the calculation. Based on
these findings, FID issued TitleMax a “Needs Improvement” rating,
meaning that TitleMax was subject to additional regulatory oversight and
required to make changes to its practices to bring them into compliance with

 

 
——s

the statutory requirements or else face liability and potential loss of its
lender's license.

Rather than modifying its practices to conform with FID's
demands, TitleMax sued in the Nevada district court, seeking declaratory
relief from the findings of the 2018 ROEs, as well as temporary and
permanent injunctive relief enjoining FID from imposing or seeking to

 

impose discipline based on those alleged violations. As relevant here,
TitleMax asked that the district court declare that (1) refinancing a title
oan does not amount to a prohibited extension and (2) the FMV limitation
refers only to the principal amount of the loan. FID moved for summary
judgment, and TitleMax opposed and moved for summary judgment in its
own right. The district court denied FID's motion for summary judgment
and granted TitleMax’s, as follows:

‘This Court hereby finds, concludes, and declares,
that TitleMax’s practice of “refinancing” does not
violate either NRS 604.5074 or NRS 604A.065.

‘This Court further finds, concludes, and declares,
that the language of NRS 604A.5076 which refers
to the “fair market value” ofa vehicle, refers only to
the principal amount of the loan, and does not
include interest, fees, or other expenses or other
recoverable amounts.

FID’s appeal followed.
IL

The district court's order granting summary judgment is
subject to de novo review. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121
P.3d 1026, 1029 (2005). So too, the interpretation the district court gave to
the various statutes at issue in reaching that result. Zohar v. Zbiegien, 130
Nev. 733, 737, 334 P.3d 402, 405 (2014). In this case, the language of those
statutes is sufficiently plain to answer the questions FID's appeal poses.

 

 
Wheble v. Eighth Judicial Dist. Court, 128 Nev. 119, 122, 272 P.3d 134, 136
(2012) (stating that “[w|hen a statute is clear on its face, (this court] will not
look beyond the statute's plain language”).
A

FID’s first challenge is to the district court's determination that
TitleMax's practice of offering its customers repeated opportunities to
“refinance” violates the extension prohibition for 210-day title loans, as
informed by the definition of “extension” found in NRS 604A.065. In full,
NRS 604A.5074(3) provides,

The original term of a title loan may be up to 210
days if:

(a)The loan provides for payments in
installments;

(b) The payments are calculated to ratably
and fully amortize the entire amount of principal
and interest payable on the loan;

(©) The loan is not subject to any extension;

(@)The loan does not require a balloon
payment of any kind; and

(e) The loan is not a deferred deposit loan.
(emphasis added). NRS 604A.065, somewhat circularly, defines an

 

extension as “any extension or rollover of a loan beyond the date on which
the loan is required to be paid in full under the original terms of the loan
agreement, regardless of the name given to the extension or rollover.”
(emphases added),

‘The ordinary meaning of an extension is “lal period of
additional time to take an action, make a decision, accept an offer, or
complete a task.” Extension, Black's Law Dictionary (11th ed. 2019); see
Lofthouse v. State, 136 Nev. 378, 380, 467 P.3d 609, 611 (2020) (noting that
the court gives statutory words their plain and ordinary meanings unless

5

 

 
the context requires a technical meaning or a different meaning is apparent
from the context). TitleMax argues that, in a refinance, the first loan is paid
off and second loan is made, such that the original loan term is not
“extended.” But when the same lender and the same borrower are involved,
the principal is only given to the borrower once, at the inception of the
original loan, and must be repaid when the refinanced loan's term expires.
Thus, functionally, such a “refinancing” product offers customers who
‘period of additional time’—210 days from the day of
“refinancing”—to pay TitleMax back the principal of the originally issued,

 

accept its terms

later refinanced loan. Accordingly, “regardless of the name” TitleMax gives
to this particular practice, in substance, based on the common
understanding of the term, it appears to fall within NRS 604A.065 and, by
reference, the extension prohibition.

But even setting this aside, under NRS 604A.065 a prohibited
extension may also be a “rollover,” which is “[tJhe extension or renewal of a
short term loan; the refinancing of a maturing loan or note.” Rollover,
Black's Law Dictionary (11th ed. 2019) (emphasis added). Accordingly, the
parties’ dispute over whether TitleMax’s refinancing product was, in fact, a
refinance is beside the point in any case. In this context, given the ordinary
meaning of the statutory terms used, an extension is a rollover, and a
rollover is a refinance; refinances are therefore a species of extension that
fall within the extension prohibition. See Bruce v. First Fed. Sav. & Loan
Ass'n of Conroe, Inc., 837 F.2d 712, 719 (5th Cir. 1988) (holding, in the
context of the former Thrift Institution Restructuring Act, that a lender's
“offer to refinance the loan... . may constitute an extension of credit”); Cf.
Nathalie Martin & Ozymandias Adams, Grand Theft Auto Loans:
Repossession and Demographic Realities in Title Lending, 77 Mo. L. Rev.

 

 

 

 
—

41, 74 (2012) (discussing practice of title loan extensions, rollovers, and
refinancing as synonymous and collecting data from service providers).

Despite the seeming clarity of the language laid out above,
TitleMax attempts to call this analysis into question. First, TitleMax points
to graphics on a pamphlet offered to the Legislature by the assemblyperson
who presented the bill that enacted NRS Chapter 604A and argues that the
caption on those graphics demonstrates that a “rollover,” as referenced in
NRS 604A.065, is a very specific kind of financial product that meaningfully
differs from a refinance. But even assuming that the pamphlet graphies
imply what TitleMax says they do, any implicit suggestion drawn from the
caption on a graphic on a pamphlet presented, at one point, to the
Legislature cannot overcome the enacted text of the statute itself. Wheble,
128 Nev. at 122, 272 P.3d at 136. The Legislature could not have written,
NRS 604A.065 more expansively—an “[elxtension” is “any extension or
rollover” of a loan beyond its original due date, “regardless of the name {the
lender gives] the extension or rollover.”

‘TitleMax also suggests that treating a refinance as a type of
extension renders certain language found elsewhere in NRS Chapter 604A
superfluous. See Buckwalter v. Eighth Judicial Dist. Court, 126 Nev. 200,
202, 234 P.3d 920, 922 (2010) (noting that statutes should be construed
together to avoid rendering any language superfluous). NRS 604A.5037,
which regulates high-interest loans, is structured similarly to NRS
604A.5074. NRS 604A.5037(1) generally prohibits the original term of a
high-interest loan from exceeding 35 days, though subsection (2) allows the
original term to be for a longer period (90 days) if certain criteria are met,
including—as with the limitations on title loans—that the high-interest
fa

 

loan does not allow for “any extension.” According to TitleMax,

 

 
refinance is a type of prohibited extension, NRS 604A.5037(3), which
separately prohibits the lender from “agreeling] to establish or extend the
period for the repayment, renewal, refinancing or consolidation of an
outstanding high-interest loan for a period that exceeds 90 days after the
date of the origination of the loan,” would have no meaning. But this is not
the case; NRS 604A.5037(3) limits the period of extensions for high-interest
loans under NRS 604A.5037(1), not those that meet the heightened
requirements of subsection (2), for which no extension is allowed in the first
;ht fall under subsection (1),

  

 

place. Put differently, a high-interest loan
with, say, a 35-day original term and provisions that allow for an extension
of that term; however, subsection (3) would still prohibit the lender from
stretching that extension beyond 90 days from the date of the original loan.
If anything, NRS 604A.5037(3)s allowance of additional time via
refinancing, so long as the total period does not exceed 90 days from the
original date of the loan, confirms that in the Legislature's view a refinance
is in fact a form of extension. Our reading of extension to include refinances
as a subcategory does not violate the Buckwalter principle.

TitleMax relatedly argues that the Legislature's use of the word
“refinancing” in NRS 604A.5037(3)—which express reference is also found
in NRS 604A.501 (regulating deferred deposit loans)—means that it did not
intend to include a refinance as a type of “extension” under NRS
604A.5074(3). But, as discussed, the plain meaning of an extension in this
context broadly encompasses a refinance, among other types of loan
renewals or agreements to extend the loan-term period; the reverse is not
true. Accordingly, where the Legislature refers to “any extension” in NRS
Chapter 604A, itis really saying “a refinance, among any other product with
similar effect”; where, in contrast, the Legislature refers to “refinancing”

 

 
specifically, it is limitedly pointing to that financial practice in particular.
‘Thus, TitleMax’s citation in its favor of the principle that this court
“presume(s] that the variation in language indicates a variation in
meaning,” Williams v. State, Dep't of Corr., 133 Nev. 594, 598, 402 P.3d
1260, 1264 (2017), does not land—our understanding of extension as a top-
line category of financial products, and refinances as a subvarietal thereof,

 

still gives distinct meaning to each term.

Neither do the remainder of TitleMax’s arguments on this point
sway the outcome. Citing Becerra v. Superior Court, 240 Cal. Rptr. 34 250,
265 (Ct. App. 2018), TitleMax argues that because “refinances” are not
forbidden they are implicitly allowed; but, as established, refinances are
actually forbidden as.a species of extension. See NRS 604A.5074(3Xc). And,
while TitleMax seems to claim that this interpretation would infringe upon
its due process rights, the text itself plainly counsels this result; any claim
of a failure of notice stemming therefrom thus necessarily fails. Cf.
Flamingo Paradise Gaming, LLC v. Chanos, 125 Nev. 502, 514, 217 P.3d
546, 554 (2009) (holding that statute did not give notice of what conduct was,
prohibited because plain meaning of undefined terms could not be
ascertained). Finally, while the parties dispute the proper application of
the maxim expressio unius est exclusio alterius in this context, see Horizons
at Seven Hills Homeowners Ass'n v. Ikon Holdings, LLC, 132 Nev. 362, 369,
373 P.3d 66, 71 (2016), this is beside the point—NRS 604A.065 defines
“extension” functionally, “regardless of the name given to the extension,”
making the expressio unius canon inapposite. See Arguello v. Sunset
Station, Inc., 127 Nev. 365, 370, 252 P.3d 206, 209 (2011),

 

 
an

We therefore reverse the district court’s order granting
declaratory relief to the extent that it held that “TitleMax’s practice of
‘refinancing’ does not violate either NRS 604A.5074 or NRS 604A.065.""

B.

FID bases its second challenge on the latter part of the district
court's declaratory judgment—that the FMV limitation refers only to the
principal amount of the loan. In relevant part, NRS 604A.5076(1) provides,
“A licensee who makes title loans shall not... [mJake a title loan that
exceeds the fair market value of the vehicle securing the title loan.”
Pursuant to NRS 604.105,

1, “Title loan” means a loan made to a

customer pursuant to a loan agreement which,
under its original terms:

(a) Charges an annual percentage rate of
more than 35 percent; and

(b) Requires the customer to secure the loan
by either:

(2) Giving possession of the title to a
vehicle legally owned by the customer to the
licensee or any agent, affiliate or subsidiary of the
licensee; or

(2) Perfecting a security interest in the
vehicle by having the name of the licensee or any
agent, affiliate or subsidiary of the licensee noted
on the title as a lienholder.

2. The term does not include a loan which
creates a purchase-money security interest in a
vehicle or the refinancing of any such loan.

1With regard to the merits of TitleMax’s motion to strike portions of
FID’s reply brief, it is unnecessary to address them—this decision is
founded in the text of the relevant statutes, rather than any argument FID
raises in reply. TitleMax’s motion to strike is therefore denied.

10

 

 
cone ie

NRS Chapter 6044's definition of “loan” is, again, unhelpfully circular,
“referring the reader [back] to” the definitions of the products regulated by
the chapter. State, Dep't of Bus. & Indus., Fin. Insts. Div. v. Check City
Piship, LLC, 130 Nev. 909, 913, 337 P.3d 755, 758 (2014); see also NRS
604.080. But the ordinary meaning of the term, as relevant here, is “a

 

‘sum of money lent at interest,” not the sum of money lent and the interest.
Loan, Black's Law Dictionary (11th ed. 2019); see also Check City, 130 Nev.
at 913, 337 P.3d at 758 (recognizing that the “usual and natural reading” of
the term is the principal amount borrowed before applying different
statutory definition), Indeed, like Nevada, many other states similarly
regulate the practice of title loans, and definitions in these foreign statutes
further support this common understanding of the term. See Mark S.
Edelman, Robert A. Aitken, Raechelle C. Yballe, The Road Ahead:
Emerging Trends in Personal Property Finance, 63 Bus. Law. 597, 598
(2008) (collecting statutes treating the principal amount of a loan as distinct
from interest); see also Unif. Consumer Credit Code § 1.301(25XaXi), 7
ULLA. 126 (2002) (defining “Ioan” as “the creation of {a debt"); Fla. Stat.
Ann. § 537.003 (West 2013) (defining a title loan as “a loan of money to a
consumer” secured by a vehicle title and separately defining “[iJnterest” as
the cost of obtaining a title loan); Ill. Admin, Code tit. 38, § 110.300
(separating the terms “loan” and “interest... charged [thereon]” in the
definition of title loan); Berger v. State, Dep't of Revenue, 910 P.24 581, 586
(Alaska 1996) (defining a loan, for the purposes of the Alaska Small Loans
Act, as “the payment of money by a lender to a borrower in exchange for an
agreement to repay with or without interest”).

As FID recognizes, this court departed from the ordinary
meaning of “loan” in Check City—which examined the limitations on

ul

 

 
another financial product regulated by NRS Chapter 604A, deferred deposit
loans—by holding that interest and other fees had to be included in the
calculation of the permissible upper limit of such a loan, 130 Nev. at 912,
337 P.3d at 757 (interpreting NRS 604A.425, recodified with amendment as
NRS 6044.5017, which provided, “A licensee shall not ... mlake a deferred
deposit loan that exceeds 26 percent of the expected gross monthly income
ofthe customer when the loan is made”). But this court did so because NRS
(604A.050 defined a deferred deposit loan as “a transaction,” such that it was
clear that “the principal amount borrowed is merely one aspect of the larger
transaction” at play in the deferred deposit loan context. Check City, 130
Nev. at 912, 337 P.8d at 757. In contrast, with regard to title loans (and

 

high-interest loans), the Legislature straightforwardly phrased the
Products’ definitions in terms of types of “loan(s]” rather than

1, s

 

“transaction th that there is no reason to deviate from what this court

 

previously recognized is the ordinary meaning of the relevant term. See
NRS 604A.065; NRS 604A.0703 (defining a high-interest loan as “a loan
‘made to a customer pursuant to a loan agreement which, under its original
terms, charges an annual percentage rate of more than 40 percent”)
Moreover, contrary to FID's claims that reaching a result
inapposite from Check City would be “nonsensical” here, it actually makes
pragmatic and policy sense for the Legislature to have regulated deferred
deposit loans differently than either title loans or high-interest loans. As
this court recognized in Check City, deferred deposit loans are unusual
because the whole cost of the “transaction”—including interest—is included
upfront in the check the borrower gives the lender; that is, at the outset, “a
deferred deposit loan transaction encompasses more than simply the

amount borrowed but also includes some consideration to the lender beyond

2

 

 
the customer's promise to repay the amount borrowed.” 130 Nev. at 913,
337 P.3d at 757. In terms of the workability of the rule, given that the total
cost to the borrower is readily discernable at the time the lender accepts the
post-dated check, the reference to the “transaction” and the inclusion of
interest and other fees therein makes sense. Not so in the title loan context,
where interest accrues daily and can typically only be determined post hoc,
when the loan is finally paid off.

Policy reasons further support the distinction. In contrast to a
deferred deposit loan, a title loan is nonrecourse, meaning that the lender's
recovery will ultimately be limited to the value of the vehicle that secures
its loan. Compare NRS 604A.503 (providing that deferred deposit lender
‘may recover total amount of principal owed plus unpaid interest), with NRS
604A.5078 (providing that “the sole remedy of the licensee who made the
title loan is to seek repossession and sale of the vehicle which the customer
used to secure the title loan”); see also Jim Hawkins, Regulating on the
Fringe: Reexamining the Link Between Fringe Banking and Financial
Distress, 86 Ind. L.J. 1361, 1392 (2011) (noting that in the context of title
loans, as opposed to other “fringe” banking products, “consumers have a
safety hatch they can use if they cannot pay off the loan—they can walk
away with the money and lose their vehicle”). Thus, a title loan lender does
not have the same incentive to inflate the total amount of a loan and interest
as does a deferred deposit lender, and a borrower is less likely to fall into a
cycle of unmanageable debt as a result of the former. See Hawkins, 86 Ind.
LJ. at 1393 (concluding that title loan lenders “have structured the
transaction to prevent the total financial breakdown of the people who use
them”). The Legislature therefore could have feasibly determined that the
interest charged on deferred deposit loans needed to be more tightly

13

 

 
ain sa

regulated. See State, Dep't of Bus. & Indus., Fin. Insts. Div. v. Dollar Loan
Ctr., LLC, 134 Nev. 112, 112, 412 P.3d 30, 32 (2018) (noting that in enacting
NRS Chapter 604A the Legislature was “Irlesponding to a so-called ‘debt
treadmill”)

Further, while FID relies heavily on the policy underlying NRS
Chapter 604A in support of its interpretation of the FMV limitation, see id.,
134 Nev. at 115, 412 P.3d at 34 (suggesting that NRS Chapter 604A has a
protective purpose), scholars who study these types of financial products
have argued that laws capping the amount of a title loan based on the value
of the securing vehicle should actually “aim to incentivize lenders to loan
the highest percentage of the vehicle's value possible because then borrowers
who lose a vehicle will lose the least amount of their equity.” Jim Hawkins,
Credit on Wheels: The Law and Business of Auto-Title Lending, 69 Wash. &
Lee L. Rev. 535, 601 (2012) (emphasis added). This means that FID's
favored interpretation of the FMV limitation may actually undercut the
very policy it seeks to promote. Accordingly, to the extent that policy
considerations were even pertinent to our interpretation of the FMV
limitation, those considerations do not clearly counsel in favor of our
sidestepping the plain meaning laid out above and rolling the interest
charged on a loan into the FMV limitation. Lofthouse, 136 Nev. at 380, 467
P.3d at 611.

*This is not to minimize the potential detrimental effect of losing one’s
vehicle after making repeated payments on an over-secured loan, see, e.g,
Jessie Lundberg, Big Interest Rates Under the Big Sky: The Case for Payday
and Title Lending Reform in Montana, 68 Mont. L. Rev. 181, 191 (2007)
(arguing that “ItJitle loans can be every bit as disastrous as payday loans”),
but to illuminate a potential rationale for regulating other types of
consumer financial products even more aggressively.

“4

 

 
ML

In sum, we conelude that (1) the extension prohibition on 210-

day title loans includes refinances as a species of extension based on the
plain language of NRS 604A.065 and (2) the FMV limitation only refers to
the principal amount of the loan. We therefore reverse in part and affirm
in part the district court's order granting summary judgment and

declaratory relief in TitleMax's favor.

Pickering

We concur

{ab J.

 

Herndon

16