Taking the pay out of payday loans: putting an end to the usurious and unconscionable interest rates charged by payday lenders

University of Cincinnati Law Review

Volumn 69, Issue 4, 2001, Pages 1257-1288

  Bruch, Charles A ^a  

^a NONE

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EID: 0035568295     PISSN: 00096881     EISSN: None     Source Type: Journal    
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References (389)

1. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042 (M.D. Tenn. 1999).
2. Id. at 1046 n.4.
3. See id. at 1051.
4. See id. at 1046.
5. See id.
6. See id.
7. See id.
8. See id.
9. See id.
10. Lynn Drysdale & Kathleen E. Keest, The Two-Tiered Consumer Financial Services Marketplace: The Fringe Banking System and Its Challenge to Current Thinking About the Role of Usury Laws in Today's Society, 51 S.C.L. REV. 589, 604-05 (2000). Two-Tiered System provides an insightful distinction between the primary credit market, consisting of banks and credit unions, which typically make relatively low-risk, low-interest loans to consumers to finance home and automobile purchases, and the secondary credit market which is comprised of high-interest, high-risk lenders offering products such as rent-to-own, title-pawns, and payday loans. Id.
11. See id. at 602.
12. See id.
13. See KATHLEEN E. KEEST & ELIZABETH RENUART, THE COST OF CREDIT: REGULATION AND LEGAL CHALLENGES 279 (2d ed. 2000).
14. See id. at 280. Other more thorough and time-consuming credit checks are usually not required. See id. Some payday lenders use a computer system called "Tele-Track" to help ascertain whether borrowers have outstanding payday loans with other lenders. See Senate Forum on Short-Term, High-Interest Paycheck Advances, Before the Senate Comm. on Governmental Affairs, 106th Cong. (1999) (forum held by Senator Joseph Lieberman), available at 1999 WL 1242421, at *44 [hereinafter Lieberman Transcript].
15. See id. at 280. Other more thorough and time-consuming credit checks are usually not required. See id. Some payday lenders use a computer system called "Tele-Track" to help ascertain whether borrowers have outstanding payday loans with other lenders. See Senate Forum on Short-Term, High-Interest Paycheck Advances, Before the Senate Comm. on Governmental Affairs, 106th Cong. (1999) (forum held by Senator Joseph Lieberman), available at 1999 WL 1242421, at *44 [hereinafter Lieberman Transcript].
16. See Drysdale & Keest, supra note 10, at 600-01.
17. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1051 (M.D. Tenn. 1999).
18. See Drysdale & Keest, supra note 10, at 601.
19. See id.
20. See id.
21. See id.
22. See id.
23. Gutierrez v. Devon Fin. Servs., Inc., 99 C 2647, 1999 U.S. Dist. LEXIS 19738, at *2 (N.D. III. Sept. 29, 1999). This comment was an assertion by the plaintiff which, as the court acknowledged, was not denied by the defendant. See id.
24. See 12 U.S.C. § 86 (l994).
25. See KEEST & RENUART, supra note 13, at 42.
26. See id.
27. See Party Yards, Inc. v. Templeton, 751 So. 2d 121, 122-23 (Fla. Dist. Ct. App. 2000).
28. See id. at 123.
29. See id.
30. See id.
31. See FLA. STAT. ANN. § 687.03 (West 1999).
32. See Party Yards, 751 So. 2d at 123. This case defines the elements of usury as follows: "the party must show: (1) an express or implied loan; (2) a repayment requirement; (3) an agreement to pay interest in excess of the legal rate; and (4) a corrupt intent to take more than the legal rate for the use of the money loaned." Id.
33. See KEEST & RENUART, supra note 13, at 45.
34. See Drysdale & Keest, supra note 10, at 559. This list is not intended to be exhaustive, but is instead exemplary of the types of specific statutes governing transactions for which usury is a concern.
35. See Jan Lindsey, Pennsylvania Puts a Lid on High Check-Cashing Fees (visited Feb. 28, 2001) 〈http://www.bankrate.com/brm/news/chk/19980227.asp?keywords〉.
36. See Jean Ann Fox, Safe Harbor for Usury: Recent Developments in Payday Lending, September 1999 (visited Feb. 28, 2001) 〈http://www.consumerfed.org/safeharbor.pdf〉.
37. See KEEST & RENUART, supra note 13, at 524-25.
38. See Berger v. State, 910 P.2d 581, 584 (Alaska 1996). The Uniform Small Loan Laws were drafted between 1916 and 1942 to stem the proliferation of loan sharking in the United States. These statutes authorize lenders to exceed usury rates and charge as much as 36% APR for small consumer loans. See Payday Loans: A Form of Loansharking The Problem, Legislative Strategies, A Model Act (visited Mar. 1, 2001) http://www.consumerlaw.org/PayDayLoans/pay-menu.hlm〉.
39. See KEEST & RENUART, supra note 13, at 281-82; Consumer Federation of America, States Grant Payday Lenders a Safe Harbor from Usury Laws (Sept. 7, 1999) 〈http://www.consumerfed.org/safeharpr.pdf〉; The PIRGs and Consumer Federation of America, Show Me the Money!: A Survey of Payday Lenders and Review of Payday Lender Lobbying in State Legislatures (visited Feb. 20, 2001) 〈http://www.pirg.org/reports/consumer/payday/index.html〉 (hereinafter Show Me the Money].
40. See KEEST & RENUART, supra note 13, at 281-82; Consumer Federation of America, States Grant Payday Lenders a Safe Harbor from Usury Laws (Sept. 7, 1999) 〈http://www.consumerfed.org/safeharpr.pdf〉; The PIRGs and Consumer Federation of America, Show Me the Money!: A Survey of Payday Lenders and Review of Payday Lender Lobbying in State Legislatures (visited Feb. 20, 2001) 〈http://www.pirg.org/reports/consumer/payday/index.html〉 (hereinafter Show Me the Money].
41. See KEEST & RENUART, supra note 13, at 281-82; Consumer Federation of America, States Grant Payday Lenders a Safe Harbor from Usury Laws (Sept. 7, 1999) 〈http://www.consumerfed.org/safeharpr.pdf〉; The PIRGs and Consumer Federation of America, Show Me the Money!: A Survey of Payday Lenders and Review of Payday Lender Lobbying in State Legislatures (visited Feb. 20, 2001) 〈http://www.pirg.org/reports/consumer/payday/index.html〉 (hereinafter Show Me the Money].
42. See KEEST & RENUART, supra note 13, at 280-81; Show Me the Money, supra note 38, at 23.
43. See KEEST & RENUART, supra note 13, at 280-81; Show Me the Money, supra note 38, at 23.
44. See KEEST & RENUART, supra note 13, at 280-81. This category includes Alabama, Alaska, Arizona, Connecticut, Georgia, Indiana, Maine, Maryland, Massachusetts, Michigan, New Jersey, New York, North Dakota, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, Texas, Vermont, Virginia, Virgin Islands, and West Virginia. See id.; Show Me the Money, supra note 38, at 23.
45. See KEEST & RENUART, supra note 13, at 280-81. This category includes Alabama, Alaska, Arizona, Connecticut, Georgia, Indiana, Maine, Maryland, Massachusetts, Michigan, New Jersey, New York, North Dakota, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, Texas, Vermont, Virginia, Virgin Islands, and West Virginia. See id.; Show Me the Money, supra note 38, at 23.
46. See KEEST & RENUART, supra note 13, at 280-81. This category includes Alabama, Alaska, Arizona, Connecticut, Georgia, Indiana, Maine, Maryland, Massachusetts, Michigan, New Jersey, New York, North Dakota, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, Texas, Vermont, Virginia, Virgin Islands, and West Virginia. See id.; Show Me the Money, supra note 38, at 23.
47. See KEEST & RENUART, supra note 13, at 280-81; Show Me the Money, supra note 38, at 23.
48. See KEEST & RENUART, supra note 13, at 280-81; Show Me the Money, supra note 38, at 23.
49. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23. Included in this category are Delaware, Idaho, Illinois, New Hampshire, New Mexico, Oregon, South Dakota, and Wisconsin. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
50. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23. Included in this category are Delaware, Idaho, Illinois, New Hampshire, New Mexico, Oregon, South Dakota, and Wisconsin. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
51. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23. Included in this category are Delaware, Idaho, Illinois, New Hampshire, New Mexico, Oregon, South Dakota, and Wisconsin. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
52. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23. Included in this category are Delaware, Idaho, Illinois, New Hampshire, New Mexico, Oregon, South Dakota, and Wisconsin. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
53. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
54. See KEEST & RENUART, supra note 13, at 281; Show Me the Money, supra note 38, at 23.
55. See KEEST & RENUART, supra note 13, at 281-82; Show Me the Money, supra note 38, at 23. This category is made up of the following states: Arkansas, ARK. CODE ANN. §§ 23-52-101 to 23-52-117 (LEXIS through all 2000 legislation); California, CAL. CIV. CODE § 1789.33 (West 1998); Colorado, COLO. REV. STAT. §§ 5-3.1-101 to 5-3.1-121 (2000); District of Columbia, D.C. CODE ANN. §§ 26-1101 to 26-1123 (Supp. 2001); Florida, FLA. STAT. ANN. §§ 560.101-560.310 (1997); Hawaii, 1999 Haw. Sess. Laws, Act 141, 1 I; Iowa, IOWA CODE §§ 533D.1-533D.16 (Supp. 2001); Kansas, KAN. STAT. ANN. § 16a-2-404 (1995); Kentucky, KY. REV. STAT. ANN. §§ 368.010 to 368.991 (Banks-Baldwin 1998); Louisiana, LA. REV. STAT. ANN. §§ 9:3578.1-3578.8 (West Supp. 2001); Minnesota, MINN. STAT. ANN. § 47.60 (Supp. 2001); Mississippi, MISS. CODE ANN. §§ 75-67-501 to 75-67-539 (2000); Missouri, Mo. ANN. STAT. § 408.500 (Supp. 2001), MO. CODE REGS. ANN., tit. 4, §§ 11.010-.020 (LEXIS through rules effective Feb. 28, 2001); Montana, MONT. CODE ANN. §§ 31-1-701 to 31-1-725 (Supp. 1999); Nebraska, NEB. REV. STAT. §§ 45-901 to 45-929 (Michie 1998); Nevada, NEV. REV. STAT. §§ 604-010 to 604-180 (1999); North Carolina, N.C. GEN. STAT. §§ 53-275 to 53-289 (1999); Ohio, OHIO REV. CODE ANN. §§ 1315.35 to 1315.44 (West Supp. 2001); Oklahoma, OKLA. STAT. tit. 14A, § 3-508B (1996); South Carolina, S.C. CODE ANN. §§ 34-39-110 to 34-39-260 (Law. Co-op. Supp. 2001); Tennessee, TENN. CODE ANN. §§ 45-17-101 to 45-17-119 (2000); Utah, UTAH CODE ANN. §§ 7-23-101 to 7-23-110 (Supp. 2000); Washington, WASH. REV. CODE ANN. §§ 31.45.010 to 31.45.900 (West Supp. 2001); and Wyoming, WYO. STAT. ANN. §§ 40-14-362 to 40-14-364 (Lexis 1999). See KEEST & RENUART, supra note 13, at 557-66.
56. See KEEST & RENUART, supra note 13, at 281-82; Show Me the Money, supra note 38, at 23. This category is made up of the following states: Arkansas, ARK. CODE ANN. §§ 23-52-101 to 23-52-117 (LEXIS through all 2000 legislation); California, CAL. CIV. CODE § 1789.33 (West 1998); Colorado, COLO. REV. STAT. §§ 5-3.1-101 to 5-3.1-121 (2000); District of Columbia, D.C. CODE ANN. §§ 26-1101 to 26-1123 (Supp. 2001); Florida, FLA. STAT. ANN. §§ 560.101-560.310 (1997); Hawaii, 1999 Haw. Sess. Laws, Act 141, 1 I; Iowa, IOWA CODE §§ 533D.1-533D.16 (Supp. 2001); Kansas, KAN. STAT. ANN. § 16a-2-404 (1995); Kentucky, KY. REV. STAT. ANN. §§ 368.010 to 368.991 (Banks-Baldwin 1998); Louisiana, LA. REV. STAT. ANN. §§ 9:3578.1-3578.8 (West Supp. 2001); Minnesota, MINN. STAT. ANN. § 47.60 (Supp. 2001); Mississippi, MISS. CODE ANN. §§ 75-67-501 to 75-67-539 (2000); Missouri, Mo. ANN. STAT. § 408.500 (Supp. 2001), MO. CODE REGS. ANN., tit. 4, §§ 11.010-.020 (LEXIS through rules effective Feb. 28, 2001); Montana, MONT. CODE ANN. §§ 31-1-701 to 31-1-725 (Supp. 1999); Nebraska, NEB. REV. STAT. §§ 45-901 to 45-929 (Michie 1998); Nevada, NEV. REV. STAT. §§ 604-010 to 604-180 (1999); North Carolina, N.C. GEN. STAT. §§ 53-275 to 53-289 (1999); Ohio, OHIO REV. CODE ANN. §§ 1315.35 to 1315.44 (West Supp. 2001); Oklahoma, OKLA. STAT. tit. 14A, § 3-508B (1996); South Carolina, S.C. CODE ANN. §§ 34-39-110 to 34-39-260 (Law. Co-op. Supp. 2001); Tennessee, TENN. CODE ANN. §§ 45-17-101 to 45-17-119 (2000); Utah, UTAH CODE ANN. §§ 7-23-101 to 7-23-110 (Supp. 2000); Washington, WASH. REV. CODE ANN. §§ 31.45.010 to 31.45.900 (West Supp. 2001); and Wyoming, WYO. STAT. ANN. §§ 40-14-362 to 40-14-364 (Lexis 1999). See KEEST & RENUART, supra note 13, at 557-66.
57. See KEEST & RENUART, supra note 13, at 281-82; Show Me the Money, supra note 38, at 23. This category is made up of the following states: Arkansas, ARK. CODE ANN. §§ 23-52-101 to 23-52-117 (LEXIS through all 2000 legislation); California, CAL. CIV. CODE § 1789.33 (West 1998); Colorado, COLO. REV. STAT. §§ 5-3.1-101 to 5-3.1-121 (2000); District of Columbia, D.C. CODE ANN. §§ 26-1101 to 26-1123 (Supp. 2001); Florida, FLA. STAT. ANN. §§ 560.101-560.310 (1997); Hawaii, 1999 Haw. Sess. Laws, Act 141, 1 I; Iowa, IOWA CODE §§ 533D.1-533D.16 (Supp. 2001); Kansas, KAN. STAT. ANN. § 16a-2-404 (1995); Kentucky, KY. REV. STAT. ANN. §§ 368.010 to 368.991 (Banks-Baldwin 1998); Louisiana, LA. REV. STAT. ANN. §§ 9:3578.1-3578.8 (West Supp. 2001); Minnesota, MINN. STAT. ANN. § 47.60 (Supp. 2001); Mississippi, MISS. CODE ANN. §§ 75-67-501 to 75-67-539 (2000); Missouri, Mo. ANN. STAT. § 408.500 (Supp. 2001), MO. CODE REGS. ANN., tit. 4, §§ 11.010-.020 (LEXIS through rules effective Feb. 28, 2001); Montana, MONT. CODE ANN. §§ 31-1-701 to 31-1-725 (Supp. 1999); Nebraska, NEB. REV. STAT. §§ 45-901 to 45-929 (Michie 1998); Nevada, NEV. REV. STAT. §§ 604-010 to 604-180 (1999); North Carolina, N.C. GEN. STAT. §§ 53-275 to 53-289 (1999); Ohio, OHIO REV. CODE ANN. §§ 1315.35 to 1315.44 (West Supp. 2001); Oklahoma, OKLA. STAT. tit. 14A, § 3-508B (1996); South Carolina, S.C. CODE ANN. §§ 34-39-110 to 34-39-260 (Law. Co-op. Supp. 2001); Tennessee, TENN. CODE ANN. §§ 45-17-101 to 45-17-119 (2000); Utah, UTAH CODE ANN. §§ 7-23-101 to 7-23-110 (Supp. 2000); Washington, WASH. REV. CODE ANN. §§ 31.45.010 to 31.45.900 (West Supp. 2001); and Wyoming, WYO. STAT. ANN. §§ 40-14-362 to 40-14-364 (Lexis 1999). See KEEST & RENUART, supra note 13, at 557-66.
58. See James J. White, The Usury Law Debate: Article the Usury Trompe l'Oeil, 51 S.C.L. REV. 445 (2000). This article provides a detailed analysis of exportation, which is the means by which banks offer loans to customers in different states at interest rates restricted only by the state in which the bank is located. See id. at 452.
59. See James J. White, The Usury Law Debate: Article the Usury Trompe l'Oeil, 51 S.C.L. REV. 445 (2000). This article provides a detailed analysis of exportation, which is the means by which banks offer loans to customers in different states at interest rates restricted only by the state in which the bank is located. See id. at 452.
60. See id.
61. See Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDA), 12 U.S.C. § 1735f-7a (1994); Alternative Mortgage Transaction Parity Act of 1982, 12 U.S.C. §§ 3801-3806 (1994).
62. See Federal Deposit Insurance Act, 12 U.S.C. §§ 1811-1835a (1994).
63. See Federal Credit Union Act, 12 U.S.C. §§ 1785 (1994).
64. See National Bank Act, 12 U.S.C. § 85 (1994).
65. See Interstate Banking and Branching Efficiency Act of 1994, 12 U.S.C. §§ 36, 43 (1994).
66. See KEEST & RENUART, supra note 13, at 282.
67. See 12 U.S.C. § 85.
68. See Marquette Nat'l Bank v. First of Omaha Serv. Corp., 439 U.S. 299, 319 (1978); KEEST & RENUART, supra note 13, at 82.
69. See Marquette Nat'l Bank v. First of Omaha Serv. Corp., 439 U.S. 299, 319 (1978); KEEST & RENUART, supra note 13, at 82.
70. KEEST & RENUART, supra note 13, at 82.
71. See 12 U.S.C. § 1831(d) (1994) (state banks); 12 U.S.C. § 1785 (1994) (credit unions).
72. 15 U.S.C. §§ 1601-1693r (1994).
73. See KEEST & RENUART, supra note 13, at 59.
74. See Jackson v. American Loan Co., 99 C 2067, 1999 U.S. Dist. LEXIS 9143, at *9 (N.D. III. June 10, 1999), aff'd, 202 F.3d 911 (7th Cir. 2000).
75. See 12 C.F.R. 1 226.4(2001). Precise methods for determining these figures are provided in TILA and Federal Reserve Board "Regulation Z." See id. §§ 226.1-226.33. Regulation Z defines consumer credit as "credit offered or extended to a consumer primarily for personal, family, or household purposes." Id. § 226.2(a)(12). For a detailed list of items that are included and excluded from calculation of the APR, see id. § 226.4(b) (inclusions) and id. 1 226.4(c) (exclusions). To see how the APR is calculated, see 15 U.S.C. § 1638(a) (1994).
76. l2 C.F.R. 1 226.2(a)(14) (2001).
77. See id. The absence of this weapon from the litigation battlefield is baffling.
78. See 12 C.F.R. pt. 226, Supp. 1, § 226.2(9)(14)(2) (2001). This official staff commentary to Regulation Z became mandatory in October, 2000, but it does not change the law; it simply illustrates that payday loans should be considered consumer credit. Since § 226.2(a)(14) has defined credit as a deferred transaction, and because this statute has been in place since the first payday loan store was set up in 1993, it will be interesting to see if this official staff comment, which is a restatement of the statute, has an impact on the payday loan industry. See id.
79. 18 U.S.C.S. § 1961 n.1 (1991).
80. Id.
81. Id. n.92.
82. See Drysdale & Keest, supra note 10, at 642; KEEST & RENUART, supra note 13, at 281.
83. See Drysdale & Keest, supra note 10, at 642; KEEST & RENUART, supra note 13, at 281.
84. See Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 448-49 (D.C. Cir. 1965).
85. See U.C.C. 1 2-302 (1989).
86. See id.; Hume v. United States, 132 U.S. 406 (1889); M.A. Mortènson Co. v. Timberline Software Corp., 998 P.2d 305 (Wash. 2000); Woodson v. Hopkins, 85 Miss. 171(1904); Barker v. Altegra Credit Co., 251 B.R. 250 (E.D. Penn. 2000); Mallory v. Mortgage Am., Inc., 67 F. Supp. 2d 601 (S.D. W. Va. 1999).
87. See supra note 70.
88. 2 JOSEPH M. PERILLO & HELEN HADJIYANNAKIS BENDER, CORBIN ON CONTRACTS, 1 5.15 n.1 (1995) (quoting Harlan Fisk Stone, Book Review, 12 COLUM. L. REV. 756, 756 (1912)).
89. RESTATEMENT (SECOND) OF CONTRACTS § 208(c)(1981).
90. See id. § 208(a).
91. See id.
92. See id. § 208.
93. See id. § 208(c).
94. See id. § 208 cmt. a.
95. Id. § 208(b) (quoting Hume v. United States, 132 U.S. 406, 415 (1889)).
96. See 17A AM. JUR. 2D Contracts 1 295, at 294-97 (1991); 2 PERILLO & BENDER, supra note 72, at 74-80.
97. See 17A AM. JUR. 2D Contracts 1 295, at 294-97 (1991); 2 PERILLO & BENDER, supra note 72, at 74-80.
98. See M.A Mortenson Co., v. Timberline Software Corp., 998 P.2d 305, 314 (Wash. 2000); IOWA CODE ANN. § 537.5108 (West 1997). Some courts refuse to accept the concept of procedural and substantive unconscionability, choosing to instead look at both the reasonable expectations of the weaker party and any oppressive behavior demonstrated by the stronger party. These courts feel that the definition of "procedural unconscionability" is effectively identical to the definition of "adhesion contract," and they feel that this similarity renders every adhesion contract nearly unconcionable on a per se basis. Unwilling to make this sweeping condemnation, the courts have elected to disregard the concept of procedural and substantive unconscionability instead. See California Grower's Ass'n v. Bank of Am., 27 Cal. Rptr. 2d 396, 401 (Cal. Ct. App. 1994); see also 15 WALTER H. E. JAEGER, WILLISTON ON CONTRACTS § 1763A, at 213-15 (3d ed. 1972).
99. M.A Mortenson Co., 998 P.2d at 315.
100. See Wernly v. Anapol, 91 B.R. 702, 704 (Bankr. E.D. Pa. 1988).
101. See Carboni v. Arrospide, 2 Cal. App. 4th 76, 81 (Cal. Ct. App. 1991).
102. See Woodson v. Hopkins, 85 Miss. 171, 181 (1904).
103. See KEEST & RENUART, supra note 13, at 533.
104. See A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 487 (Cal. Ct. App. 1982).
105. See id.; KEEST & RENUART, supra note 13, at 533.
106. See A & M Produce Co., 135 Cal. App. 3d at 487; KEEST & RENUART, supra note 13, at 532.
107. See A & M Produce Co., 135 Cal. App. 3d at 487; KEEST & RENUART, supra note 13, at 532.
108. See A & M Produce Co., 135 Cal. App. 3d at 487.
109. See KEEST & RENUART, supra note 13, at 533; M.A Mortenson Co., v. Timberline Software Corp., 998 P.2d 305, 315 (Wash. 2000); Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C. Cir. 1965).
110. KEEST & RENUART, supra note 13, at 531-32.
111. See Walker-Thomas Furniture, 350 F.2d at 449.
112. Adhesion contracts are form contracts offered on a "'take it or leave it' basis." Broemmer v. Abortion Servs., 840 P.2d 1013, 1015-16 (Ariz. 1992). The stronger party in the transaction usually has considerable leverage, and the only way the weaker party can obtain the goods or services at issue is by agreeing to the terms of the contract. There usually is no negotiation involved with adhesion contracts. Furthermore, adhesion contracts often contain terms beneficial only to the stronger party. See id.
113. See California Grower's Ass'n v. Bank of Am., 27 Cal. Rptr. 2d 396, 401 (Cal. Ct. App. 1994).
114. See A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 486-87 (Cal. Ct. App. 1982).
115. See KEEST & RENUART, supra note 13, at 42-43.
116. See JOHN P. CASKEY, FRINGE BANKING: CHECK-CASHING OUTLETS, PAWNSHOPS, AND THE POOR 13 (1994); Jarret C. Oeltjen, Florida Pawnbroking, An Industry in Transition, 23 FLA. ST. U.L. REV. 995, 996 (1996).
117. See JOHN P. CASKEY, FRINGE BANKING: CHECK-CASHING OUTLETS, PAWNSHOPS, AND THE POOR 13 (1994); Jarret C. Oeltjen, Florida Pawnbroking, An Industry in Transition, 23 FLA. ST. U.L. REV. 995, 996 (1996).
118. See Oeltjen, supra note 98 at 1023-1024.
119. See CASKEY, supra note 98, at 12.
120. See id.
121. See Oeltjen, supra note 98, at 1023-24.
122. See id. at 1024; id. at 1024 n.215 (discussing a Florida study of pawnbroker markups).
123. Id. at 1023; Quick Cash, Inc. v. State Dep't of Agric. & Consumer Servs., 605 So. 2d 898, 902 (Fla. Dist. Ct. App. 1992).
124. See Perez v. United States, 402 U.S. 146, 156-57 (U.S. 1971).
125. See United States v. Pacione, 738 F.2d 567, 570 (2d Cir. 1984). Although payday lenders are not known for resorting to physical violence as a collection method, there have been a fair number of suits filed against payday lenders for extortionate collection practices. See Sharp v. Chartwell Fin. Servs. Ltd., 99 C 3828, 2000 U.S. Dist. LEXIS 3143, at *10 (N.D. III. Feb. 28, 2000) (harassing phone calls); Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1051 (M.D. Tenn. 1999) (threatening to prosecute under the state's bad check statute when there was no authority for such prosecution); Boyce v. Attorney's Dispatch Serv., 99 C 3828, 1999 U.S. Dist. LEXIS 12970, at *5 (S.D. Ohio Apr. 27, 1999) (involving letters and phone calls threatening prosecution). Although extortionate collection practices of payday lenders is a substantial problem, this Article's focus on usury and unconscionability precludes an examination of these collection practices.
126. See 114 CONG. REC. 14,390 (1968).
127. See id.
128. See 113 CONG. REC. 24,461 (1967).
129. See 18 U.S.C. 1 1961(1994).
130. See id. 1 1961(6); see also KEEST & RENUART, supra note 13, at 266. An "enterprise" is defined in RICO as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. 1 1961(4).
131. See id. 1 1961(6); see also KEEST & RENUART, supra note 13, at 266. An "enterprise" is defined in RICO as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. 1 1961(4).
132. See CASKEY, supra note 98, at 31-32.
133. See Drysdale & Keest, supra note 10, at 619.
134. See Lieberman Transcript, supra note 14, at 2 (Lieberman testimony); see also Consumer Federation of America, Comments of Consumers Union and Consumer Federation of America to the Finance Commission on Proposed Rules to Authorize Deferred Presentment Transactions (Mar. 31, 2000) 〈http://www.consumersunion.org/finance/comments700sw.htm〉.
135. See Lieberman Transcript, supra note 14, at 2 (Lieberman testimony); see also Consumer Federation of America, Comments of Consumers Union and Consumer Federation of America to the Finance Commission on Proposed Rules to Authorize Deferred Presentment Transactions (Mar. 31, 2000) 〈http://www.consumersunion.org/finance/comments700sw.htm〉.
136. See Drysdale & Keest, supra note 10, at 619.
137. See id.
138. See id.
139. See CASKEY, supra note 98, at 32.
140. See supra note 37.
141. See CASKEY, supra note 98, at 32.
142. See Martin Dyckman, Loan Sharks, Then and Now, ST. PETERSBURG TIMES, Apr. 25, 1999, at 3D.
143. See KEEST & RENUART, supra note 13, at 265-66.
144. See id.
145. See Drysdale & Keest, supra note 10, at 600.
146. Pendleton v. American Title Brokers, Inc., 754 F. Supp 860, 861 (S.D. Ala. 1991).
147. See KEEST & RENUART, supra note 13, at 265.
148. See Pendleton, 754 F. Supp at 861.
149. See id. at 864.
150. See Floyd v. Title Exch. & Pawn, Inc., 620 So. 2d 576, 576-77 (Ala. 1993).
151. See Clinton v. And R, Inc., 524 S.E.2d 481, 482-83 (Ga. 1999).
152. See State v. Pawn America, No. 24632, 1998 WL 407101 (W. Va. July 17, 1998); Commonwealth v. Car Pawn, Inc., 37 Va. Cir. 412 (Va. Ct. App. 1995); Floyd v. Title Exch. & Pawn, Inc., 620 So. 2d 576 (Ala. 1993).
153. See KEEST & RENUART, supra note 13, at 269.
154. See Association of Progressive Rental Organizations, What Is Rent-to-Oum? (visited Dec. 4, 2000) 〈http://www.apro-rto.com/content/whatisrto.asp〉 [hereinafter What Is Rent-to-Own?].
155. See Fogie v. Thorn Americas, Inc., 190 F.3d 889, 893 (8th Cir. 1999).
156. See id.
157. See Sight & Sound, Inc. v. Wright, 36 B.R. 885, 887-88 (Bankr. S.D. Ohio 1983).
158. See Rent-A-Center, Inc. v. Hall, 510 N.W.2d 789, 792-93 (Wis. Ct. App. 1993).
159. See id.
160. See KEEST & RENUART, supra note 13, at 268.
161. See In re Stellman, 237 B.R. 759, 763 (Bankr. D. Idaho 1999).
162. See ROBERT L. JORDAN ET AL., SECURED TRANSACTIONS IN PERSONAL PROPERTY 362 n.4 (Foundation Press 2000).
163. See What is Rent-to-Own?, supra note 133.
164. See Association of Progressive Rental Organizations, Government Affairs (visited Feb. 28, 2001) 〈http://www.apro-rto.com/content/governmentanairs.asp〉.
165. See Fogie v. Thorn Americas, Inc., 190 F.3d 889, 908 (8th Cir. 1999); Sight & Sound, Inc. v. Wright, 36 B.R. 885, 891 (Bankr. S.D. Ohio 1983).
166. See Miller v. Colortyme, Inc., 518 N.W.2d 544, 550-51 (Minn. 1994).
167. See Drysdale & Keest, supra note 10, at 619; KEEST & RENUART, supra note 13, at 279.
168. See Drysdale & Keest, supra note 10, at 619; KEEST & RENUART, supra note 13, at 279.
169. See John Hendren, Need a Few Bucks Just Til Payday?, TOPEKA CAPITAL J., Mar. 21, 1999; Steve Jordon, Quick Cash, High Fees; More Are Using Loans to Make it to Next Payday - Payday Loan Services Offer Quick Cash at a Price, OMAHA WORLD-HERALD, Apr. 9, 2000, at 1M.
170. See John Hendren, Need a Few Bucks Just Til Payday?, TOPEKA CAPITAL J., Mar. 21, 1999; Steve Jordon, Quick Cash, High Fees; More Are Using Loans to Make it to Next Payday - Payday Loan Services Offer Quick Cash at a Price, OMAHA WORLD-HERALD, Apr. 9, 2000, at 1M.
171. See Hendren, supra note 147; Jordon, supra note 147.
172. See Hendren, supra note 147; Jordon, supra note 147.
173. See Show Me the Money, supra note 38, at 8.
174. See id.
175. See id.
176. See id.
177. See id.; Jordon, supra note 147, at 1M.
178. See id.; Jordon, supra note 147, at 1M.
179. See KEEST & RENUART, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 2122 (Pettijohn testimony).
180. See KEEST & RENUART, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 2122 (Pettijohn testimony).
181. KEEST & RENUART, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 21-22 (Pettijohn testimony).
182. KEEST & RENUART, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 21-22 (Pettijohn testimony).
183. See Consumers Union, Disguised Payday Loans Mushroom in Texas, Victimizing Borrowers Who Face Exorbitant Interest Rates, Threat of Criminal Penalties (Feb. 25, 1999) 〈http://www.consumersunion.org/finance/paydaysw299.htm?payday+loans〉.
184. ld.; see also Drysdale & Keest, supra note 10, at 604 (describing ads and procedure).
185. ld.; see also Drysdale & Keest, supra note 10, at 604 (describing ads and procedure).
186. See Quick Cash, Inc. v. State Dep't of Agric. & Consumer Servs., 605 So. 2d 898, 902 (Fla. Dist. Ct. App. 1992). The defense raised by the payday lender in this case is identical to the defenses raised by salary-sellers at the beginning of the twentieth century. See CASKEY, supra note 98, at 31-32.
187. See Quick Cash, Inc. v. State Dep't of Agric. & Consumer Servs., 605 So. 2d 898, 902 (Fla. Dist. Ct. App. 1992). The defense raised by the payday lender in this case is identical to the defenses raised by salary-sellers at the beginning of the twentieth century. See CASKEY, supra note 98, at 31-32.
188. See Cashback Catalog Sales, Inc. v. Price, 102 F. Supp. 2d 1375, 1376 (S.D. Ga. 2000).
189. See Lieberman Transcript, supra note 14, at 22 (Pettijohn testimony).
190. See id. at 17 (Webster testimony). During the same forum the Payday Loan industry reported an average income of $35,000, although the Consumer Federation of America has determined the average salary to be $25,000. See id. at 46 (Lieberman testimony).
191. See id.
192. See Drysdale & Keest, supra note 10, at 633.
193. Lieberman Transcript, supra note 14, at 18 (Webster testimony).
194. See Check Cashing Headquarters, Check with Us First (visited Sept. 16, 2000) 〈http://www.checkcashinghq.com/cc.htm〉.
195. See id. at 5.
196. Gutierrez v. Devon Fin. Servs., Inc., No. 99 C 2647, 1999 U.S. Dist. LEXIS 19738, at *2(N.D. III. Sept. 29, 1999).
197. See Drysdale & Keest, supra note 10, at 629.
198. Taylor v. Halsted Fin. Servs., L.L.C., No. 99 C 2466, 2000 U.S. Dist. LEXIS 384, at *32 (N.D. III. Jan. 14, 2000).
199. See Allison Kaplan, Legislators Target 'Payday Loans' as Legal Loan Sharking, CHICAGO DAILY HERALD, May 5, 1999, at 8.
200. See Lieberman Transcript, supra note 14, at 18 (Webster testimony).
201. See Jean Ann Fox, The Growth of Legal Loan Sharking: A Report on the Payday Loan Industry (visited Feb. 22, 2001) 〈http://www.stateandlocal.org/loanshar.html〉.
202. See Lieberman Transcript, supra note 14, at 19 (Webster testimony).
203. See MyPaydayLaan.com (visited Sept. 16, 2000) 〈http://www.mypaydayloan.com〉.
204. See Kaplan, supra note 170, at 8.
205. See supra notes 173-75.
206. See KEEST & RENUART, supra note 13, at 279.
207. See Lieberman Transcript, supra note 14, at 35 (Tarpey testimony).
208. See Drysdale & Keest, supra note 10, at 633.
209. See KEEST & RENUART, supra note 13, at 280. The payday loan industry characterizes these statistics as evidence of "customer satisfaction." Drysdale & Keest, supra note 10, at 608-09.
210. See KEEST & RENUART, supra note 13, at 280. The payday loan industry characterizes these statistics as evidence of "customer satisfaction." Drysdale & Keest, supra note 10, at 608-09.
211. Drysdale & Keest, supra note 10, at 599.
212. See CASKEY, supra note 98, at 12.
213. See id.
214. See KEEST & RENUART, supra note 13, at 266-67.
215. See id.
216. Id. at 268.
217. See id.
218. See Mitchem v. American Loan Co., No. 99 C 1868, 2000 U.S. Dist. LEXIS 5785, at *2 (N.D. III. Mar. 13, 2000).
219. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1046-47 (M.D. Tenn. 1999).
220. See Fox, supra note 172; Lieberman Transcript, supra note 14, at 38-39.
221. See Fox, supra note 172; Lieberman Transcript, supra note 14, at 38-39.
222. See 113 CONG. REC. 24,461 (1967).
223. See id.
224. See Lieberman Transcript, supra note 14, at 35 (Tarpey testimony).
225. See KEEST & RENUART, supra note 13, at 279.
226. Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1045 (M.D. Tenn. 1999).
227. See id.
228. See id.
229. See Hartke v. Illinois Payday Loans, Inc., No. 99-3119, 1999 U.S. Dist. LEXIS 14937, at *6 (C.D. III. Sept. 13, 1999).
230. Id; 12 C.F.R. 1 226.2(a)(14) (2001).
231. See Hamilton v. York, 987 F. Supp 953, 955-56 (E.D. Ky. 1997); E-Z Check Cashing, 35 F. Supp. 2d at 1048.
232. See Hamilton, 987 F. Supp at 955-56 (quoting Hurt v. Crystal Ice & Cold Storage Co., 286 S.W.2d 1055, 1056-57 (Ky. 1926)).
233. See id.
234. See id. at 956; E-Z Check Cashing, 35 F. Supp. 2d at 1048; Miller v. HLT Check Exch., 215 B.R. 970, 974 (Bankr. E.D. Ky. 1997); Cashback Catalog Sales, Inc. v. Price, 102 F. Supp. 2d 1375, 1379 (S.D. Ga. 2000).
235. See supra note 203.
236. See supra note 203.
237. See Quick Cash, Inc. v. State Dep't of Agric. & Consumer Servs., 605 So. 2d 898, 902 (Fla. Dist. Ct. App. 1992).
238. See id.
239. See id.
240. See id.
241. See Cashback Catalog Sales, Inc. v. Price, 102 F. Supp. 2d 1375, 1376 (S.D. Ga. 2000).
242. See Consumers Union, Disguised Payday Loans Mushroom in Texas, Victimizing Borrowers Who Face Exorbitant Interest Rates, Threat of Criminal Penalties (Feb. 25, 1999) 〈http://wvvw.consumersunion.org/finance/paydaysw299.htrn? payday+loans〉; Drysdale & Keest, supra note 10, at 604 (describing ads and procedure).
243. See Consumers Union, Disguised Payday Loans Mushroom in Texas, Victimizing Borrowers Who Face Exorbitant Interest Rates, Threat of Criminal Penalties (Feb. 25, 1999) 〈http://wvvw.consumersunion.org/finance/paydaysw299.htrn? payday+loans〉; Drysdale & Keest, supra note 10, at 604 (describing ads and procedure).
244. See KEEST & RENUART, supra note 13, at 279.
245. See Hamilton v. York, 987 F. Supp 953, 955-56 (E.D. Ky. 1997) (quoting Hurt v. Crystal Ice & Cold Storage Co., 286 S.W.2d 1055, 1056-57 (Ky. 1926).
246. See id.
247. See 12 C.F.R. pt. 226, Supp. 1, § 226.2(9)(14)(2) (2001).
248. See Jackson v. American Loan Co., 202 F.3d 911, 912 (7th Cir. 1999) (extension fee); Hartke v. Illinois Payday Loans, Inc., No. 99-3119, 1999 U.S. Dist. LEXIS 14937, at *6 (C.D. III. Sept. 13, 1999) (check cashing fee); Miller v. HLT Check Exch., 215 B.R. 970, 974 (Bankr. E.D. Ky. 1997) (service charges); Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1046 (M.D. Tenn. 1999) (other charges).
249. See Balderos v. City Chevrolet, 214 F.3d 849, 851-52 (7th Cir. 2000); Miller, 215 B.R. at 974.
250. See 15 U.S.C § 1605(a) (1994).
251. See id. § 1605(b).
252. See 12 C.F.R. § 226.4(a) (2001); Balderos, 214 F.3d at 851-52; Miller, 215 B.R. 970 at 974.
253. See 12 C.F.R. § 226.4(a). The [APR] is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction. Id.; see also Balderos, 214 F.3d at 851-52; Miller, 215 B.R. at 974
254. See Drysdale & Keest, supra note 10, at 604.
255. See 15 U.S.C § 1605(a) (1994).
256. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1046 n.4 (M.D. Tenn. 1999).
257. Id.
258. See id. at 1052.
259. See id.
260. See id. at 1051-52. The ruling in Turner is supported by the 7th Circuit, albeit in a somewhat indirect fashion, in Jackson v. American Loan Company, 202 F.3d 911 (7th Cir. 2000). In Jackson, the 7th Circuit held that TILA applies only to initial credit agreements and not to extensions. Since the court was dealing with a TILA claim related to a payday loan extension, it ruled that the extension fees were not interest relative to the initial loan agreement. However, the court inferred that extension fees would be correctly cast as interest charges in refinancing agreements. Jackson, 202 F.3d at 912-13.
261. See KEEST & RENUART, supra note 13, at 281; see also Show Me the Money, supra note 38, at 7. For example, some lenders falsely report to prospective borrowers that the fee is $ 15 per $100 borrowed. Most borrowers interpret this as meaning that for a $115 post-dated check a borrower will receive $100 cash, translating into a 15% fee. What the lenders mean, however, is that for a $100 post-dated check a borrower will receive $85 in cash, a fee of 17.65%. See Show Me the Money, supra note 38, at 7.
262. See KEEST & RENUART, supra note 13, at 281; see also Show Me the Money, supra note 38, at 7. For example, some lenders falsely report to prospective borrowers that the fee is $ 15 per $100 borrowed. Most borrowers interpret this as meaning that for a $115 post-dated check a borrower will receive $100 cash, translating into a 15% fee. What the lenders mean, however, is that for a $100 post-dated check a borrower will receive $85 in cash, a fee of 17.65%. See Show Me the Money, supra note 38, at 7.
263. See KEEST & RENUART, supra note 13, at 281; see also Show Me the Money, supra note 38, at 7. For example, some lenders falsely report to prospective borrowers that the fee is $ 15 per $100 borrowed. Most borrowers interpret this as meaning that for a $115 post-dated check a borrower will receive $100 cash, translating into a 15% fee. What the lenders mean, however, is that for a $100 post-dated check a borrower will receive $85 in cash, a fee of 17.65%. See Show Me the Money, supra note 38, at 7.
264. See supra Part II.
265. See KEEST & RENUART, supra note 13, at 282.
266. See id.
267. See id.
268. See Hearing Before the House Banking and Financial Services Comm., Subcomm. on financial Institutions and Consumer Credit, 106th Cong. (1999) (prepared testimony of Jean Ann Fox, Director of Consumer Protection, Consumer Federation of America), available at 〈http://www.house.gov/financialservices/51299fox.hlm〉; see also Show Me the Money, supra note 38, at 5. Eagle National Bank has partnered with payday lenders to make loans in Arizona and Virginia, which are both Type 1 states. See Show Me the Money, supra note 38, at 5.
269. See Hearing Before the House Banking and Financial Services Comm., Subcomm. on financial Institutions and Consumer Credit, 106th Cong. (1999) (prepared testimony of Jean Ann Fox, Director of Consumer Protection, Consumer Federation of America), available at 〈http://www.house.gov/financialservices/51299fox.hlm〉; see also Show Me the Money, supra note 38, at 5. Eagle National Bank has partnered with payday lenders to make loans in Arizona and Virginia, which are both Type 1 states. See Show Me the Money, supra note 38, at 5.
270. See Hearing Before the House Banking and Financial Services Comm., Subcomm. on financial Institutions and Consumer Credit, 106th Cong. (1999) (prepared testimony of Jean Ann Fox, Director of Consumer Protection, Consumer Federation of America), available at 〈http://www.house.gov/financialservices/51299fox.hlm〉; see also Show Me the Money, supra note 38, at 5. Eagle National Bank has partnered with payday lenders to make loans in Arizona and Virginia, which are both Type 1 states. See Show Me the Money, supra note 38, at 5.
271. See Prepared testimony of jean Ann Fox [hereinafter Prepared testimony of jean Ann Fox], supra note 234.
272. See Lieberman Transcript, supra note 14, at 27 (Rockford testimony); see also KEEST & RENUART, supra note 13, at 282.
273. See Lieberman Transcript, supra note 14, at 27 (Rockford testimony); see also KEEST & RENUART, supra note 13, at 282.
274. Drysdale & Keest, supra note 10, at 647.
275. KEEST & RENUART, supra note 13, 282.
276. See id.
277. See id.
278. See Lieberman Transcript, supra note 14, at 22 (Pettijohn testimony).
279. See Consumer Federation of America, States Grant Payday Lenders a Safe Harbor from Usury Laws, at 3 (Sept. 7, 1999) 〈http://www.consumerfed.org/safeharpr.pdf〉. Interest rate exportation in the context of payday loans has not yet been tested in a court of record. See Phanco v. Dollar Fin. Group, Case No. CV 99-1281 DDP (C.D. Cal. filed Feb. 8, 1999). Phanco was a multi-claim class action suit alleging, inter alia, that Eagle National Bank of Pennsylvania's affiliation with payday lenders resulted in a per se illegal application of interest rate exportation. Unfortunately, at least from the perspective of this Comment, the parties agreed to a settlement in November 2000, and the validity of this interest rate exportation configuration was never resolved. See id.
280. See Consumer Federation of America, States Grant Payday Lenders a Safe Harbor from Usury Laws, at 3 (Sept. 7, 1999) 〈http://www.consumerfed.org/safeharpr.pdf〉. Interest rate exportation in the context of payday loans has not yet been tested in a court of record. See Phanco v. Dollar Fin. Group, Case No. CV 99-1281 DDP (C.D. Cal. filed Feb. 8, 1999). Phanco was a multi-claim class action suit alleging, inter alia, that Eagle National Bank of Pennsylvania's affiliation with payday lenders resulted in a per se illegal application of interest rate exportation. Unfortunately, at least from the perspective of this Comment, the parties agreed to a settlement in November 2000, and the validity of this interest rate exportation configuration was never resolved. See id.
281. See KEEST & RENUART, supra note 13, at 279. This book states that one major payday loan company had bad debt charge-offs of only 2.6% in 1998, which compares favorably to the average charge-off rate of .14% in the check-cashing industry. See CASKEY, supra note 98, at 113 (check-cashing average).
282. See KEEST & RENUART, supra note 13, at 279. This book states that one major payday loan company had bad debt charge-offs of only 2.6% in 1998, which compares favorably to the average charge-off rate of .14% in the check-cashing industry. See CASKEY, supra note 98, at 113 (check-cashing average).
283. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); Show Me the Many, supra note 38, at 11.
284. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); Show Me the Many, supra note 38, at 11.
285. See Hartke v. Illinois Payday Loans, Inc., No. 99-3119, 1999 U.S. Dist. LEXIS 14937, at *9-10 (C.D. III. Sept. 13,1999); Pinkett v. Moolah Loan Co., No. 99C2700, 1999 U.S. Dist. LEXIS 17276, at *16-17(N.D. III. Nov. 1, 1999).
286. See Lieberman Transcript, supra note 14, at 18-19 (Webster testimony); Drysdale & Keest, supra note 10, at 651.
287. See Lieberman Transcript, supra note 14, at 18-19 (Webster testimony); Drysdale & Keest, supra note 10, at 651.
288. See Lieberman Transcript, supra note 14, at 18-19 (Webster testimony).
289. See Drysdale & Keest, supra note 10, at 606 (comparing bounced checks to payday loans); Lieberman Transcript, supra note 14, at 18-19 (Webster testimony) (NSF fees of $50); Check Cashing Headquarters, Check with Us First (visited on Sept. 16, 2000) 〈http://www.checkcashinghq.com/cc.htm〉 (NSF fees of $43).
290. See Drysdale & Keest, supra note 10, at 606 (comparing bounced checks to payday loans); Lieberman Transcript, supra note 14, at 18-19 (Webster testimony) (NSF fees of $50); Check Cashing Headquarters, Check with Us First (visited on Sept. 16, 2000) 〈http://www.checkcashinghq.com/cc.htm〉 (NSF fees of $43).
291. See Drysdale & Keest, supra note 10, at 606 (comparing bounced checks to payday loans); Lieberman Transcript, supra note 14, at 18-19 (Webster testimony) (NSF fees of $50); Check Cashing Headquarters, Check with Us First (visited on Sept. 16, 2000) 〈http://www.checkcashinghq.com/cc.htm〉 (NSF fees of $43).
292. See Drysdale & Keest, supra note 10, at 606.
293. See Lieberman Transcript, supra note 14, at 18-19 (Webster testimony).
294. See KEEST & RENAURT, supra note 13, at 279.
295. See Johnson v. Tele-Cash, Inc., 82 F. Supp. 2d 264, 278-79 (D. Del. 1999), rev'd on other grounds sub nom. Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000).
296. See Drysdale & Keest, supra note 10, at 651 n.378.
297. See id.
298. See id.
299. See id.
300. See Lieberman Transcript, supra note 14, at 35 (Tarpey testimony).
301. See Drysdale & Keest, supra note 10, at 651 n.378.
302. See KEEST & RENAURT, supra note 13, at 279; supra note 244.
303. See KEEST & RENAURT, supra note 13, at 279; supra note 244.
304. See KEEST & RENAURT, supra note 13, at 279; supra note 244.
305. See KEEST & RENAURT, supra note 13, at 279; supra note 244.
306. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); id. at 35-36 (Tarpey testimony).
307. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); id. at 35-36 (Tarpey testimony).
308. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); id. at 35-36 (Tarpey testimony).
309. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); id. at 35-36 (Tarpey testimony).
310. See id.
311. Drysdale & Keest, supra note 10, at 632-33.
312. See id.
313. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony).
314. See Drysdale & Keest, supra note 10, at 632-33.
315. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); Show Me the Money, supra note 38, at 11.
316. See Lieberman Transcript, supra note 14, at 38 (Gallagly testimony); Show Me the Money, supra note 38, at 11.
317. See Lieberman Transcript, supra note 14, at 17 (Webster testimony).
318. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042 (M.D. Tenn. 1999).
319. See Lieberman Transcript, supra note 14, at 35 (Tarpey testimony).
320. Id. at 47 (Lieberman testimony); id. at 11-12 (Andersen testimony); KEEST & RENAURT, supra note 13, at 280.
321. Id. at 47 (Lieberman testimony); id. at 11-12 (Andersen testimony); KEEST & RENAURT, supra note 13, at 280.
322. Id. at 47 (Lieberman testimony); id. at 11-12 (Andersen testimony); KEEST & RENAURT, supra note 13, at 280.
323. See Lieberman Transcript, supra note 14, at 35-36 (Tarpey testimony) (describing how lenders want borrowers to continually renew loans).
324. See id. at 15 (Fox testimony).
325. See id.; Show Me the Money, supra note 38, at 10 (describing how more than 13,000 bad check charges were Tiled by payday lenders in a single precinct in Dallas County); Fox, supra note 172.
326. See id.; Show Me the Money, supra note 38, at 10 (describing how more than 13,000 bad check charges were Tiled by payday lenders in a single precinct in Dallas County); Fox, supra note 172.
327. See id.; Show Me the Money, supra note 38, at 10 (describing how more than 13,000 bad check charges were Tiled by payday lenders in a single precinct in Dallas County); Fox, supra note 172.
328. See KEEST & RENAURT, supra note 13, at 278-79; Lindsey, supra note 34
329. See KEEST & RENAURT, supra note 13, at 278-79; Lindsey, supra note 34 (describing how one payday lender sends a mobile loan unit into the rural areas of Pennsylvania).
330. See Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1051-52(M.D. Tenn. 1999); Smith v. Check-N-Go, Inc., 200 F.3d 511, 514-15 (7th Cir. 1999).
331. See supra note 277.
332. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
333. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
334. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
335. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
336. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
337. See KEEST & RENAURT, supra note 13, at 278-79; Show Me the Money, supra note 38, at 2-3; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
338. See Smith v. Cash Store Mgmt., Inc., 195 F.3d 325, 333 (7th Cir. 1999) (Manion, J., dissenting).
339. See Drysdale & Keest, supra note 10, at 630 (citing a low financial literacy among students).
340. See Drysdale & Keest, supra note 10, at 631-32.
341. See Pinkett v. Moolah Loan Co., No. 99C2700, 1999 U.S. Dist. LEXIS 17276, at *16-17 (N.D. III. Nov. 1, 1999).
342. See Hamilton v. York, 987 F. Supp 953, 955 (E.D. Ky. 1997).
343. See KEEST & RENAURT, supra note 13, at 280; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
344. See KEEST & RENAURT, supra note 13, at 280; Lieberman Transcript, supra note 14, at 28 (Wilson testimony).
345. See KEEST & RENAURT, supra note 13, at 280; Lieberman Transcript, supra note 14, at 28 (Wilson testimony). For example, any mortgage broker can explain how the mortgage industry determines the maximum home loan that a potential home buyer is eligible for by multiplying the potential home buyer's gross income by a standard percentage established by the industry.
346. See KEEST & RENAURT, supra note 13, at 280; Lieberman Transcript, supra note 14, at 28 (Wilson testimony). For example, any mortgage broker can explain how the mortgage industry determines the maximum home loan that a potential home buyer is eligible for by multiplying the potential home buyer's gross income by a standard percentage established by the industry.
347. See Drysdale & Keest, supra note 10, at 664.
348. See Hamilton, 987 F. Supp at 955.
349. See Broemmer v. Abortion Servs., 840 P.2d 1013, 1015-16 (Ariz. 1992).
350. See 12 C.F.R 1 226.18 (2001).
351. 15 U.S.C 1 1632(a) (1994).
352. See Johnson v. Tele-Cash, Inc., 82 F. Supp. 2d 264, 277 (D. Del. 1999), rev'd on other grounds sub nom. Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000); Dixey v. Idaho First Nat'l Bank, 677 F.2d 749, 752 (9th Cir. 1982). When measuring conformance of a particular credit agreement to TILA, the courts use a "reasonable person" approach, looking to the content of the form and not to the perceptions of the individuals reading the form. See Smith v. Check-N-Go, Inc., 200 F.3d 511, 514-15 (7th Cir. 1999). This approach is based on the belief that, for example, some people are more sensitive to terms that are circled than they are to terms that are in boldface. See id. To make it easier for creditors to comply with these restrictions, the Federal Reserve Board created a sample consumer credit agreement for lenders to use as a guide. See Tele-Cash, 82 F. Supp. 2d at 277; 12 C.F.R. pt. 2, app. § H-2 (2001) (Loan Model Form).
353. See Show Me the Many, supra note 36, at 6.
354. See Van Jackson v. Check-N-Go, Inc., No. 99 C 7319, 2000 U.S. Dist. LEXIS 8352, at *15 (N.D. III. June 13, 2000); Smith v. Cash Store Mgmt., Inc., 195 F.3d 325, 328 (7th Cir. 1999); Mitchem v. American Loan Co., No. 99 C 1868, 2000 U.S. Dist. LEXIS 5785, at *2 (N.D. III. Mar. 13, 2000); Laws v. Payday Loan Corp., No. 98 C 5562, 1999 U.S. Dist. LEXIS 16225, at *3 (N.D. III. Sept. 30, 1999), aff'd sub nom. Brown v. Payday Check Advance, Inc., 202 F.3d 987 (7th Cir. 2000); Tele-Cash, 82 F. Supp. 2d at 273; Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449-50 (D.C. Cir. 1965).
355. Van Jackson, 2000 U.S. Dist. LEXIS 8352, at *15.
356. See Cash Store Mgmt., 195 F.3d at 328.
357. See Mitchem, 2000 U.S. Dist. LEXIS 5785, at *2.
358. See Laws, 1999 U.S. Dist. LEXIS 16225, at *3 (interest rate and APR in same size font as other terms); Tele-Cash, 82 F. Supp. 2d at 273 (interest rate and APR in same size font as other terms).
359. See Williams, 350 F.2d at 449-50.
360. Lieberman Transcript, supra note 14, at 2 (Lieberman testimony).
361. See id. at 3 (Lieberman testimony); Show Me the Money, supra note 38, at 3.
362. See id. at 3 (Lieberman testimony); Show Me the Money, supra note 38, at 3.
363. See KEEST & RENAURT, supra note 13, at 45.
364. See id. at 282.
365. See Show Me the Money, supra note 38, at 3.
366. H.R. 1684, 106th Cong. (1999).
367. See id.
368. See id.
369. See id.
370. Id.; see also supra notes 154-60 and accompanying text for a discussion of some of the more clever recharacterizations of payday loans. Additionally, under H.R. 1684 § (6)(E), a lender can avoid regulation by claiming that it has no knowledge of the source of the cash used to repay a loan, or the lender can assert that the specific dollar bills used to repay the loan were not proceeds from another loan. H.R. 1684, 106th Cong. § (6)(E). Similarly, H.R. 1684 § (6)(F) lenders can set loans up with final due dates one year in the future with two-week "checkpoints," thereby avoiding "extension" regulations. Id. § (6)(F).
371. Id.; see also supra notes 154-60 and accompanying text for a discussion of some of the more clever recharacterizations of payday loans. Additionally, under H.R. 1684 § (6)(E), a lender can avoid regulation by claiming that it has no knowledge of the source of the cash used to repay a loan, or the lender can assert that the specific dollar bills used to repay the loan were not proceeds from another loan. H.R. 1684, 106th Cong. § (6)(E). Similarly, H.R. 1684 § (6)(F) lenders can set loans up with final due dates one year in the future with two-week "checkpoints," thereby avoiding "extension" regulations. Id. § (6)(F).
372. See H.R. 3823, 106th Cong. (2000).
373. See id.
374. See id.
375. See id.
376. See id.
377. See 12 U.S.C. § 1815(a)(1) (1994) (stating that any depository institution may become a member of the FDIC); id. § 1813(c)(1) (defining a depository institution as a bank or savings association); id. § 1813(a)(1)(A) (including National Bank in the definition of bank). These statutes provide that there is such a thing as a non-FDIC national bank. See id. §§ 1815(a)(1), 1813(c)(l), 1813(a)(l)(A); see also supra note 195 (citing a source that discusses how payday lenders have labeled their transactions as many different things, none of which include the word "loan").
378. See 114 CONG. REC. 14,391 (1968).
379. See 15 U.S.C 1 1605(a)(1994); Balderos v. City Chevrolet, 214 F.3d 849, 851-52 (7th Cir. 2000); Miller v. HLT Check Exch., 215 B.R. 970, 974 (E.D. Ky. 1997).
380. See Hamilton v. York, 987 F. Supp 953, 955-56 (E.D. Ky. 1997) (quoting Hurt v. Crystal Ice & Cold Storage Co., 286 S.W.2d 1055, 1056-57 (Ky. 1926)).
381. KEEST & RENAURT, supra note 13, at 282. After imposition of federal APR safety-net legislation as proposed in this Comment, profits of payday lenders will probably decline and the industry may shrink or collapse. This result, if it occurs, will be neither good nor bad; it will merely reflect the impact of supply and demand economics on a short-term consumer credit offering that complies with traditional limits of usury and unconscionability. This Article has deliberately not considered the consequences of safety-net legislation on the payday loan industry, and it has also not attempted to identify or evaluate financing alternatives for people who currently rely on payday loans.
382. This legislation would feature federal regulation through a high safety-net interest rate, but it would simultaneously embrace federalism by providing the states room underneath the safety net to establish their own interest rate policies and safeguards.
383. See KEEST & RENAURT, supra note 13, at 279.
384. See Lieberman Transcript, supra note 14, at 21 (Webster testimony).
385. See Drysdale & Keest, supra note 10, at 664.
386. KEEST & RENAURT, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 21-22 (Pettijohn testimony).
387. KEEST & RENAURT, supra note 13, at 279; see also Lieberman Transcript, supra note 14, at 21-22 (Pettijohn testimony).
388. Jackson v. American Loan Co., 202 F.3d 911, 912 (7th Cir. 1999) ("extension fee"); Hartke v. Illinois Payday Loans, Inc., No. 99-3119, 1999 U.S. Dist. LEXIS 14937, at *6 (C.D. III. Sept. 13, 1999) (check cashing fee); Miller v. HLT Check Exch., 215 B.R. 970, 974 (E.D. Ky. 1997) ("service charges"); Turner v. E-Z Check Cashing, Inc., 35 F. Supp. 2d 1042, 1046 (M.D. Tenn. 1999) ("other charges").
389. See KEEST & RENAURT, supra note 13, at 82.