O.C.G.A. § 7-2-14 (2019)

Annotations

Cross references. Payday loans are illegal, § 16-17-1 et seq. Editor’s notes. Ga. L. 2020, p. 156, § 1/SB 462, not codified by the General Assembly, provides that: “The General Assembly finds and declares that installment lending vitally affects the general economy of Georgia and the public interest and welfare of its citizens; therefore, it is the policy of Georgia and the purpose of this chapter to protect the interest of borrowers and provide for sound, efficient, and responsive regulation of installment lenders.” Ga. L. 2020, p. 156, § 10/SB 462, not codified by the General Assembly, provides that: “This Act shall apply to all installment loan agreements entered into on and after July 1, 2020.” Law reviews. For article, “Small Loans Under Georgia Laws,” see 3 Mercer L. Rev. 227 (1952). For article, “The Georgia Industrial Loan Act: An Analysis,” see 7 Mercer L. Rev. 297 (1956). For article discussing the Industrial Loan Act with emphasis on defending the debtor from claims, see 24 Mercer L. Rev. 545 (1973). For article surveying 1976 to 1977 developments in application of the Indus-

trial Loan Act, see 29 Mercer L. Rev. 41 (1977). For article surveying Georgia cases dealing with commercial law from June 1977 through May 1978, see 30 Mercer L. Rev. 15 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975). For note discussing significant judicial, legislative, and administrative developments under the Industrial Loan Act between 1973 and 1978, see 27 Emory L.J. 109 (1978). For note discussing debtor-creditor relations under the Georgia Industrial Loan Act, see 12 Ga. L. Rev. 814 (1978). For note, “Gorsuch’s Purgatory: Attempting to Define Debt Collector Under the Fair Debt Collection Practices Act,” see 35 Ga. St. U.L. Rev. 433 (2019). For comment on Lewis v. Termplan, Inc., 124 Ga. App. 507, 184 S.E.2d 473 (1971), see 9 Ga. St. B.J. 380 (1973). For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821, 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974).

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION LICENSE REQUIREMENT APPLICATION General Consideration Creditors not to receive illegal charges directly or indirectly. - Creditors are admonished by the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) to draft loan contracts in such a way that illegal charges will not be received either directly or indirectly. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). Loan violates the Georgia Industrial Loan Act (see now Georgia In-

stallment Loan Act, O.C.G.A. § 7-3-1 et seq.) if the loan refinances a loan which itself violates that Act. Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979). Lender cannot recover money lent on refinancing of loan which violates the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979). Purpose of the Georgia Industrial Loan Act (see now Georgia Install-

General Consideration (Cont’d) ment Loan Act, O.C.G.A. § 7-3-1 et seq.) is to eliminate abuses arising from unregulated entities engaging in small loan business. Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409, 263 S.E.2d 220, 1979 Ga. App. LEXIS 2945 (1979). Purpose of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) is to provide a source of regulated lending funds since such need existed for those who had been borrowing at usurious rates from loan sharks, street shylocks, and wage-buyers. Freeman v. Decatur Loan & Fin. Corp., 140 Ga. App. 682, 231 S.E.2d 409, 1976 Ga. App. LEXIS 1600 (1976). Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) was designed to require creditors to make certain uniform disclosures in consumer credit transactions in order to assure a meaningful disclosure of credit terms so that consumers will be able to compare more readily the various credit terms available to the consumers and avoid uninformed use of credit. Grubb v. Oliver Enters., Inc., 358 F. Supp. 970, 1972 U.S. Dist. LEXIS 11283 (N.D. Ga. 1972). Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.,) must be strictly construed. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., is in derogation of common law and must be strictly construed. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389, 268 S.E.2d 433, 1980 Ga. App. LEXIS 2186 (1980). Chapter to be read liberally and broadly. - Wording and legislative history of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) make clear that it is to be read liberally and broadly to prevent even the most subtle or indirect methods of assessing usurious rates. Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979).

Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) makes certain financial transactions legal which would otherwise be usurious under former Code 1933, § 57-101 (see now O.C.G.A. § 7-4-2). Lewis v. Termplan, Inc., 124 Ga. App. 507, 184 S.E.2d 473, 1971 Ga. App. LEXIS 995 (1971). Chapter operates uniformly and in same manner as usury statute. - Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) operates generally upon entire class of subjects with which the statute deals, uniformly throughout the state and in the same manner generally as the usury statute. Talley v. Sun Fin. Co., 223 Ga. 419, 156 S.E.2d 55, 1967 Ga. LEXIS 547 (1967). Chapter prevails over Uniform Commercial Code. - Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A § 7-3-1 et seq.) is applicable to security agreements and in the event its provisions conflict with the Georgia Uniform Commercial Code, the Industrial (now Installment) Loan Act governs. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). Effect of § 7-3-29 on judicial and other interpretations of this chapter. - Former O.C.G.A. § 7-3-29 (now O.C.G.A. § 7-3-50) evidenced a recognition on the part of the General Assembly that the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) was ambiguous in certain sections. It in no way discourages judicial or other valid authority from seeking interpretations of the Act which further its purpose, despite prior inconsistent interpretations. Ford v. Termplan, Inc., 528 F. Supp. 1016, 1981 U.S. Dist. LEXIS 10030 (N.D. Ga. 1981). Judicial construction of the Retail Installment and Home Solicitation Sales Act, O.C.G.A. § 10-1-1 et seq., enacted at a different time, is weak evidence of legislative intent in enacting the Georgia Industrial Loan Act (see now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq. Ford v. Termplan, Inc., 528 F. Supp. 1016, 1981 U.S. Dist. LEXIS 10030 (N.D. Ga. 1981).

Retail Installment and Home Solicitation Act, O.C.G.A. § 10-1-1 et seq. and the Georgia Industrial Loan Act (see now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., differ in purpose and effect and provisions of one act are not controlling in interpretation of the other. Liberty Loan Corp. v. Childs, 140 Ga. App. 473, 231 S.E.2d 352, 1976 Ga. App. LEXIS 1525 (1976). Action under Truth-in-Lending Act does not affect attack under this chapter. - Statutory damages sought by defendants in federal court as a violation of the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., is a legal tort action authorized by federal law; and it is in no wise an estoppel of defendants to contend the loan contract was void under O.C.G.A. Ch. 3, T. 7. Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353, 217 S.E.2d 613, 1975 Ga. App. LEXIS 1671 (1975). Truth-in-Lending Act inapplicable to loans violating Georgia Industrial Loan Act. - Federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., does apply to loans which also violate the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq. Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979). Violation of chapter as affirmative defense. - Party asserting defense of violation of O.C.G.A. § 7-3-1 et seq. has burden of showing that defense affirmatively by record. Grier v. Employees Fin. Servs., 158 Ga. App. 813, 282 S.E.2d 342, 1981 Ga. App. LEXIS 2428 (1981). Rule of 78’s can be used to compute interest rebates. - O.C.G.A. § 7-3-1 et seq. authorizes the lender to use the Rule of 78’s to compute interest rebates in refinancing cases and does not require lenders to compute such rebates on a pro rata basis. Varner v. Century Fin. Corp., 253 Ga. 27, 317 S.E.2d 178, 1984 Ga. LEXIS 707 (1984). Loans which had undergone refinancing were not void under O.C.G.A. § 7-3-1 et seq. merely because the prepaid interest attributable to the original loans was rebated under the terms of those agreements according to the Rule of 78’s,

instead of by a pro rata method. Varner v. Century Fin. Co., 738 F.2d 1143, 1984 U.S. App. LEXIS 19711 (11th Cir. 1984). Penalty for omission in original agreement. - A 1979 debt was not uncollectible because the original 1977 agreement violated the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., by failing to provide for rebates of unearned credit insurance premiums. However, as a penalty for this violation, the loan company had to forfeit all interest and charges accrued in connection with the 1977 agreement. Varner v. Century Fin. Co., 738 F.2d 1143, 1984 U.S. App. LEXIS 19711 (11th Cir. 1984). Clause rendering entire balance due upon default is void. - Contract clause that renders entire unpaid balance due and payable upon default of payment is void and unenforceable as providing for acceleration of unearned interest. Blazer Fin. Servs. v. Dukes, 141 Ga. App. 663, 234 S.E.2d 149, 1977 Ga. App. LEXIS 2039 (1977). Effect of accelerating debt on insurance coverage. - In the absence of any requirement that a lender cancel credit insurance coverage upon acceleration of a debt, there is no violation of this chapter when a lender, pursuant to properly drafted loan documents and in accord with this chapter, accelerates a debt but does not refund insurance premiums on insurance coverage still in effect. Williams v. Charter Credit Co., 179 Ga. App. 721, 347 S.E.2d 635, 1986 Ga. App. LEXIS 2023 (1986). License Requirement License is condition precedent to recovery upon obligation incurred under chapter. - It must appear from the allegations of the petition that the payee in the note representing the transaction under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) was duly licensed to operate thereunder when the obligation was incurred, i.e., when the note was executed. This is required in order to show that plaintiff sues upon a lawful obligation. Bayne v. Sun Fin. Co. No. 1, 114 Ga. App. 27, 150 S.E.2d 311, 1966 Ga. App. LEXIS 647 (1966).

BANKING AND FINANCE Application

License Requirement (Cont’d) It is settled that one who seeks to recover money loaned under provisions of the Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.), must plead and prove that the person was licensed to do business under the act at time the loan was made. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548, 154 S.E.2d 823, 1967 Ga. App. LEXIS 1167 (1967). It is a condition precedent to recovery on a note otherwise usurious that the obligee named therein was at the time of execution of the note duly licensed under the provisions of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Hardy v. R & S Fin. Co., 116 Ga. App. 451, 157 S.E.2d 777, 1967 Ga. App. LEXIS 849 (1967). As a condition precedent to recovery upon an obligation incurred under provisions of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) it must appear that the obligee was licensed under that Act to engage in the business of making loans, thereunder. Southern Disct. Co. v. Cooper, 130 Ga. App. 223, 203 S.E.2d 237, 1973 Ga. App. LEXIS 1282, 1973 Ga. App. LEXIS 1688 (1973). There can be no recovery upon obligation incurred under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) without proof that the obligee in the note sued upon was duly licensed at the time the obligation was incurred. HFC v. Johnson, 119 Ga. App. 49, 165 S.E.2d 864, 1969 Ga. App. LEXIS 972 (1969); Scoggins v. Whitfield Fin. Co., 242 Ga. 416, 249 S.E.2d 222, 1978 Ga. LEXIS 1234 (1978). Bayne v. Sun Fin. Co. No. 1, 114 Ga. App. 27, 150 S.E.2d 311, 1966 Ga. App. LEXIS 647 (1966). Failure to plead fact of licensing is an amendable defect. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548, 154 S.E.2d 823, 1967 Ga. App. LEXIS 1167 (1967).

Question is whether contract could be used to exact illegal charges. - Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) was designed to protect debtors who are often unaware of the debtors’ legal rights or complicated rules of construction. The relevant question is not simply whether a violation exists in the contract, when evaluated under general rules of contract construction, but whether the lender might be able to employ certain provisions of the contract to exact illegal charges from unsuspecting debtors. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). When the plaintiff contracted for collection of unearned interest, which violates the obligation is void. Guyton v. Martin Fin. Corp., 135 Ga. App. 62, 217 S.E.2d 390, 1975 Ga. App. LEXIS 1561 (1975). When loan is void, lender forfeits principal, interest, and other charges. - Lender forfeits not only interest and other charges, but forfeits principal as well when the loan is found to be null and void under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353, 217 S.E.2d 613, 1975 Ga. App. LEXIS 1671 (1975). Action for money had and received not sustainable when predicated upon a contract void under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Anderson v. G.A.C. Fin. Corp., 135 Ga. App. 116, 217 S.E.2d 605, 1975 Ga. App. LEXIS 1588 (1975). Reaffirmance of obligation void under the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) is also void. Pinkett v. Credithrift of Am., Inc., 430 F. Supp. 113, 1977 U.S. Dist. LEXIS 16664 (N.D. Ga. 1977). Lender cannot recover money lent on refinancing of loan which violates

the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979). Plaintiff must show chapter applicable. - Plaintiff lender bears burden of establishing that the plaintiff comes within the terms of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Gray v. Quality Fin. Co., 130 Ga. App. 762, 204 S.E.2d 483, 1974 Ga. App. LEXIS 1252 (1974). Administrative interpretation of chapter is entitled to consideration by court. - Administrative interpretation of this chapter given by the Georgia Industrial Loan Commissioner is entitled to consideration in determination by the court of the manner in which fees and charges allowed by law should be calculated. Belton v. Columbus Fin. & Thrift Co., 127 Ga. App. 770, 195 S.E.2d

195, 1972 Ga. App. LEXIS 1018 (1972); FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449, 1980 Ga. App. LEXIS 2402 (1980). Administrative rulings will be adopted when the rulings conform to meaning which court deems proper. Belton v. Columbus Fin. & Thrift Co., 127 Ga. App. 770, 195 S.E.2d 195, 1972 Ga. App. LEXIS 1018 (1972). Remedy same for illegal loans and loans based on illegal consideration. - Under Georgia law, public policy dictates that loans based partly on illegal consideration are void and money paid pursuant to such contracts need not be repaid, and since this is the same remedy as provided in this chapter for loans which violate it, the distinction between illegal loans and loans based in part on illegal consideration is of no importance. Williams v. Public Fin. Corp., 598 F.2d 349, 1979 U.S. App. LEXIS 13406 (5th Cir. 1979).

OPINIONS OF THE ATTORNEY GENERAL One who lends money on wages and salaries is subject to provisions of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). 1954-56 Ga. Op. Att’y Gen. 385. Lenders not subject to license requirement. - Person not engaged in business of making loans, but who makes occasional loans in amounts less than $2,500.00 (now $3,000.00) repayable in monthly, quarterly, or annual installments, may charge interest at 6 percent (now 8 percent) per annum for the entire period of loan and take security therefor, and is not required to obtain a license under this chapter. 1954-56 Ga. Op. Att’y Gen. 392. Federal savings and loan associations are exempt from chapter. - Consumer loans for amounts less than $3,000.00, with interest charged in excess of 9 percent simple interest, are governed by this chapter, but this chapter grants specific exemptions from its provisions to “banks, trust companies, real estate loan or mortgage companies, federal and Georgia building and loan

associations” under former Code 1933, §§ 25-221 and 25-318 (see now O.C.G.A. § 7-3-4). Although federal savings and loan associations are not specifically named as such, they are included in the list of exemptions under that section and, therefore, wholly owned subsidiaries of federal savings and loan associations, created pursuant to federal statute and regulation, are not required to obtain a license under this chapter in order to make loans of less than $3,000.00 at interest rates permitted by Georgia usury statutes. 1978 Op. Att’y Gen. No. 78-12. Unauthorized transactions. - Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., and the rules and regulations promulgated thereunder do not allow Industrial Loan Act (now Georgia Installment Loan Act) licensees to transact noncredit insurance through employees or otherwise. 1984 Op. Att’y Gen. No. 84-60. Industrial loan licensed employee may conduct the business of insurance provided that the person is duly licensed as an insurance agent and

provided that the customer is not misled into thinking that the customer’s ability to procure a loan is contingent upon the customer’s agreement to purchase this

insurance or otherwise to transact business in the industrial loan office. 1984 Op. Att’y Gen. No. U84-54.

RESEARCH REFERENCES Am. Jur. Proof of Facts. Violation of the Truth-In-Lending Act and Regulation Z, 73 POF3d 275. Class Action for Failure to Disclose Under the Truth-In-Lending Act and Regulation Z, 76 POF3d 193. ALR. Constitutionality of statutes regulating the business of making small loans, 69 A.L.R. 581; 125 A.L.R. 743; 149 A.L.R. 1424. Construction and application of provisions of small loan acts as regards maximum amount of loan, 99 A.L.R. 923.

Building and loan association as within statute relating to lenders of money, 99 A.L.R. 1027. Construction and application of provisions of small loan statutes prohibiting the splitting up or dividing of a loan, or the existence of indebtedness under more than one contract of loan at the same time, 141 A.L.R. 912. Usury as affected by acceleration clause, 66 A.L.R.3d 650.

ARTICLE 1 GENERAL PROVISIONS Editor’s notes. This article was designated by Ga. L.

2020, p. 156, § 2/SB 462, effective June 30, 2020.