Court Opinion

ID: 7821622
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:56:28.74473+00
Date Added: 2024-06-11T16:30:45.163419
License: Public Domain

George Rose Smith, Justice, concurring. I agree that the “discount points,” amounting to $2,130, did not constitute “interest,” because that amount was paid by the sellers to the lender at a time when the purchaser as yet owed nothing. The discount points were therefore a deduction from principal, like the 1% origination fee. If, however, the majority imply that the discount points are not even to be considered in testing the transaction for usury, then I doubt if the lender itself seriously makes that contention. What happened is essentially undisputed. The buyers and sellers first signed an offer-and-acceptance form reciting a purchase of $43,500, with a provision that the sellers agreed to pay a 7% discount point on the loan value of the land. It turned out that the loan value was not sufficient to enable the buyers to obtain the necessary loan with the discount point and with the agreed down payment of $4,500. Consequently, 78 days later the parties signed an identical substituted offer and acceptance in which the purchase price was reduced to $40,000, with the same 7% discount point on the loan value and the same $4,500 down payment. In consummating the loan the lender provided the buyers with a Truth-In-Lending disclosure statement reciting the amount of the loan and the prepaid finance charges as follows: Amount of Loan $35,500.00 Prepaid Finance Charge Loan fee, discount of similar charges 2,130.00 1% origination fee 355.00 Photos and schedule 8.50 Interest adjustment 129.45 Total prepaid finance charge 2,622,95 Amount financed 32,877.05 Thus the lender admitted in the disclosure statement that the discount point of $2,130 was a prepaid finance charge to be deducted from the amount of the loan. No other conclusion is really possible, because all this was done by prearrangement. The net result is exactly the same as if on the closing date the buyers, the sellers, and the lender had all sat down together to close the transaction. The lender would then have advanced the net loan, including the $2,130 discount, to the buyers; the buyers would have handed the money to the sellers; and the sellers would have paid the discount of $2,130 back to the lender. The testimony does not show that the $2,130 was actually passed from hand to hand, but the result is the same either way, because the discount was a paper transaction understood and agreed to by all concerned. Even so, the loan was not usurious. The payments upon a loan of $32,877.05, payable at 10% interest in 360 monthly installments, would be $288.48 a month. Lake’s Monthly Installment and Interest Tables, p. 448 (6th ed., 1970). Here the contract payments, as set forth in the disclosure statement, in the promissory note to the lender, and in the mortgage, were only $279-39 a month. Hence the interest rate was less than 10% per annum and not usurious under Arkansas law.