Court Opinion

ID: 9682428
Source: CourtListenerOpinion
Date Created: 2023-08-24 08:11:09.779041+00
Date Added: 2024-06-11T18:17:39.289355
License: Public Domain

KILGARLIN, Justice,
concurring.
While I concur in the result reached by the majority, I certainly do not do so on the theory that de minimis usurious charges should go unpunished. I arrive at the conclusion in a different manner. The majority holds that charging $2.00 to $3.00 interest above the maximum legal rate is an excusable violation of the usury laws. I agree that this is a penal statute and that as such it must be strictly construed. Hight v. Jim Bass Ford, Inc., 552 S.W.2d 490 (Tex.Civ.App.—Austin 1977, writ ref’d n.r.e.). Strict construction, however, does not entail excusing violations of the law, particularly not the Consumer Credit Code. The code was enacted with a Declaration of Legislative Intent which, among other things, said:
(1) Many citizens of our State are being victimized and abused in various types of credit and cash transactions ....
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(3) [Penalties imposed for usury do not provide effective or workable safeguards ....
(4) These unregulated practices bring great social and economic hardship to many citizens of our State. They impose intolerable burdens on those segments of our society which can least afford to bear them—the uneducated, the unsophisticated, the poor and the elderly.
(5) These facts conclusively indicate a need for a comprehensive code of legislation to clearly define interest and usury, ... and to provide firm and effective penalties for usury and other prohibited practices.
15 Tex.Rev.Civ.Stat.Ann., Tit. 79, § 1, pp. 1-2 (Vernon 1971).
A violation, regardless of how small and insignificant it may seem to the judges on this court, is nevertheless a violation for which penalties have been authorized. Our holding is akin to a court determining that a blood alcohol content of 0.11% is de min-imis and therefore the provisions of Tex. Rev.Civ.Stat.Ann. art. 6701Z-1 should not be enforced. Both are penal statutes designed to combat social ills. Once we have opened the Pandora’s box of line drawing, we will be called upon again and again to decide if this or that amount of excessive interest violates the law. How and where will we draw that line? Is it to be $5.00, $10.00, $15.00, or what? How fares the uneducated, the unsophisticated, the poor and the elderly under our scheme?
With this opinion we have washed away the brightly colored line that the legislature has drawn and substituted our own less distinct definition of usury. While it may seem insignificant to punish a company for charging $3.00 over the legal rate, *56we must recognize that loan companies now deal in volume. If we multiply $3.00 by the number of loans a credit corporation or car dealership establishes, the extra income to the loan company may be enormous.
Although it appalls me to hold that a de minimis violation is no violation, as the majority does, I concur in the result which the majority reaches. I do so, however, based on a mathematical argument which the auto dealership makes. It basically argues that the lower court’s calculations to determine whether usury has been charged were incorrect. Relying on the language of Tex.Rev.Civ.Stat.Ann. art. 5069-7.03(4), Yates argues that the law dictates the maximum annual percentage rate to be charged, not the maximum number of dollars to be charged. The relevant language of article 5069-7.03(4) states:
[I]f the first installment is not payable one month from the date of the contract, the charge may not exceed an amount which, having due regard for the schedule of installment payments, will provide the same effective return as if the contract were payable in substantially equal successive monthly installments beginning one month from the date of the contract.
Effective return is the equivalent of an annual percentage rate or APR. Yates interprets this language to mean that the legislature authorized car dealerships and loan companies to charge an annual percentage rate for contracts with odd days that is the equivalent of the annual percentage rate legally authorized to be charged for contracts without odd days. In this particular instance, the car dealership entered into a contract allowing the consumer forty-two months and six days to pay off the debt. Not only should Yates be able to charge interest for the additional six days during which the consumer had use of the loan principal, but it should also be able to charge a slightly higher amount of interest because the extra interest rate allowed to be charged for those six days will be amortized throughout the contract’s life. Each payment the consumer makes to the dealership will include the interest the consumer would have paid had there been no additional six days in the contract and will include money for the principal. In addition, because of the extra six days, each payment will also include an amount toward the interest chargeable on the six days. That extra amount for that six day interest will decrease the amount the consumer pays on the principal with each payment. Consequently, the consumer will have use of a greater amount of the principal over a longer period of time. The annual percentage rate is designed to compensate for these variations in payment schedules.
Under Yates’ argument, the first thing to be done is to calculate the maximum legal charge. The statute requires the maximum APR for the forty-two month and six day contract to be the rate that would be allowed assuming this were only a forty-two month (with no odd days) contract. This APR is determined by using a table to convert the $7.50/$100/annum ceiling authorized by art. 5069-7.03(1) Class 1 into" an APR. The conversion results in a 13.60671078% maximum APR.
Next, we calculate the annual percentage rate actually charged by the car company. This determination requires the use of a formula provided by Appendix J of Federal Regulation Z of the Federal Truth in Lending laws. The use of this formula requires advanced mathematical calculations called iteration and interpolation. Iteration involves the successive repetition of a mathematical operation, and interpolation is a process which allows a mathematician to define a number .within certain bounds. The calculator continuously plugs a set of two numbers into a formula to narrow these bounds in order to arrive at a precise number. Applying these operations to the formula and the facts in each of these cases, we determine that Yates charged Ramirez an APR on this forty-two month and six day contract of 13.5950953%, which is .0116155% smaller than the maximum legal rate allowable. The car dealership charged below the legal rate on the other *57four loans as well. Because Yates charged under the maximum legal rate, its charges were not usurious.
The method of reaching this result is difficult and complicated; thus it ought to be supported by expert testimony and explanations of the mathematical intricacies involved. Nevertheless, Yates made this argument in its applications for writ of error and provided some guidance, and the consumers never challenged the calculations or the results. The calculations result in a determination that Yates did not overcharge for the loans which it made.
Consequently, the court does Yates an injustice by assuming that it charged a usurious rate of interest when, in fact, it charged an amount of money fully within the amount legally authorized. Rather than diving into the murky depths of a de minimis holding, I believe justice is better achieved by actually examining the merits of the case. In this manner, we preserve the bright line established by the legislature; we preserve the legislative intent of imposing penalties on perpetrators of usury; and, we forestall future questions involving the extent of a de minimis violation. For the reasons above, I concur in the judgment.
SPEARS, J., joins in this concurring opinion.