Opinion ID: 726119
Heading Depth: 4
Heading Rank: 1

Heading: Amount of Interest Charged

Text: 42 The plaintiff class urged the district court to find that the difference between the total payments needed to purchase an item by renewing the contract to ownership and the cash price was entirely interest. It cannot be disputed that this amount, described in the rental purchase agreements as the cost of lease services, is 82% of the cash price in each contract. Adjusting this figure for the duration of the various contracts among the plaintiff class members produces annual percentage rates ranging between 46% for the longest contract and 746% for the shortest. Obviously, these rates far exceed the legal limit under the usury statute, Minn.Stat. § 334.01. 5 43 RAC contends that the cost of lease services cannot be entirely interest because it includes the value of services such as delivery, maintenance, repair, and contract options. If the case had gone to trial, RAC intended to present evidence to show the value of these additional services. 44 The district court found no evidence that the members of the plaintiff class agreed to pay for any additional services. The court also found that, even if the cost of lease services figure included both interest and the value of additional services, no reasonable fact finder could conclude that the portion attributable to the value of additional services was great enough so that the interest portion was below the statutory usury rate. A close review of the record discloses that the district court was correct in both findings. 45 It is proper to exclude from the interest calculation a certain sum, agreed to be paid the lender for services and expenses in connection with the loan if the charge is reasonable and bona fide. Hobart v. Michaud, 174 Minn. 474, 219 N.W. 878, 879 (1928); Daley v. Minnesota Loan and Inv. Co., 43 Minn. 517, 45 N.W. 1100, 1101 (1890). However, if the fee is not related to any separate expenses but is compensation for the use of the money loaned, it must be considered interest. VanderWeyst v. First State Bank of Benson, 425 N.W.2d 803, 811 (Minn.), cert. denied, 488 U.S. 943, 109 S.Ct. 369, 102 L.Ed.2d 359 (1988). 46 RAC contends the plaintiff class members agreed to pay the value of additional services because they each agreed to the general cost of lease services term in the written contracts. RAC's expert claimed that the value of each of the following services should be excluded from the interest calculation: delivery, maintenance, repair and replacement. RAC contends it is not required to itemize the additional services covered by the term cost of lease services. 6 47 The undisputed evidence shows that the parties contemplated each of the services identified by RAC's expert would be provided without charge. In the express written terms of each of the contracts, the delivery charge indicated is $0.00. In its published advertisements, RAC announced that delivery, repair, service, set up, and loaners were free services. We are convinced that no fact finder could view this evidence and reasonably conclude that the plaintiff class members knowingly agreed to pay for these services as cost of lease services. 48 RAC's expert also identified certain contract options including the right to continue renting; the right to stop renting; and, the right to obtain ownership over time by the two methods described in the contracts. RAC contends the value of these options should be excluded from cost of lease services in calculating the interest charged by RAC. 49 The Minnesota Supreme Court, after fully considering the very contracts at issue here, including the rights described now by RAC as options, ruled that these contracts are consumer credit sales contracts. Fogie v. Rent-A-Center, 518 N.W.2d at 544. Describing the contract's terms as options does not change its nature. These so-called options are simply the rights enjoyed by any consumer credit sale purchaser. The compensation paid for the right to acquire ownership by paying the purchase price over time in a consumer credit sale is interest. Likewise, the compensation collected by the seller for the risks associated with collecting the purchase price over time is interest. Simply calling the rights and risks associated with credit sales options does not entitle the seller to additional compensation in excess of the usury rate. 50 Accordingly, by process of elimination, we must conclude that the cost of lease services term in the rental purchase contracts is interest. To the extent the value of any additional service or option is included, we agree with the district court that no fact finder could reasonably conclude such value is sufficient to reduce the 46% to 746% range of annual percentage rates charged by RAC to a nonusurious level. 51 The district court properly found that the third element of the usury claim has been established. 52