Court Opinion

ID: 9760224
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:43:27.962083+00
Date Added: 2024-06-11T07:29:09.438708
License: Public Domain

*1039DISSENTING OPINION BY
Judge LEAVITT.
Respectfully, I dissent. Simply, the initiative of the Department of Banking (Department) to abolish the business of payday loans in Pennsylvania has not been authorized by statute.
The Consumer Discount Company Act1 (CDCA) does not authorize the Department’s initiative. Section 3.A provides, in relevant part, as follows:
On and after the effective date of this act, no person shall engage or continue to engage in this Commonwealth, either as principal, employe, agent or broker, in the business of negotiating or making loans or advances of money or credit, in the amount or value of twenty-five thousand dollars ($25,000) or less, and charge, collect, contract for or receive interest, discount, bonus, fees, fines, commissions, charges, or other considerations which aggregate in excess of the interest that the lender would otherwise be permitted by law to charge if not licensed under this act' on the amount actually loaned or advanced, or on the unpaid principal balances when the contract is payable by stated installments[,] except a domestic business corporation organized under or existing by virtue of the Business Corporation Law of this Commonwealth, after first obtaining a license from the Secretary of Banking of the Commonwealth of Pennsylvania, in accordance with the provisions of this act.
7 P.S. § 6203.A (emphasis added). From its enactment in 1937 until last year, the Department understood Section 3.A to require a lender to have a physical presence in Pennsylvania, in the form of a principal, employee, agent or broker, in order for the Department to be authorized to license that lender. Stated otherwise, the Department believed that the CDCA authorized the licensing of those engaged in intrastate, not interstate, lending. Indeed, the Department reiterated this position as recently as 2007 in litigation before this Court.2
■ Cash America, a Delaware-based company licensed by Nevada, does not have a physical presence in Pennsylvania; it makes payday loans available on its website and without geographical boundaries. A. borrower, whether in Pennsylvania or in some other state, must surf the Internet to find Cash America and enter into a loan transaction with it. Once on the Cash America website, the borrower must open an account and fill out an application in order to enter into a loan transaction. By clicking on a box entitled “Rates and Terms,” the borrower identifies his or her *1040state of residence to learn what requirements, if any, apply to the applicant.
In their amici curiae brief, Community Legal Services and the Pennsylvania AFL-CIO point out that Pennsylvanians, and other consumers who apply for a payday loan from Cash America, do so at their peril. First, payday loans are costly, compared to traditional loans.3 Second, amici point out that payday lending can set a trap for the financially vulnerable and unwary who may find themselves in a no-exit cycle of debt. Specifically, by using a paycheck to repay a loan, the payday borrower is left with too little remaining in the paycheck to meet ongoing obligations. The borrower then enters into another payday loan. Soon, instead of living paycheck to paycheck, these borrowers find themselves living payday loan to payday loan.
In July 2008, the Department issued a “Notice to those Engaging or Considering Engaging in Nonmortgage Consumer Lending to Pennsylvania Residents” (Notice), 38 Pa. Bull. 3986 (2008). The Notice stated that
nonmortgage consumer lending to Pennsylvania residents by any means, including by means of the internet or by mail, constitutes engaging in such business “in this Commonwealth” as contemplated by Section 3.A of the Consumer Discount Company Act (CDCA) (7 P.S. § 6203.A).
Id. The Notice explained that the Department had retreated from
[its] prior position, [that] such an entity would not be required to obtain a license under the CDCA to originate nonmort-gage consumer loans by means of the Internet or mail to residents of this Commonwealth in which the charges exceeded 6% simple interest per annum, provided that the entity was licensed or otherwise authorized under the entity’s home state law to engage in this type of lending activity.
Id. The Department’s Notice did not refer specifically to “payday loans,” but it did avert to the need to protect Pennsylvania residents from “certain Internet lending practices.” Given these “practices,” the Notice concluded that
the Department is convinced that a change in policy is warranted, and licensing under the CDCA should be required for all nondepository entities ... lending to Pennsylvania residents in which the charges exceed 6% simple interest per annum.[4]
Id. (emphasis added). A change in policy may well be warranted, and amici make a compelling argument that payday lending should be regulated. However, this “change in policy” requires legislation.
*1041The Department’s attempt to use the CDCA to effect a new regime of regulation does not work. There are several impediments to its attempt.
First, in 1937, when the CDCA was enacted, the jurisprudence of the United States Supreme Court prevented the States from regulating interstate loans under the then-current theory that such action by the States would violate the Commerce Clause in the United States Constitution. U.S.. Const, art. 1, § 8, cl. 3.5 In Crutcher v. Commonwealth, 141 U.S. 47, 11 S.Ct. 851, 35 L.Ed. 649 (1891), the Supreme Court held that a Kentucky statute requiring in-state agents of an out-of-state business to acquire a license before doing business in Kentucky was an unconstitutional attempt to regulate interstate commerce. See also International Text-Book Company v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678 (1910) (holding that a Kansas statute requiring out-of-state businesses to file an information statement in Kansas was an impermissible attempt to regulate interstate commerce). In International Text-Book, the U.S. Supreme Court explained that “[i]t is the established doctrine of this court that a state may not, in any form or under any guise, directly burden the prosecution of interstate business.” Id. at 112, 30 S.Ct. 481. Given this jurisprudence, the legislature limited the scope of the CDCA to intrastate loans, lest the CDCA be challenged as an unconstitutional burden on interstate commerce.
Second, the Department’s 2008 interpretation of the CDCA gives no effect to the words “principal, employe, agent or broker” that appear in Section 3.A. It is axiomatic that “[t]he Legislature cannot be deemed to intend that its language be superfluous and without import.” Robinson v. Abington Education Association, 492 Pa. 218, 234 n. 16, 423 A.2d 1014, 1022 n. 16 (1980) (quotation omitted). By using the language “in this Commonwealth, either as principal, employe, agent or broker,” the legislature was referring to intrastate transactions. Section 3.A of the CDCA, 7 P.S. § 6203.A (emphasis added). This is why the Department, for over 60 years, has publicly expressed the view that the provisions of the CDCA do not apply to out-of-state lenders.
Third, although the CDCA has been amended numerous times, the language of Section 3.A was never amended to extend the reach of the CDCA to out-of-state lenders. Our Supreme Court has explained that when the legislature amends a statute but does not revise or repeal an agency’s interpretation of it, this is evidence that the legislature has acquiesced in the interpretation and that the interpretation is, in fact, the one the legislature intended. Gilligan v. Pennsylvania Horse Racing Commission, 492 Pa. 92, 99, 422 A.2d 487, 491 (1980).
Indeed, the legislature could have easily amended the CDCA to apply to interstate transactions. For example, the Goods and Services Installment Sales Act,6 the Pennsylvania Securities Act of 19727 and the Debt Management Services Act8 all include provisions which specifically make those statutes applicable to transactions *1042made by out-of-state entities with Pennsylvania residents.9 Clearly, the legislature knows how to craft a statute to make it applicable to an out-of-state actor. The legislature did not, however, use this knowledge to amend the CDCA.
Fourth, the Department’s interpretation gives no meaning to the requirement that the lender be a “domestic business corporation organized under ... the Business Corporation Law of this Commonwealth .... ” Section 3.A of the CDCA, 7 P.S. § 6203.A. When one parses Section 3.A, it reads
no person shall engage ... in the business of ... making loans ... and charge ... in excess of the interest that the lender would ... be permitted by law to charge if not licensed ... except a domestic business corporation ... after first obtaining a license....
Id. This language cannot be squared with the possibility that the CDCA regulates interstate lending. Section 3.A requires the lender seeking a license to be organized as a Pennsylvania corporation; this is a requirement that could only be imposed on a Pennsylvania lender. Othei'-wise, compliance would require the out-of-state lender to set up a Pennsylvania subsidiary, which would violate the Dormant Commerce Clause.
The Department contends that the fact that the Internet did not exist in 1937 should not have any bearing on the construction of the CDCA. I agree with this premise. The Internet is only one of several means of interstate communication. Others include mail, telephone and telegraph, which did exist in 1937. However, the Department uses the Internet as a smokescreen to obscure the words in Section 3.A that can only be understood to limit the scope of the CDCA to intrastate loan transactions.
For example, acknowledging that the CDCA addresses those who do business “in this Commonwealth” as a “principal, employe, agent or broker,” the Department explains that Cash America is doing business in Pennsylvania as a principal. By this logic, Cash America, a Nevada-licensed lender, is present electronically in Pennsylvania. If that is so, then the loan transaction is an intrastate transaction, with both the lender and borrower “in this Commonwealth.” This circular conclusion underscores the fact that Section 3.A was never intended to apply to interstate loans.
In short, it is irrelevant that Cash America is making loans by means of the Internet. The point is that the CDCA does not, and was never intended to, apply to interstate transactions, whether effected by the mail, by telephone or by the Internet. The Department has not thought through the issues presented by the language of Section 3.A.10 The legislature needs to amend the CDCA to expand its scope to interstate consumer loan transac*1043tions that involve Pennsylvania residents, if it so desires that result.
Indeed, our Supreme Court has cautioned against an agency ushering in a new regulatory regime that is directly contrary to a long-standing prior regulatory position, without authorizing legislation. In Malt Beverages Distributors Association v. Pennsylvania Liquor Control Board, - Pa. -, 974 A.2d 1144 (2009), our Supreme Court refused to uphold the issuance of a retailer’s license to Sheetz to sell take-out beer. It explained:
While a policy determination in this regard may well be accomplished by our legislature, it is not our role to sanction such a momentous transformation. Uniontoum Newspapers, Inc. v. Roberts, 576 Pa. 231, 839 A.2d 185, 194 (2003) (providing that policy considerations do not lie with the courts, but are reserved for the legislative body to resolve.)
Id., at 1154 (emphasis added). Likewise, the “momentous transformation” sought here by the Department of Banking should be accomplished by the legislature and not by the courts.
As a final point, the relief ordered by the majority exceeds the bounds of a declaratory judgment action. The majority “declares that Cash America’s practice of making payday loans to Pennsylvania residents is not authorized by the laws of this Commonwealth and that such lending specifically violates the CDCA and [the Loan Interest and Protection Law].” Majority op. at 1038. The Department agreed to delay the effective date of its enforcement initiative date until this Court decided whether the Department’s Notice correctly construed the CDCA, so Cash America cannot be in violation of a yet-to-be initiated enforcement action. Further, it is a misdemeanor to violate the licensing requirements of the CDCA. The judgment of the majority, as stated, prejudges the outcome of a criminal case, which, inter alia, violates the rules of criminal procedure as well as due process.
The issues surrounding payday loans should be presented to the legislature. The legislature can then decide what is best for Pennsylvania residents and determine whether to outlaw entirely or to regulate payday lending practices. Legislation is the means necessary to usher in the “change in policy” sought by the Department as well as amici curiae. For the Department to outlaw payday loans by administrative fiat violates the long-standing principle that an “administrative agency can only exercise those powers which have been conferred upon it by the Legislature in clear and unmistakable language.” Aetna Casualty and Surety Co. v. Insurance Department, 536 Pa. 105, 118, 638 A.2d 194, 200 (1994) (citation omitted).
I would grant Cash America’s Application for Summary Relief.
Judge COHN JUBELIRER and Judge SIMPSON join in this dissent.

. Act of April 8, 1937, P.L. 262, as amended, 7 P.S. §§ 6201-6219.

. The Department took this position in Pennsylvania Department of Banking v. NCAS of Delaware, LLC, d/b/a Advance America Cash Advance Centers, 931 A.2d 771 (Pa.Cmwlth. 2007), affirmed, 596 Pa. 638, 948 A.2d 752 (2008). The Department's brief, filed in that case, stated as follows:
In [several interpretivel letters, the Department stated that out-of-state lenders who make loans to Pennsylvania residents, but have no physical presence in the Commonwealth, need not be licensed under the CDCA. However, these letters were not a novel administrative interpretation suggestive of any change in underlying public policy against usury. Rather, the Department's view that the CDCA does not apply to out-of-state lenders is based on the plain language of Section 3.A of the CDCA, which states that lenders must be licensed under the statute only when they are “in this Commonwealth” and that the Secretary of Banking may only grant licenses, to "domestic business corporations” or, by application of 15 Pa.C.S. §§ 4161-62, to domesticated foreign corporations.
Appendix to Respondent's Motion for Summary Relief at A-171 — A—172.

. Cash America makes loans in small amounts, i.e., the lesser of 25 percent of the borrower's gross monthly income or $750, and for a short duration. Its fees do not exceed 25 percent of the loan amount, which is costly. The Department challenges these fees as constituting an interest rate of 1140.63 percent for an 8-day loan, 651.79 percent for a 14-day loan and 260.71 percent for a 35-day loan. These are annual percentage rates. Further, these proffered rates do not consider the fact that to process any loan, regardless of its size, a lender incurs certain irreducible costs.
Cash America asserts that it cannot make loans to Pennsylvania residents under the limits of the CDCA, should the Department's new policy become effective. Cash America Brief at 16. Accordingly, the Department's "new policy,” as affirmed by the majority, puts Cash America out of business in Pennsylvania.

. Section 201 of the Loan Interest and Protection Law, 41 P.S. § 201, provides that 6 percent interest is the maximum interest rate that can be charged on non-mortgage loans of $50,000 or less that are made by an unlicensed lender.

.It states:
The Congress shall have Power ... [t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.
U.S. Const, art. 1, § 8, cl. 3.

. Act of October 28, 1966, Special Sess. No. 1, P.L. 55, as amended, 69 P.S. §§ 1101-2303.

. Act of December 5, 1972, P.L. 1280, as amended, 70 P.S. §§ 1-101-1-703.

. Act of October 9, 2008, P.L. 1421, 63 P.S. §§ 2401-2449.

. See Section 103 of the Goods and Sendees Installment Sales Act, 69 P.S. § 1103 (Act applies if a Pennsylvania buyer agrees to buy, regardless of the situs of the contract); Section 702 of the Pennsylvania Securities Act, 70 P.S. § 1-702 (Act applies when a sale or offer to sell or purchase or offer to purchase occurs in Pennsylvania); and Section 48 of the Debt Management Services Act, 63 P.S. § 2448 (Act is applicable to any debt management or debt settlement agreement entered into with a Pennsylvania resident).

. The Department concedes that if a Pennsylvania resident physically travels to Nevada to effect a loan from Cash America, the CDCA does not apply. One wonders why not? Particularly where the borrower thereafter communicates with Cash America by Internet, phone or mail from Pennsylvania. What if the Pennsylvania borrower goes to New Jersey and uses the Internet to close the deal with Cash America? These issues need to be considered and addressed in legislation.