Opinion ID: 1583791
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Heading Rank: 4

Heading: Application of the ICCC to Payday Loans.

Text: Richey claims the payday loan transaction is governed by the ICCC, and the transaction violated the ICCC in three ways. First, she argues Midwest failed to comply with the notice to cure provisions under the ICCC. Next, Richey argues the disclosure agreement inaccurately stated the interest rate, or at least was deceptive and misleading in stating the interest rate, under the provisions of the ICCC. Last, Richey argues the interest charged is unconscionable and violates the limitations imposed by the ICCC. Thus, we must first decide if the ICCC applies to payday loan transactions. Payday loans are specifically governed by the Delayed Deposit Services Licensing Act. The Iowa legislature enacted the statute in 1995. 1995 Iowa Acts ch. 139, §§ 1-16 (codified as amended in Iowa Code §§ 533D.1-.16 (2007)). The DDSLA specifically applies to licensed delayed deposit service businesses, or payday loan companies, and explicitly excludes transactions involving banks, savings and loan associations, credit unions, industrial loan companies licensed under chapter 536A, and any affiliate of these financial organizations. Iowa Code § 533D.16 (recognizing organizations not regulated by chapter 533D). The provisions of the DDSLA clearly governed the transaction between Midwest and Richey in this case. On the other hand, consumer credit transactions in Iowa have long been governed by the ICCC. The ICCC predates the DDSLA, and governs all consumer credit transactions in Iowa not specifically excluded under the statute. The ICCC specifically applies to acts, practices or conduct in this state in the solicitation, inducement, negotiation, collection, or enforcement of a transaction, without regard to where it is entered into or modified. Id. § 537.1201(1)(c). The transaction between Midwest and Richey satisfies this definition. Additionally, the express exclusions under the statute do not include delayed deposit services. See id. § 537.1202 (indicating what chapter 537 does not apply to). Under the ICCC, a payday loan would normally satisfy the definition of a consumer loan. See id. § 537.1301(14). Consequently, it is clear the ICCC applies to payday loans to the extent the statute does not conflict with the specific provisions of the DDSLA. The ICCC provides that no part of [the ICCC] shall be deemed to be impliedly repealed by subsequent legislation if such a construction can be reasonably avoided.  Id. § 537.1104 (Emphasis added.) The DDSLA was enacted after the ICCC and was passed to govern delayed deposit services. When the provisions of the DDSLA specifically govern the issues in this case and conflict with the provisions in the ICCC, the provisions of the DDSLA must prevail unless such a construction could be reasonably avoided. [2] Id. We now apply this principle to Richey's arguments. Richey argues Midwest failed to properly provide her with a notice to cure default under the ICCC. Both parties agree the DDSLA does not include a notice to cure requirement prior to bringing suit. Thus, the ICCC's notice provisions are not contradicted or impliedly repealed by the DDSLA, and there is no need to reasonably avoid applying the DDSLA. See id. Moreover, the ICCC's notice to cure provisions appl[y] to actions or other proceedings to enforce rights arising from consumer credit transactions. Id. § 537.5102. The parties concede this is a consumer credit transaction. Id. § 537.1301(12) (defining consumer credit transaction). Thus, Midwest must comply with the notice to cure provisions of the ICCC. See id. § 537.5110(1) ([T]he obligation of a consumer in a consumer credit transaction is enforceable by a creditor only after compliance with this section.). The ICCC requires a creditor to provide a notice to cure to a consumer before bringing any legal action, so long as the consumer has a right to cure the default. Id. § 537.5110(2). It is undisputed Richey had a right to cure default. See id. § 537.5110(3) (recognizing the circumstances when a consumer has the right to cure a default). The ICCC also provides that if Midwest failed to follow the appropriate procedures, its petition shall be dismissed. Id. § 537.5110(7). Section 537.5111 sets forth the requirements for a notice to cure. A creditor gives notice to a consumer when the creditor . . . mails the notice to the consumer at the consumer's residence. Id. § 537.5111(3). The consumer's residence is defined as the address given by [the debtor] as the [debtor's] residence in a writing signed by the [debtor] in connection with a transaction until the [debtor] notifies the person extending credit of a different address as the [debtor's] residence, and it is then the different address. Id. § 537.1201(4) (emphasis added). Thus, the creditor must mail the notice to cure to the address given by the debtor in a writing signed by the debtor in connection with the transaction. However, if the debtor later notifies the creditor of a different address, then the notice to cure must be mailed to the different address. Richey claims the check presented to Midwest satisfied both statutory definitions of a consumer residence for the purpose of mailing a notice to cure. First, she claims the check presented to Midwest, together with her oral confirmation that the address on the check was her current residence, constituted a writing signed by the debtor in connection with [the] transaction. Id. Second, she claims the check, together with her oral confirmation that the address on the check was her current residence, constituted notice to the creditor of a different address. Both arguments by Richey are predicated on her testimony that she orally told Midwest during the course of the transaction that the address on her check was her current residence. Yet, the magistrate who presided over the hearing necessarily rejected this testimony, as did the district court. The evidence revealed that, pursuant to office protocol, Midwest would have placed the check address on the disclosure agreement if Richey had confirmed during the transaction that her check address was the correct address. By finding Richey failed to give Midwest her correct address during the course of the transaction, the magistrate, and the district court, necessarily rejected Richey's testimony that she told Midwest the address on the check was her current residence. See Brichacek v. Hiskey, 401 N.W.2d 44, 46 (Iowa 1987) (When no motion to enlarge or amend is made, we assume as fact an unstated finding that is necessary to support the judgment.). Moreover, Richey then signed the disclosure statement containing an address purporting to be her residence, and there was no testimony that Richey later notified Midwest she lived at a residence different from the address on the disclosure agreement. Under the circumstances, Richey's residence for the purpose of mailing a notice to cure was the address on the disclosure statement signed by Richey in connection with the transaction. Midwest mailed the notice to cure to this address, and therefore complied with our statutory requirements. Of course, the fact remains Richey presented Midwest with a check that revealed her correct address. While Richey has not argued this fact alone is sufficient, we find that simply providing a check with a different address, under the circumstances of this case, is not sufficient notice to comply with section 537.1201(4). Under section 537.1201(4), Richey's residence remained her Des Moines address until she notified Midwest of her West Des Moines address. Richey next argues Midwest's disclosure statement inaccurately disclosed her rate of interest under the ICCC. In her reply brief, however, Richey admits she erroneously computed the interest rate, and Midwest's computation was correct. As a result, Richey now claims the interest rate on the disclosure agreement was not inaccurate, but deceptive and misleading under the ICCC. The ICCC requires the APR be disclosed according to the federal Truth in Lending Act. Iowa Code § 537.3201; see 15 U.S.C. §§ 1601 et seq. (2006). Yet, these provisions of the ICCC do not apply because the more specific DDSLA provides interest rate notice requirements of its own. See Iowa Code § 533D.9(2). Richey has not argued these requirements were not met. [3] Furthermore, even if we accepted Richey's argument under the ICCC, we are not persuaded an admittedly accurate interest rate could be deceptive and misleading, or that a deceptive and misleading rate would enable Richey to prevail in this matter. Last, Richey claims the interest rate charged by Midwest is unconscionable. Section 537.5108 of the ICCC allows a court to refuse to enforce a consumer credit agreement when the terms were unconscionable at the time of the transaction or if agreement was induced by unconscionable conduct. See Paglia v. Elliott, 373 N.W.2d 121, 126 (Iowa 1985) (finding unconscionability under the criteria in section 537.5108); see also Home Fed. Sav. & Loan Ass'n v. Campney, 357 N.W.2d 613, 618 (Iowa 1984) (listing factors to determine unconscionability). Richey, however, makes no claim that the transaction in this matter was induced by unconscionable conduct. The only claim raised by Richey is that the amount of fees she paid pursuant to her agreement with Midwest is substantively unconscionable. See Casey v. Lupkes, 286 N.W.2d 204, 207 (Iowa 1979) (recognizing the test for when a bargain is unconscionable). The only factual findings of the district court related to the claim were the date Richey presented Midwest with her post-dated check, the amount of the check, the face amount of the loan, and the date the check could be cashed. In support of her claim, Richey cites section 537.2401(1) of the ICCC, which limits charges to twenty-one percent on consumer transactions. However, it is not possible to reasonably avoid applying the limitations in section 533D.9 [4] of the DDSLA to this transaction. See Iowa Code § 537.1104. Therefore, the limitations of the DDSLA apply, and the limitations of the ICCC do not provide Richey with a basis for relief. Richey also cites a number of cases and law review articles raising policy issues regarding the pay day loan industry. See, e.g., Charles A. Bruch, Taking the Pay Out of Payday Loans: Putting an End to the Usurious and Unconscionable Interest Rates Charged by Payday Lenders, 69 U. Cin. L.Rev. 1257 (2001); Creola Johnson, Payday Loans: Shrewd Business or Predatory Lending?, 87 Minn. L.Rev. 1 (2002). By enacting section 533D.9, however, the legislature has directly addressed the policy question of the level at which fees for pay day loans become per se impermissible. Moreover, the fees Midwest imposed were permissible under the DDSLA. [5] While the existence of a legislative provision permitting fees on pay day loans may not necessarily defeat all claims of unconscionability, the court on this record will not entertain what amounts to a facial challenge of the legislature's policy determinations contained in section 533D.9 of the DDSLA.