Opinion ID: 1868607
Heading Depth: 1
Heading Rank: 9

Heading: Fairfax Family Fund, Inc.

Text: Finally, in People v. Fairfax Family Fund, Inc ., the California appellate court held that a Kentucky corporation engaged in the business of making small loans by mail to residents of California was subject to California regulation. The defendant maintained no offices in California. The defendant solicited its business by mailing printed material from Kentucky to persons in California. The borrower returned by mail a loan application and promissory note, and the defendant secured a California independent contractor to conduct a local credit investigation. After approval, the defendant mailed a check to the borrower, who made all payments on the loan by mail to the defendant's offices in Kentucky. The Kentucky corporation did business in thirty-one other states, but had loans of $3,500,000 outstanding to California residents, and was increasing the amount of loans to them at a rate of about $90,000 per week. Despite the amount of loans made to California residents, the defendant never secured a small loan license as required by California Financial Code section 24200 which provided: No person shall engage in the business of making or negotiating, for himself, or another, loans of money, credit, goods, or things in action, in the amount or of the value of three hundred dollars ($300) or less, without first obtaining a license from the commissioner. The California appeals court held that the Commerce Clause had not withdrawn from the state the power to regulate or control matters of local concern so long as Congress had not acted in the area, the regulation was nondiscriminatory, and the regulation did not impose a burden on interstate commerce. 47 Cal.Rptr. at 813. The court held California had the power to license and regulate this business the same as local loan companies. The district court below noted the similarity of this case to Fairfax Family Fund: In Fairfax Family Fund, the California appeals court noted that the small loan law, which serves primarily to protect citizens of California from fraudulent and unconscionable conduct of those in the lending business, constitutes a matter of local concern for the purpose of determining whether it violates the Commerce Clause insofar as a lender engaged in interstate commerce is concerned. 47 Cal.Rptr. at 813. The Commerce Clause does not preclude a state from giving needful protection to its citizens in the course of their contacts with businesses conducted by outsiders when the legislation is general in its scope, is not aimed at interstate or foreign commerce, and merely involves burdens incident to effective administration. 47 Cal.Rptr. at 815. The court noted that no question of discrimination existed because the statute applied to both interstate and intrastate lending agencies. The court explained that the degree of regulation is not disproportionate to the evils that exist if the lenders are left to their own devices without regulation by the state. Id. The licensing procedure imposes charges or expenses no larger in amount than are reasonably necessary to defray the administrative costs involved and could not, in any event, qualify as discriminatory or imposing undue restrictions on interstate commerce. Id. To deny the state the power to license and regulate this business as it does for local concerns engaging in the same business would, in effect, grant an immunity to which it is not entitled under the circumstances. Id. The court noted that [a]s a practical matter, it would be next to impossible for the state to regulate the activities of this business without the license requirement. Id. Finally, the court observed that when the burdens imposed by local legislation become too great, Congress may legislate to secure uniformity or to protect the national interest as this is a legislative, not a judicial, function. Id. Credicorp, 659 So.2d at 381-82. We are in agreement with the district court's analysis. Based on the approach of the above regulatory cases, we conclude the regulatory and licensing provisions in chapter 520 constitute permissible regulation and are not violative of the Commerce Clause. On this issue we agree with the district court: The instant case is analogous to the above regulatory cases. The licensing provision in section 520.32 involves a local concern that the state has the power to regulate, that has not been regulated by Congress, and that does not discriminate against, or in any respect unnecessarily obstruct, interstate commerce. Moreover, the provision is designed to safeguard the people of Florida from deceitful practices and conduct such as that undertaken by Credicorp. In our view, the Florida Legislature envisioned the licensing of retail installment sellers such as Credicorp. Section 520.36, entitled Mail order and telephone sales, indicates the legislative intent to include within the licensing provisions retail installment contracts negotiated and entered into by mail or telephone. Id. at 382. Pursuant to the provisions of chapter 520, it appears the Department is attempting to prohibit misrepresentations by retailers, whether in state or out, regarding ongoing retail installment contracts with residents of the State of Florida. The statute is designed to safeguard the people of Florida from deceitful practices and conduct such as that allegedly undertaken by Credicorp. Id. In fact, section 520.331 is specifically aimed at disciplining retail installment sellers who engage in fraud, misrepresentation, deceit, or gross negligence. [6] As noted by the hearing officer, one purpose of chapter 520's regulatory scheme is to protect Florida consumers from misleading solicitations. It is also apparent that Credicorp's solicitation activities in Florida have been extensive. The hearing officer cited a single day's activity in 1992 reflecting that 243 Florida residents had sent money and application forms pursuant to Credicorp's promise of a GOLD CARD WITH A $10,000 LINE OF CREDIT. On the other hand, Bellas Hess and the other cases relied upon by Credicorp are sales and use tax cases. That is not the case here. Any fees charged here are patently intended to offset the costs to government of regulating retail installment sales. As noted by Justice Scalia in his separate opinion in Quill Corp. v. North Dakota, 504 U.S. 298, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992), courts should apply United States Supreme Court cases that specifically fit the situation in dispute, 504 U.S. at 319, 112 S.Ct. at 1916 (Scalia, J., concurring). The district court also quoted an important observation in Justice Scalia's concurring opinion in Quill Corp.: Even before Bellas Hess, we had held, correctly, I think, that state regulatory jurisdiction could be asserted on the basis of contacts with the State through the United States mail. See Travelers Health Assn. v. Virginia ex rel. State Corp. Comm'n, 339 U.S. 643, 646-650, 70 S.Ct. 927, 928-931, 94 L.Ed. 1154 (1950) (Blue Sky laws). 504 U.S. at 298, 112 S.Ct. at 1904. 659 So.2d at 381. It would appear that the United States Supreme Court has itself limited the law of Bellas Hess to tax cases. We follow Justice Scalia's lead here. We find that the licensing provision in section 520.32 involves a local concern that the state has the power to regulate, that has not been regulated by Congress, and that does not discriminate against, or in any respect unnecessarily obstruct, interstate commerce. See California v. Thompson, 313 U.S. 109, 114, 61 S.Ct. 930, 932, 85 L.Ed. 1219 (1941)(Fraudulent or unconscionable conduct of those so engaged which is injurious to their patrons, is peculiarly a subject of local concern and the appropriate subject of local regulation.); Merrick v. N.W. Halsey & Co., 242 U.S. 568, 37 S.Ct. 227, 61 L.Ed. 498 (1917). In fact, absent the enforcement of Florida's regulatory scheme, it is apparent that Credicorp's solicitations of Florida citizens could continue unabated and without sanction. We do not believe that Congress, or the Supreme Court in its interpretation of the Commerce Clause, has mandated such an outcome. Accordingly, we answer the first certified question in the affirmative and hold that section 520.32 is a regulatory measure and, because of its evenhanded application to all retail installment sellers, is not violative of the Commerce Clause. We quash the decision of the district court on the constitutionality of section 520.32. By answering the first certified question in the affirmative and upholding section 520.32, we have mooted the second certified question. Accordingly, we decline to answer the second certified question. We recognize that our opinion is contrary to the district court's conclusion as to the validity and application of section 520.32 and that our holding may impact the resolution of the other issues raised in the district court. For that reason, we remand this case to the district court to address or reconsider any remaining issues as the district court may find necessary. It is so ordered. KOGAN, C.J., and OVERTON, SHAW, GRIMES, HARDING and WELLS, JJ., concur.