Opinion ID: 1592069
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Heading: The Alabama Small Loan Act

Text: The first Model Uniform Small Loan Act was drafted in 1916. Alabama adopted a version of the Uniform Small Loan Act in 1959. The Banking Department argues that payday loans are disguised as check-cashing transactions in order to evade the Alabama Small Loan Act. Although the term loan is not defined in the Small Loan Act, the word has a commonly understood meaning  to advance money for a period of time with an obligation to repay, with or without interest. The Banking Department contends that its position is consistent with other state consumer-finance regulations and that the federal government has already amended its consumer-finance regulations to include payday loans as credit transactions subject to the Truth-In-Lending Act (TILA), 15 U.S.C. § 1601 et seq. Courts in other jurisdictions have found payday loans to be subject to consumer-finance statutes. The Banking Department also contends that the consent order did not provide a safe harbor from liability for payday loans that violate the Alabama Small Loan Act. The customers argue that the trial court erred in ruling that it would be a violation of the separation-of-powers doctrine for it to hold that payday loans fall within the scope of the Alabama Small Loan Act. The customers contend that the transactions are subterfuges to evade the application of the Small Loan Act. The customers note that the trial court did not hold that the transactions were not loans, rather the court held that it would be judicial activism to include the transactions within the meaning of the Small Loan Act when the term loan was not defined in the Small Loan Act. In determining whether the deferred-presentment transactions are subject to the Small Loan Act, we note the following rule of statutory construction: `The fundamental rule of statutory construction is to ascertain and give effect to the intent of the legislature in enacting the statute. Words used in a statute must be given their natural, plain, ordinary, and commonly understood meaning, and where plain language is used a court is bound to interpret that language to mean exactly what it says. If the language of the statute is unambiguous, then there is no room for judicial construction and the clearly expressed intent of the legislature must be given effect.' Ex parte Master Boat Builders, Inc., 779 So.2d 192, 196 (Ala.2000) (quoting IMED Corp. v. Systems Eng'g Assocs. Corp., 602 So.2d 344, 346 (Ala.1992)). The Alabama Small Loan Act is a remedial statute, Echols v. Star Loan Co., 290 Ala. 76, 274 So.2d 51 (1973), and should be liberally construed to effect its purpose and to advance the remedy for which it was enacted. We are guided by the legislature's findings of fact and declaration of intent set out in the Alabama Small Loan Act: (a) The Legislature finds as facts and determines that: (1) There exists among citizens of this state a widespread demand for small loans. The scope and intensity of this demand have been increased progressively by many social and economic forces; (2) The expense of making and collecting small loans, which are usually made on comparatively unsubstantial security to wage earners, salaried employees and other persons of relatively low incomes, is necessarily high in relation to the amounts lent; (3) Such loans cannot be made profitably under the limitations imposed by existing laws relating to interest and usury. These limitations have tended to exclude lawful enterprises from the small loan field. Since the demand for small loans cannot be legislated out of existence, many small borrowers have been left to the mercy of those willing to bear the opprobrium and risk the penalties of usury for a large profit; (4) Interest charges are often disguised by the use of subterfuges to evade the usury law. These subterfuges are so complicated and technical that the usual borrower of small sums is defenseless even if he is aware of the usurious nature of the transaction and of his legal rights; (5) As a result, borrowers of small sums are being exploited to the injury of the borrower, his dependents and the general public. Charges are generally exorbitant in relation to those necessary to the conduct of a legitimate small loan business, trickery and fraud are common and oppressive collection practices are prevalent; and (6) These evils characterize and distinguish loans of $749.00 or less. Legislation to control this class of loans is necessary to protect the public welfare. (b) It is the intent of the Legislature in enacting this law to bring under public supervision those engaged in the business of making such loans, to eliminate practices that facilitate abuse of borrowers, to establish a system of regulation for the purpose of insuring honest and efficient small loan service and of stimulating competitive reductions in charges, to allow lenders who meet the conditions of this chapter a rate of charge sufficiently high to permit a business profit and to provide the administrative machinery necessary for effective enforcement. § 15-18-2, Ala.Code 1975. This Court, in interpreting the Alabama Small Loan Act, has focused on the purpose behind the Act. In New Finance Ltd. v. Ellis, 284 Ala. 374, 225 So.2d 784 (1969), the issue was whether the Alabama Small Loan Act prohibited a licensee under the Act from incorporating into a loan agreement a provision that the borrower will pay all expenses of collecting the debt, including a reasonable attorney fee. In addition to charging an interest rate, the Small Loan Act expressly provided for an insurance and a recording charge. The Court stated: We judicially know that prior to the Alabama Small Loan Act in 1959, the small loan operator went unrestrained by an effective statutory regulation. Those whose chief motivation was greed preyed upon the ignorant, the uninformed, and the necessitous. For decades concerned citizens and organizations made strenuous but futile efforts to have enacted legislation looking toward elimination of this evil. For some years, it was one of the main projects of the Junior Bar Section of the Alabama Bar. The efforts of all of these interested combinations eventually came to fruition in the passage of the Small Loan Law. The amounts of the loans made by the small loan operator is often small, $10.00, $20.00, $50.00, etc. An interest rate of 8% per annum would not be economically feasible when considered in the light of office expenses, bookkeeping, and collection costs, plus the fact that many of those seeking small loans are poor credit risks. The thinking of those experts in the field of small loans has been that the interest rate on such loans should be sufficiently high to enable a lender to have a fair return on his operations, and at the same time effectively limit the charges permitted to be imposed by the lender. The increase in the permissible rate of interest should be sufficiently high to take care of the costs of the lender's operations, including the credit risks involved. For this quid, a quo of higher charges in the form of full protection should be thrown around the borrower. See Euel Screws, Report of Committee on Small Loans Studies, Junior Bar Section, 20 Alabama Lawyer. It was the almost unanimous conclusion of virtually all of the studies made in this field through the years that the two factors above (interest rate, and borrower protection) could best be obtained by a realistic interest rate on small loans, and a strict and fixed limitation on all permissible charges additional to such higher interest. 284 Ala. at 375-76, 225 So.2d at 784-785. The Court concluded that the legislature's intent in fixing the interest at a higher rate than other loans that the lender should pay the collection costs: [T]he clear and unambiguous language of the Act in reference to additional permissible charges, necessarily dictates the conclusion that the inclusion of a provision for payment of attorney's fees in case of default is prohibited by the explicit terms of the Act. 284 Ala. at 377, 225 So.2d at 787. The applicability of the Alabama Small Loan Act has been addressed in cases involving transactions other than deferred-presentment transactions. Pendleton v. American Title Brokers, Inc., 754 F.Supp. 860 (S.D.Ala.1991), involved a transaction in which the customer pledged title to an automobile as collateral for a loan, and the lender then leased the automobile back to the customer. The customer argued that the lender violated TILA and the Alabama Small Loan Act. With regard to the state-law claim, the lender argued that he had not violated the Alabama Small Loan Act because he was in the pawnbroking business, which § 5-18-4(b) expressly excludes from the provisions of the Act. Interpreting the Alabama Small Loan Act, the federal district court concluded that because the lender did not retain possession of the collateral as security for its loans, but rather made its money by leasing the customer their own automobile, the lender was not in the traditional practice of pawnbroking in which the pawnbroker retains possession of the collateral. In Floyd v. Title Exchange & Pawn of Anniston, Inc., 620 So.2d 576 (Ala.1993), the lender was in the business of pawning automobile certificates of title. The sole issue on appeal was whether a person can pawn an automobile certificate of title and retain possession of the automobile. The answer depended on whether the legislature intended an automobile certificate of title to be tangible personal property within the meaning of the Alabama Pawnshop Act. The supervisor of the Bureau of Loans argued that the pawnbroker was making small loans without a license and was charging excessive rates of interest, in violation of the Alabama Small Loan Act. Floyd held that money-lending transactions involving the transfer of automobile certificates of title for the purpose of giving security are pawn transactions and not small loan transactions governed by the provisions of the Alabama Small Loan Act. Courts in Alabama have also addressed deferred-presentment transactions in the context of arbitration and class actions. [4] In Alabama Catalog Sales v. Harris, 794 So.2d 312 (Ala.2000), the plaintiff brought a class action against catalogue retailers, alleging that by making illegal payday loans, charging usurious interest, and operating without a license the retailers had violated the Alabama Small Loan Act. The retailers moved to compel arbitration. The plaintiff argued that her contracts with the retailers were void because of illegality and thus that the arbitration clauses in those contracts were also void. The retailers argued that the contracts were not void and that the arbitrator, not the trial court, should decide the question of the legality of the contracts. The trial court denied the motions to compel. This Court stated: The defendants argue that Harris failed to present substantial evidence of illegality.... We conclude that Harris presented sufficient evidence indicating that the contracts are illegal, and, therefore, are void and unenforceable. Likewise, Harris argues, the unenforceability of the contracts extends to the agreements to arbitrate. We agree. Thus, if the contracts are void and unenforceable, no claims arising out of or relating to the contracts are subject to arbitration.... The record contains sufficient evidence indicating that the underlying contracts violate the Alabama Small Loan Act.... 794 So.2d at 316-17. In Ex parte Speedee Cash of Alabama, Inc., 806 So.2d 389 (Ala.2001), Speedee Cash requested mandamus relief to stay a class action filed in Chilton County in 1999, after the complaint in the present action was filed in Montgomery County. The plaintiffs claimed violations of the Alabama Small Loan Act. A plurality of this Court concluded that the stay should be granted because the defendant classes in the Chilton County action and in this action were the same or at least involved a substantial degree of overlap and one lender was included in both defendant classes. Speedee Cash is one of the appellees in the present appeals. In Alternative Financial Solutions, LLC v. Colburn, 821 So.2d 981 (Ala.2001), the consumers sued Alternative Financial Solutions (AFS) and Money Service Centers (MSC) in Tuscaloosa and Madison Counties, respectively, arguing that AFS and MSC had violated the Alabama Small Loan Act. AFS and MSC moved to enforce arbitration provisions in their contracts with the consumers. Both trial courts denied the motions; AFS and MSC appealed separately; and the appeals were consolidated. This Court held that the transactions did not substantially affect interstate commerce and affirmed the trial courts' orders denying arbitration. AFS and MSC intervened in the present case and have been operating in accordance with the consent order since 1999. In Voyager Life Insurance Co. v. Hughes, 841 So.2d 1216 (Ala.2001), the plaintiffs were sold credit-disability insurance in conjunction with consumer loans. The loan agreement and insurance policy both contained an arbitration clause. The trial court determined that the defendants had waived their right to arbitration as to all the plaintiffs. This Court held that the defendants had substantially invoked the litigation process as to certain plaintiffs but reversed as to other plaintiffs who were added later in the litigation. The Court made no determination as to whether the Alabama Small Loan Act or the Mini-Code applied to the loan agreements or the policies because that argument was not raised at the trial court level. Bess v. Check Express, 294 F.3d 1298 (11th Cir.2002), involved a class action brought by customers against check-cashing companies, alleging violations of state and federal law arising out of deferred-presentment transactions. The customers argued that the transactions were small loans governed by the Alabama Small Loan Act and that the check-cashing companies had violated the Act by making loans without the requisite license and at usurious rates of interest. One of the named plaintiff/customers, Luna Colburn, had signed an arbitration agreement in connection with her transaction. The check-cashing companies sought to compel arbitration. Colburn argued that the arbitration agreement was unenforceable because, she argued, the underlying deferred-presentment transaction violated the Alabama Small Loan Act and was thus illegal. The United States Court of Appeals for the Eleventh Circuit concluded that because allegations of illegality go to the deferred payment transactions generally, and not to the arbitration agreement specifically, an arbitrator and not a federal court should determine whether the underlying transactions are illegal and void. 294 F.3d at 1305. [5] In 1994, Kenneth McCartha, the acting superintendent of banks, requested an opinion of the attorney general as to whether deferred-presentment transactions were subject to the Alabama Small Loan Act. The attorney general stated that they were. The attorney general opinion stated: [I]t is the opinion of this office that the holding of the checks ... by a check-cashing company is really a lending function. Check-cashing companies are making loans when they charge a fee and agree to hold the check or defer presentment of the check until sufficient funds are in the customer's account. Thus, the transaction ... is governed by the Alabama Small Loan Act, Section 15-18-1, et seq., and the Mini-Code, Section 15-19-1, et seq., Code of Alabama 1975, and is subject to the Truth in Lending disclosure requirements. Ala. Op. Att'y Gen. 210 (July 7, 1994). While an opinion of the attorney general is not binding, it can constitute persuasive authority. Alabama-Tennessee Natural Gas Co. v. Southern Natural Gas Co., 694 So.2d 1344, 1346 (Ala.1997). Although this is the first case in Alabama to address the laws applicable to deferred-presentment transactions in other than the context of arbitration and class actions, other jurisdictions have addressed such transactions in light of their consumer statutes. One of the first cases we have found addressing payday loans is Commonwealth v. Bar D. Financial Services, Inc., (Va.Cir.Ct. March 21, 1994), a decision by a circuit court in Virginia. The issue in Bar D was whether the transactions constituted loans in violation of the Virginia Consumer Finance Act, § 6.1-244 et seq., Va.Code. [6] The customer testified that a typical transaction would involve the customer's writing a $100 post-dated check to the defendant with both the customer and the defendant having knowledge that the funds in the customer's checking account at the time the check was issued were insufficient. The defendant would pay the customer $83 in cash and agree to defer presentment of the check to a later date, generally corresponding to the customer's next payday. The defendant argued that it was buying checks at a discount rather than extending credit. The circuit court, applying the definition of loan found in Black's Law Dictionary, concluded that the transactions were loans subject to the Virginia Consumer Finance Act. In Hamilton v. York, 987 F.Supp. 953 (E.D.Ky.1997), customers of a check-cashing company sued the company, alleging violations of Kentucky's Usury Statute and Consumer Loan Act and TILA, among others. The company moved to dismiss, arguing that it was charging not interest but only service fees for cashing checks and that such activity was permissible under the check-cashing provisions of the Kentucky statute. The customers would give the company a check in exchange for cash, and the company would hold the check for two weeks before presenting it for payment or before requiring the customers to pick up the check by paying the face amount. The fee for holding the check for two weeks was 20 percent of the sum advanced in cash, which amounted to an annual percentage rate of 520 percent. The federal court, analyzing the transaction, quoted Hurt v. Crystal Ice & Cold Storage Co., 215 Ky. 739, 286 S.W. 1055, 1056-57 (1926): `The cupidity of lenders, and the willingness of borrowers to concede whatever may be demanded or to promise whatever may be exacted in order to obtain temporary relief from financial embarrassment, as would naturally be expected, have resulted in a great variety of devices to evade the usury laws; and to frustrate such evasions the courts have been compelled to look beyond the form of the transaction to its substance, and they have laid it down as an inflexible rule that the mere form is immaterial, but that it is the substance which must be considered. No case is to be judged by what the parties appear to be or represent themselves to be doing, but by the transaction as disclosed by the whole evidence; and, if from that it is in substance a receiving or contracting for the receiving of usurious interest for a loan or forbearance of money the parties are subject to the statutory consequences, no matter what device they may have employed to conceal the true character of their dealings.' 987 F.Supp. at 955-56. The federal court, relying on the definition of loan found in Black's Law Dictionary, concluded that the transactions were short-term loans and not service fees. The company also argued that the check-cashing statutes encompassed short-term loans. The court noted that if the company's interpretation was correct, then the company would not have to stop with short-term loans; they could make long-term loans so long as they did so under the guise of cashing a check. The court denied the motion to dismiss, finding that the customers' complaint was sufficient to state a claim for relief. In 1998, the Kentucky Legislature amended its statutes to expressly address deferred-presentment transactions. In 1999, the Supreme Court of Kentucky answered a certified question from a federal district court regarding payday loans. The check-cashing company argued that its payday loans were subject to the traditional check-cashing statute, Ky.Rev.Stat. § 368, and not subject to Kentucky's Usury Statute, Ky.Rev.Stat. Chapter 360. White v. Check Holders, Inc., 996 S.W.2d 496 (Ky.1999). The question to be answered was: When a check cashing company licensed under KRS 368 et seq. accepts and defers deposit on a check pursuant to an agreement with the maker of the check, is the service fee charged by the check cashing company a `service fee' and not `interest' under KRS 368.100(2), or is the fee `interest' which is subject to the usury laws and disclosure provisions in KRS Chapter 360? 996 S.W.2d at 497. The Kentucky Court concluded that the statute allowing check-cashing businesses to charge fees without implicating the usury laws did not encompass fees for deferred-presentment transactions. In Watson v. State, 235 Ga.App. 381, 509 S.E.2d 87 (1998), the defendants were convicted of violating the Georgia Racketeer Influenced & Corrupt Organizations Act (RICO), Ga.Code Ann. § 16-14-1 et seq., stemming from their joint operation of a pawnshop and a check-cashing business. Customers would obtain a cash loan and write a check to the pawnshop for the full amount of the loan plus a 20 percent fee, which was classified as 1 percent interest and 19 percent storage fee. The customer's check was left as collateral for the loan along with an item of nominal value, such as a jar of dirt or a pocket lighter, which were deemed pledged goods pursuant to the regulatory scheme applicable to pawnbrokers in Georgia. If the loans were not repaid or renewed, the defendant would then prosecute the customer. The Court of Appeals of Georgia affirmed the defendants' convictions under RICO for making small loans thinly disguised as `pawns.' 235 Ga.App. at 385, 509 S.E.2d at 91. The federal court in Cashback Catalog Sales, Inc. v. Price, 102 F.Supp.2d 1375 (S.D.Ga.2000), denied the check-cashing company's summary-judgment motion. The customer claimed that the company had violated Georgia's usury statute, TILA, and federal racketeering laws. The court held that fact issues precluded a summary judgment. The court, in analyzing the transaction, concluded that a reasonable trier of fact could find the sale of gift certificates for a merchandise catalogue made in conjunction with payday loans amounted to illegal loans where the customer stated that he was never given a catalogue from which to order and was never told how to order from the catalogue. Also, the check-cashing company advertised its services in the telephone directory under loans despite stating on its contracts that [w]e do not make loans, nor do we charge interest. 102 F.Supp.2d at 1377. The Supreme Court of Indiana in Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572 (Ind.2001), answered a certified question of Indiana law arising out of numerous cases pending in the federal courts. In Indiana, the interest rate on small loans is capped at 36 percent per year under the Indiana Uniform Consumer Credit Code (IUCCC). The IUCCC also allows lenders to charge a minimum loan finance charge of $33. The parties in the federal cases agreed that a 15-day loan of $200 with a minimum loan finance charge of $33 represents an annual percentage rate of 402 percent. Reading the two provisions of the IUCCC together, the lenders contended that they were entitled to receive from a borrower a minimum loan finance charge in the amount of $33 even if that amount exceeds the amount that would result from the imposition of the maximum annual percentage rate of 36 percent. The Indiana Supreme Court concluded that the lenders' interpretation  allowing a minimum finance charge of $33 for a loan that otherwise would generate what amounts to pennies in interest  was inconsistent with the purposes and policies of the IUCCC and created an absurd result which the legislature could not have intended when the statute was enacted or when the various amendments were adopted. 753 N.E.2d at 577. In Betts v. Ace Cash Express, Inc., 827 So.2d 294 (Fla.Dist.Ct.App.2002), customers of a check-cashing business brought a class action against the business, alleging that its practices violated Florida's usury laws. The Fifth District Court of Appeals of Florida ultimately held that the deferred-presentment transactions did not constitute loans. The court noted that in 1995 the Florida Check Cashiers Association (FCCA) requested an opinion from the Florida Banking Department, which opined that the Money Transmitters' Code, Fla. Stat. ch. 560, enacted in 1994, did not expressly prohibit deferred-presentment transactions, and in 1997, the Florida Banking Department issued rules expressly approving deferred-presentment transactions, subject to certain restrictions. The court also noted that in 2001, the Florida Legislature had amended Chapter 560 specifically to address deferred-presentment transactions. The court stated: After considering the Department's advisory opinion solicited by the FCCA in advance of any deferred presentment transactions between the Plaintiffs and the Defendants, the subsequent authorization of the practice by the Florida Legislature, and the absence of any prohibition against the practice in the interim we disagree with the Plaintiffs' characterization of the initial transaction as a loan. 827 So.2d at 297. However, the Court of Appeals for the Fourth District in Betts v. McKenzie Check Advance of Florida, LLC, 879 So.2d 667 (Fla.Dist.Ct.App.2004), held that deferred-presentment transactions violated Florida's usury laws. In McKenzie Check Advance, the same plaintiff sued another check-cashing company with whom she had transacted business, alleging that the company's deferred-presentment practices violated Florida's usury laws. The court stated: For purposes of the analysis, the characterization of the transactions is important. There is no question that what takes place is something more than simple check cashing. In a deferred presentment transaction, the customer is advanced money in exchange for a check which the lender agrees not to immediately cash. In exchange for agreeing to defer presentment of the check, the lender exacts a fee. As Betts argues in this case, one might wonder why anyone would utilize the services of a `check casher' and pay for what he or she could otherwise obtain for free at a bank. Clearly, it is because the customer does not have the funds readily available to honor the check. Thus, there can be no question that what takes place is essentially an advance of money or a short-term loan. See Party Yards, Inc. v. Templeton, 751 So.2d 121, 122 (Fla. 5th DCA 2000) (`In usury cases, courts look to substance over form because the purpose of usury statute is to protect the needy borrower by penalizing the unconscionable lender.'). 879 So.2d at 672. The District Court for the Fourth District concluded that the Florida Banking Department had exceeded its authority in 1997 by approving deferred-presentment transactions, and the court held that such transactions occurring pre-2001 (the date the Florida Legislature addressed deferred-presentment transactions) were subject to Florida's usury laws. The Florida Supreme Court has granted certiorari review in McKenzie. McKenzie Check Advance of Florida, LLC v. Betts, 904 So.2d 431 (Fla.2005)(table). Because the Alabama Small Loan Act is a remedial statute, we must interpret it to promote, rather than to frustrate, its objectives. The mischief sought to be remedied by the Alabama Small Loan Act is predatory lending schemes practiced upon the financially strapped consumer who lacks access to mainstream banking institutions. Section 5-18-4(c) provides: (c) Evasions. The provisions of subsection (a) of the section [requiring a small-loan license] shall apply to any person who seeks to evade its application by any device, subterfuge or pretense whatsoever including, but not thereby limiting the generality of the foregoing: the loan, forbearance, use of sale of credit (as guarantor, surety, endorser, comaker or otherwise), money, insurance, goods or things in action; the use of collateral or related sales or purchases of goods or services or agreements to sell or purchase, whether real or pretended; and, receiving or charging compensation for goods or services, whether or not sold, delivered or provided and the real or pretended negotiation, arrangement or procurement of a loan through any use of activity of a third person, whether real or fictitious. Although the legislature did not specifically address deferred-presentment transactions when it adopted the Alabama Small Loan Act in 1959, it clearly contemplated subterfuges and evasions used to attempt to avoid the protections afforded consumers under that Act. The trial court correctly points out that the term loan is not defined in the Alabama Small Loan Act. [7] A statute, however, is not unconstitutionally vague because the legislature did not define all the words or terms used in the statute, see, e.g., Ex parte City of Orange Beach Bd. of Adjustment, 833 So.2d 51 (Ala.2002)(failure to adequately define structurally unsound and dilapidated in a zoning ordinance did not make the ordinance void for vagueness), nor is it subverting the intent of the legislature to apply the plain, ordinary, and commonly understood meaning of a word, see, e.g., Ex parte Etowah County Bd. of Educ., 584 So.2d 528, 530 (Ala.1991)(It is ... well accepted that this Court[, in interpreting a statute,] will give words used in a statute their `natural, plain, ordinary, and commonly understood meaning.'). `[W]hen a term is not defined in a statute, the commonly accepted definition of the term should be applied.' Ex parte Gadsden Reg'l Med. Ctr., 904 So.2d 234, 236 (Ala.2004)(quoting Bean Dredging, L.L.C. v. Alabama Dep't of Revenue, 855 So.2d 513, 517 (Ala.2003)). This is not the first time this Court has reviewed an undefined term in a consumer-protection statute. In Gibbs-Hargrave Shoe Co. v. Peek, 212 Ala. 633, 634, 103 So. 672, 673 (1925), the issue focused on the meaning of the word note in a local money-lenders act applying to Jefferson, Walker, Morgan, and Etowah Counties, where the question raised was whether the act covers a loan secured or evidenced by the promissory note of the borrower. The Peek Court stated: The act is aimed at the business of that class of money brokers or lenders commonly known as `loan sharks,' whose favorite waters are the habitat of needy and untutored wage-earners.  The language of the statute indicates a studied intent to make it broadly inclusive to prevent evasion, and become effective as a police measure to suppress the evil. In keeping with this purpose, we hold that the word `note,' as used in the title and body of the act, has its usual meaning and includes promissory notes given as security or evidence of the debt. The case here furnishes a fair illustration of the reason for general terms. The plaintiff speaks of the papers signed by him as notes, but it is clear enough they were assignments of his wages as security for loans in fact, but having a concluding clause, declaring the transaction an `absolute purchase' of wages, and disclaiming a loan; this, perhaps, to give the transaction such form as to bring it within the rule of Max J. Winkler Brokerage Co. v. Darby, 167 Ala. 223, 52 So. 23 [(1910)]. The record discloses the carrying on of such business in spite of the statute, the lender charging and collecting, for the use of the money, 20 per cent. of the amount of the loan at the end of every two weeks, or, as found by the trial court, at the rate of 520 per cent. per annum.  In construing a statute framed to prevent an abuse like this, we seek to give its language such effect as will best express the intent of the lawmakers. Cooledge v. Collum, 211 Ala. 203, 100 So. 143 [(1924)]; Alabama Brokerage Co. v. Boston, 18 Ala.App. 495, 93 So. 289 [(1922)]; Ex parte Alabama Brokerage Co., 208 Ala. 242, 94 So. 87 [(1922)]; In re Home Discount Co. (D.C.) 147 F. 538, 544 [(1906)]. 212 Ala. at 634-35, 103 So. at 673-74 (emphasis added). Black's Law Dictionary 936 (6th ed.1990) defines loan as delivery by one party and receipt by another party of a sum of money upon agreement, express or implied, to repay it with or without interest. The flat-fee, service-charge, catalogue-sales, and phone-card-club scenarios described in the complaint and supplemental pleadings all involve transactions in which a customer receives a cash advance on the day the customer writes a personal check, [8] but the check is held for a short period before it is presented to the bank for deposit. The fees and charges on the deferral are effectively interest paid for the use of the cash advance, regardless of whether there are direct fees and charges paid or whether those charges are in the form of a catalogue gift certificate or a telephone calling card of questionable worth. A check cashing transaction becomes a loan when both parties explicitly agree to defer presentment of the check for a period of time. Lisa Blaylock Moss, Modern Day Loan Sharking: Deferred Presentment Transactions & The Need for Regulation, 51 Ala. L.Rev. 1725, 1733-34 (2000) (footnote omitted). We note that the trial court's reliance on Floyd, supra, 620 So.2d 576, for the proposition that the legislature did not intend to include deferred-presentment transactions as loan transactions subject to the Alabama Small Loan Act is misplaced. Floyd did not involve the issue whether the transaction constituted a loan under the Alabama Small Loan Act. Instead, the Floyd Court had to determine which of two regulatory statutes  the Alabama Small Loan Act or the Alabama Pawnshop Act  applied. The legislature specifically excluded pawn transactions from coverage under the Small Loan Act. The Floyd Court concluded that an automobile certificate of title was not excluded from coverage by the Pawnshop Act because title was a chose in action and that, therefore, the Pawnshop Act, and not the Small Loan Act, applied. Notably, in reaching its conclusion, the Court looked to Black's Law Dictionary to glean the legislature's intent when it used the term tangible personal property in the Pawnshop Act. We find cases on Alabama's usury laws to be helpful because it is clear that the fees charged in association with the deferred-presentment transactions at issue exceed the maximum interest rate allowed by the Alabama Small Loan Act. It has long been the public policy of this State to condemn usurious contracts as `tainted with an evil ... intent' and `offensive to the policy and positive mandate of the law.' State ex rel. Embry v. Bynum, 243 Ala. 138, 144, 9 So.2d 134, 139 (1942) (citations omitted). In Bynum, the State argued that equity jurisdiction extends not only to protect property rights and interest but also to protect the public from wrongs and to abate public nuisances, even in the absence of an express statutory definition or denunciation of an act or conduct to be a public nuisance. The Court stated: [T]he state in pursuance of its established public policy in protecting the interest of its indigent and helpless citizens against the ravages of the loan shark pest, the economic prosperity of its industrial areas, the furtherance of public faith in the integrity and impartiality of its law courts, in the administration of justice therein, may invoke the aid of its courts of equity to enjoin the unlawful practices of the defendants as a public nuisance, restrain and enjoin them from proceeding in the law courts to enforce said void contracts, and keep them in subjugation to the law. 243 Ala. at 146, 9 So.2d at 142. In Cochran v. State ex rel. Gallion, 270 Ala. 440, 119 So.2d 339 (1960), the Court held that charging and retaining exorbitant credit-insurance premiums on loans was an attempt to evade the usury laws: `The courts will closely scrutinize every suspicious transaction in order to ascertain its real nature. The law is diligent to discern any artifice, device or scheme to cover up usury. In determining whether the contract is tainted with usury, the court will look to the whole transaction.... It will consider the surrounding circumstances, the occurrence at the time of the making of the agreement, and the instruments drawn. The court will look to and construe the transaction by its substance and effect rather than its form, and if, from a consideration of the whole transaction, it becomes apparent that there exists a corrupt intent to violate the usury laws, the plain duty of the court is to inflict the penalty imposed by the statute.' 270 Ala. at 444, 119 So.2d at 342 (quoting Grider v. Calfee, 242 Ala. 50, 52, 4 So.2d 474, 475-76 (1941)). We have no difficulty concluding that the deferred-presentment transactions in this case are loans subject to the protections of the Alabama Small Loan Act. The question that must now be answered is whether those deferred-presentment transactions conducted pursuant to the terms of the consent order were, as the trial court held, lawful. The Banking Department contends that the consent order was in essence an injunction to prevent the Banking Department from preventing the check cashers from making payday loans until the end of the next legislative session or until final adjudication of the case upon the merits. In order to obtain the Banking Department's agreement not to shut down their operations, the check cashers agreed to guidelines for conducting deferred-presentment transactions to control the worst abuses. The Banking Department contends that the consent order did not authorize lenders to charge fees that exceeded what is permitted by the Alabama Small Loan Act nor did it provide the check cashers with a safe harbor from past or future liability. The customers argue that the consent order does not apply to them because they were not parties to the agreement between the Banking Department and the check cashers that resulted in the order and cannot be bound by its terms. The ACCA did not file a brief in this Court, although several individual check cashers did. Individual check cashers and MSC argue the deferred-presentment transactions they engaged in were legal because they never received a cease and desist order from the Banking Department and they were allowed to intervene and were ordered to comply with the consent order. AFS and MSC argue that the Banking Department and the customers are estopped from accepting the benefits of the consent order and then disputing the legality of the transactions conducted pursuant to that order. Express Check Services contends that it did not conduct any deferred-presentment transactions before the consent order was entered in 1998 and has done business only pursuant to that order. Express Check Services contends that the Banking Department cannot now attack the validity of transactions conducted in accordance with the consent order when it agreed to the order. It also argues that the customers cannot now challenge the consent order because they agreed to move the trial court to extend the order until the case was resolved in the courts or until the issue was resolved by the legislature. Express Check Services argues that its due-process rights will be violated if it is held liable for business conducted pursuant to the consent order. Sprague Enterprises, Inc., an individual check casher, argues that the trial court was correct in concluding that deferred-presentment transactions are not subject to the Alabama Small Loan Act and in finding that the transactions conducted pursuant to the consent order were indeed lawful. Speedee Cash contends that its position is unique because the trial court dismissed all claims against Speedee Cash after Speedee Cash had satisfied the Banking Department that it had ceased offering deferred-presentment transactions. Speedee Cash notes that the customers never challenged its dismissal. Speedee Cash argues that because the customers were not granted full intervention, they cannot complain about Speedee Cash's dismissal. Because the principal parties have dismissed Speedee Cash and because the customers are limited in their intervention, Speedee Cash contends, this Court should recognize its dismissal. Speedee Cash also argues that because it started conducting the transactions under the consent order and ceased performing those transaction before the consent order expired, Speedee Cash's transactions were legal. Speedee Cash argues that equitable estoppel should prevent the Banking Department and the customers from now contending that the transactions conducted pursuant to the consent order are illegal. Speedee Cash's argument that the customers should not complain of its dismissal is without merit because Speedee Cash's motion to dismiss was limited to the defendants, and the customers are not defendants in this action. A consent order embodies an agreement of the parties and thus in some respects is contractual in nature. But it is an agreement that the parties desire and expect will be reflected in, and be enforceable as, a judicial decree that is subject to the rules generally applicable to other judgments and decrees. Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 378, 112 S.Ct. 748, 116 L.Ed.2d 867 (1992). Consent decrees are entered into by parties to a case after careful negotiation has produced agreement on their precise terms. The parties waive their right to litigate the issues involved in the case and thus save themselves the time, expense, and inevitable risk of litigation. Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with the litigation. Thus the decree itself cannot be said to have a purpose; rather the parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as the respective parties have the bargaining power and skill to achieve. For these reasons, the scope of a consent decree must be discerned within its four corners, and not by reference to what might satisfy the purposes of one of the parties to it. Because the defendant has, by the decree, waived his right to litigate the issues raised, a right guaranteed to him by the Due Process Clause, the conditions upon which he has given that waiver must be respected, and the instrument must be construed as it is written, and not as it might have been written had the plaintiff established his factual claims and legal theories in litigation. United States v. Armour & Co., 402 U.S. 673, 681-82, 91 S.Ct. 1752, 29 L.Ed.2d 256 (1971) (footnote omitted). The consent order in the present case established a set of guidelines or standards under which the Banking Department agreed to allow check cashers to operate during the pendency of this litigation or until corrective legislation was passed, whichever came first. The Banking Department acted outside of its authority in allowing the check cashers to operate under the terms of the consent order. In other words, the Banking Department exceeded its authority in agreeing not to enforce the provisions of the Alabama Small Loan Act against the check cashers. See Keith v. Volpe, 118 F.3d 1386 (9th Cir.1997)(consent decree could not be interpreted to supplant California law because the state agency would not have had the authority to agree to such a decree); Perkins v. City of Chicago Heights, 47 F.3d 212, 216 (7th Cir. 1995)(While parties can settle their litigation with consent decrees, they cannot agree `to disregard valid state laws,' ... and cannot consent to do something together that they lack the power to do individually.); Kasper v. Board of Election Comm'rs, 814 F.2d 332, 341-42 (7th Cir.1987)(A consent decree is not a method by which state agencies may liberate themselves from the statutes enacted by the legislature that created them.). However, the Banking Department, as the State's banking and loan regulatory agency, cannot now claim that it was giving the check cashers a temporary respite from having their businesses terminated when it is the Banking Department's duty to protect the citizens of Alabama from unscrupulous lenders. (Banking Department's brief at p. 67). That is, the Banking Department cannot now complain that the actions taken by the check cashers in accordance with the consent order violated the Alabama Small Loan Act because the Banking Department essentially condoned those actions in agreeing not to enforce the Small Loan Act. The Banking Department and the check cashers received judicial approval of the consent order; deferred-presentment transactions have been conducted in accordance with the terms of the consent order from 1998 to 2003. Although a consent order is a voluntary agreement between the parties, it is also a judicially approved order. Wyatt v. King, 803 F.Supp. 377 (M.D.Ala.1992). Consent decrees `have attributes both of contracts and of judicial decrees,' a dual character that has resulted in different treatment for different purposes. Local Number 93, Int'l Ass'n of Firefighters v. City of Cleveland, 478 U.S. 501, 519, 106 S.Ct. 3063, 92 L.Ed.2d 405 (1986). The Banking Department took a position in seeking approval of the consent order upon which the trial court relied. Judicial estoppel, as asserted by the check cashers, looks to the connection between the litigant and the judicial system. In Ex parte First Alabama Bank, 883 So.2d 1236, 1246 (Ala.2003), we embrace[d] the factors set forth in New Hampshire v. Maine [, 532 U.S. 742 (2001),] and join[ed] the mainstream of jurisprudence in dealing with the doctrine of judicial estoppel. We held: The United States Supreme Court in New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001), recently observed that `[t]he circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle' and then identified several factors as informative in determining the applicability of the doctrine of judicial estoppel. 532 U.S. at 750-51, 121 S.Ct. 1808 (quoting Allen v. Zurich Ins. Co., 667 F.2d 1162, 1166 (4th Cir. 1982)). The Court held that for judicial estoppel to apply (1) `a party's later position must be clearly inconsistent with its earlier position'; (2) the party must have been successful in the prior proceeding so that `judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or second court was misled.' (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir.1982)); and (3) the party seeking to assert an inconsistent position must `derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.' 532 U.S. at 750-51, 121 S.Ct. 1808. No requirement of a showing of privity or reliance appears in the foregoing statement of factors to consider in determining the applicability of the doctrine of judicial estoppel. 883 So.2d at 1244-45. In the present case, the Banking Department's position on appeal  that it can now seek to enforce the terms of the Alabama Small Loan Act  is inconsistent with its earlier position in seeking approval of the consent order that allowed the check cashers to operate outside the Alabama Small Loan Act. [9] The consent order, by its own terms, ceased to operate in 2003 with the enactment by the legislature of the Deferred Presentment Services Act, which now governs deferred-presentment transactions. The Banking Department would impose an unfair detriment on the check cashers if it is now allowed to seek to enforce the Alabama Small Loan Act as to deferred-presentment transactions that occurred while the consent order was in effect. We note that the doctrine of judicial estoppel has been applied to bar the government from repudiating the terms of a consent order. See United States v. Sherwin-Williams Co., 165 F.Supp.2d 797 (C.D.Ill.2001)(government was judicially estopped from recovering additional cleanup costs for environmental contamination from non-settling potentially responsible parties where consent decree with settling potentially responsible parties resolved all the government's claims for past and future costs of the cleanup). Accordingly, the Banking Department is estopped from enforcing the provisions of the Alabama Small Loan Act as to those deferred-presentment transactions that occurred while the consent order was in effect and that were conducted in accordance with the terms of the consent order. The customers argue that they are not bound by the terms of the consent order because they were not parties to the consent order. They also argue that compliance with the consent order does not protect the check cashers from civil liability. It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process. Hansberry v. Lee, 311 U.S. 32, 40, 61 S.Ct. 115, 85 L.Ed. 22 (1940). In Local No. 93, supra, black and Hispanic firemen sued the City of Cleveland under Title VII of the Civil Rights Act of 1964. A union representing white firemen intervened, and subsequently the minority firemen and the city agreed to a consent decree over the union's objections that Title VII barred the court from granting relief that benefited individuals who were not actual victims of discriminatory practices. The union argued that the minority firemen and the city could not enter into a consent decree without the union's consent. The United States Supreme Court stated: [P]arties who choose to resolve litigation through settlement may not dispose of the claims of a third party, and a fortiori may not impose duties or obligations on a third party, without the party's agreement. A court's approval of a consent decree between some of the parties therefore cannot dispose of the valid claims of nonconsenting intervenors; if properly raised, these claims remain and may be litigated by the intervenor. And, of course, a court may not enter a consent decree that imposes obligations on a party that did not consent decree.  478 U.S. at 529, 106 S.Ct. 3063 (citations omitted; emphasis added). In the present case, the customers are not bound by the terms of the consent order. The customers were not parties to the action when the consent order was entered. The consent order does not purport to govern the rights or obligations of the customers in seeking redress for violations of the Alabama Small Loan Act. The customers attempted to intervene to present their objections to the consent order. The customers' intervention was limited to a declaration of rights as to the legal issue of the applicability of the Alabama Small Loan Act to [the check cashers'] check cashing transactions as outlined in the [check cashers'] complaint. The customers could not seek monetary damages in this action, but the trial court did not preclude the filing of separate lawsuits. The check cashers' compliance with the consent order does not prevent them from incurring liability to the customers, who are nonparties to the agreement that resulted in the consent order. We find the following to be helpful: The central feature of any consent decree is that it is not an adjudication on the merits. The decree may be scrutinized by the judge for fairness prior to his approval, but there is not a contest or decision on the merits of the issues underlying the lawsuit. Such a decree binds the signatories, but cannot be used a shield against all future suits by nonparties seeking to challenge conduct that may or may not be governed by the decree. Nonparties have an independent right to an adjudication of their claim that a defendant's conduct is unlawful. Suppose, for example, that the government sues a private corporation for alleged violations of the antitrust laws and then enters into a consent decree. Surely, the existence of that decree does not preclude a future suit by another corporation alleging that the defendant company's conduct, even if authorized by the decree, constitutes an antitrust violation. The nonparty has an independent right to bring his own private antitrust action for treble damages or injunctive relief. Ashley v. City of Jackson, 464 U.S. 900, 902, 104 S.Ct. 255, 78 L.Ed.2d 241 (1983)(Rehnquist, J., joined by Brennan, J., dissenting from denial of certiorari review).