Opinion ID: 330039
Heading Depth: 2
Heading Rank: 5

Heading: Description of Claimed Security Interest

Text: 50 The district court found that Grants had violated Conn.Regs. § 36-395-7(b)(5), cf. 12 C.F.R. § 226.8(b)(5), by not identifying sufficiently the items upon which a security interest was claimed. The Grants contract in question states: 51 (C) that the seller shall retain title to and a purchase money security interest in such merchandise until all amounts due hereunder shall have been paid, and the right to possession in case of default . . . . 52 Grants claims that no security interest is retained in the coupon plan accounts and the only reason a security is even mentioned is because the same contract is used for big-ticket items where an interest is retained. 28 Grants claims that the existence of any retained security interest is an undetermined question of fact so that summary judgment should not have been granted. It is Grants' position that if no security interest is retained, no disclosure is necessary. See Scott v. Liberty Finance Co., supra, 380 F.Supp. at 479. Whether Grants actually retains a security interest is irrelevant. On its face, the contract provides for a security interest and for Grants to reveal later that there is none is hardly the type of disclosure Congress thought would permit consumers to compare the cost of credit among different creditors and to shop effectively for the best credit buy. S.Rep.No.392, supra, at 1. 29 III. Connecticut Usury Claims 53 By two statutes, C.G.S.A. §§ 37-4 30 and 36-243, 31 it is usurious to loan money at a rate of over 12 per cent per annum in Connecticut. The court below held 54 that the coupon plan is indeed usurious, the contract transaction a mere form for what is in substance a loan of the equivalent of money for an excessive return, . . . The customer purchases no goods by contract; he receives scrip to be used like cash to buy merchandise, and for that immediate credit agrees to pay back over an extended time period the principal amount represented by the face value of the coupons, together with a steep surcharge for the delay permitted in satisfying the account debt. 55 Grants argues that its coupon plan is not usurious and, in any event, cannot be so determined on a motion for summary judgment. 56 The elements of usury have been described as: 57 (1) agreement to lend money or its equivalent or to forbear to require repayment for a period of time; (2) the borrower's obligation to repay absolutely and not contingently; (3) the exaction of a greater compensation for making the loan or agreeing to forbear than is allowed by the applicable State Constitution or usury statute and (4) an intention to violate the usury statute. 58 Hershman, Usury and the Tight Mortgage Market, 22 Bus.Law. 333, 336 (1967). These elements have been cited as representing Connecticut law in Kafes, Usury and its Progeny: A Survey of Rate Regulation in Connecticut, 43 Conn.Bar.J. 220, 232 (1969). We are hard pressed to discover what facts in addition to those already stipulated need to be developed. 32 Items (2), (3), and (4) cannot be seriously disputed here. The borrower is required to repay the loan, and Grants has charged over 19 per cent interest on the contracts of the three named plaintiffs. 33 The requisite intent to violate the statute is similarly present. All that is necessary is that the defendant intend to charge more than the legal limit here 12 per cent and that cannot be challenged here. See Community Credit Union v. Connors, 105 A.2d 772, 775 (Conn.Sup.Ct.1954); Manchester Realty Co. v. Kanehl, 36 A.2d 114, 116-17 (Conn.Sup.Ct.1944). Grants argues that intent presents a classic question of fact. See Community Credit Union v. Connors, supra. This is normally true but in this case, where there is no dispute as to the intended interest rate, there is nothing for the trier of fact to decide. See Manchester Realty Co. v. Kanehl, supra. 59 The only substantial issue is whether the coupons are money or its equivalent within the contemplation of C.G.S.A. §§ 37-4, 36-243. Grants points out that coupons can only be used at its own stores and will be replaced if lost or stolen. On the other hand, Grants itself advertises: Use them like cash in any department of the W. T. Grant Company or member stores. 34 In addition, for coupon contracts entered into after January 1, 1971, once a single coupon is spent the total coupon amount becomes due for scheduled repayment. 35 If the coupons were treated as credit for merchandise purchases, instead of as money, the repayment obligation would accrue in stages as the goods were purchased rather than all at once. 60 In other states, similar Grants' coupons have been declared to be money in the usury context. See Rathbun v. W. T. Grant Co., 219 N.W.2d 641, 649 (Minn.Sup.Ct.1974); W. T. Grant Co. v. Walsh, 241 A.2d 46, 48 (N.J.Dist.Ct.1968). See also State v. W. T. Grant Co., CCH Consumer Credit Guide PP 99,135, 99,146 (Wisc.Cir.Ct.1972) (1969-1973 Transfer Binder). Grants argues that the statutes in the first two cases, Minn.Stat. § 334.01 and N.J.Stat. § 31:1-1, are not limited solely to money as are C.G.S.A. §§ 37-4, 36-243. Thus, those decisions are not apposite in determining whether Grants' coupons are money or its equivalent for the narrower Connecticut statutes. We agree that the Minnesota and New Jersey statutes are broader than the Connecticut statutes. Nonetheless, in both Rathbun And Walsh the coupons were found to be the equivalent of money, not the equivalent of something else also covered by the statutes. And there is no reason why in this context the Connecticut statute should be limited in a way the New Jersey or Minnesota statutes are not. The Connecticut Supreme Court of Errors has stated in reference to the state's usury laws it would be difficult to conceive of a more inclusive statute. Contino v. Turello, 101 Conn. 555, 126 A. 725, 727 (1924). Connecticut's usury statutes were enacted for the benefit of those debtor groups needing special protection. In re Feldman, 259 F.Supp. 218, 221 (D.Conn.1966); State v. Griffith, 83 Conn. 1, 74 A. 1068, 1069, aff'd, 218 U.S. 563, 31 S.Ct. 132, 54 L.Ed. 1151 (1910). It is thus in keeping with the intent of the Connecticut drafters to construe the statute to protect those low-income people most likely to become enmeshed in Grants' coupon credit plan. 61 Grants also claims C.G.S.A. § 36-243 only applies to organizations in the business of making small (under $1,800) loans. According to Grants, the record is absolutely barren of any facts to support a conclusion that defendant did 'engage in the business of making loans of money or credit.'  36 The argument disappears once it is determined that the coupons are money or its equivalent, since, according to the stipulated facts, Grants made such loans in the ordinary course of its business. 37 62 Grants also parades some horribles before us: If we hold the coupon credit plan usurious, then all the Grants big ticket credit transactions, which use the same blank forms, and the retail installment sales of most automobiles, which use similar forms, would be invalid as well. This is nonsense. A refrigerator or an automobile is not the equivalent of money, as the district court found the coupons were.