O.C.G.A. § 7-3-50 (2019)

Annotations

Law reviews. For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821, 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974). For article surveying 1976 to 1977 developments in application of the

Industrial Loan Act (now Georgia Installment Loan Act), see 29 Mercer L. Rev. 41 (1977). For article surveying Georgia cases in the area of trial practice and procedure from June 1977 through May 1978, see 30 Mercer L. Rev. 239 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978).

For article surveying Georgia cases in the area of commercial law from June 1979 through May 1980, see 32 Mercer L. Rev. 11 (1980). For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982). For article on 2004 amendment of this Code section, see 21 Ga. St. U.L. Rev. 59 (2004). Cross references. Illegal payday loans, § 16-17-1 et seq.

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION ACCELERATION OF INTEREST General Consideration Editor’s notes. - In light of the similarity of the statutory provisions, and in light of subsection (h) of O.C.G.A. § 7-3-50, decisions rendered prior to amendment of this Code section by Ga. L. 1980, p. 1784, §§ 1, 2 have been included in the annotations for this Code section. Construction. - This law, being in derogation of common law, must be strictly construed. Landmark Fin. Corp. v. Cox, 2 B.R. 739, 1980 U.S. Dist. LEXIS 17788 (S.D. Ga. 1980). Georgia courts have strictly construed the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) since its provisions are in derogation of common law. Moore v. Beneficial Fin. Co., 158 Ga. App. 535, 281 S.E.2d 293, 1981 Ga. App. LEXIS 2297 (1981). Forfeitures and penalties are not favored and statutes relating to them must be strictly construed, and in manner as favorable to person against whom forfeiture or penalty would be exacted as is consistent with fair principles of interpretation. Landmark Fin. Corp. v. Cox, 2 B.R. 739, 1980 U.S. Dist. LEXIS 17788 (S.D. Ga. 1980). Section does not discourage judicial or other interpretation of chapter. - O.C.G.A. § 7-3-29 (now O.C.G.A. § 7-3-50) evinces a recognition on the part of the General Assembly that the Georgia Industrial Loan Act (now

Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., is ambiguous in certain sections. It in no way discourages judicial or other valid authority from seeking interpretations of that 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). Contracts violating act are null and void. - As originally enacted, this section provided that contracts violating this act were null and void. Landmark Fin. Corp. v. Cox, 2 B.R. 739, 1980 U.S. Dist. LEXIS 17788 (S.D. Ga. 1980). The 1978 additions to the penalty provision did not eliminate the null and void language. In describing the purpose of these additions, the General Assembly stated that the former provisions (see now O.C.G.A. § 7-3-50(f)) were intended to exempt from certain penalties contracts made in reliance upon certain rules, regulations, or interpretations of the act. Landmark Fin. Corp. v. Cox, 2 B.R. 739, 1980 U.S. Dist. LEXIS 17788 (S.D. Ga. 1980). Legislative intent. - Payday Lending Act, O.C.G.A. § 16-17-1 et seq., and the Georgia Industrial Loan Act, (now Georgia Installment Loan Act) O.C.G.A. § 7-3-1 et seq., specifically O.C.G.A. § 7-3-50, establish the Georgia General Assembly’s intent to preserve class actions as a remedy for those aggrieved by payday lenders. Enforcing the class action

waiver in this contractual action would undermine the purpose and spirit of Georgia’s statutory scheme; therefore, the class action waiver was unenforceable. Davis v. Oasis Legal Fin. Operating Co., LLC, 936 F.3d 1174, 2019 U.S. App. LEXIS 26064 (11th Cir. 2019). Recovery of principal in action on “null and void” loan contract. - Lender as licensee may recover principal amount of loan in action solely on loan contract when such contract is considered “null and void” under O.C.G.A. § 7-3-50 as a result of inclusion of usurious amount of interest even though a lender does not seek recovery of principal in cause of action for money had and received. United States Life Credit Corp. v. Johnson, 248 Ga. 852, 287 S.E.2d 1, 1982 Ga. LEXIS 716 (1982). “Null and void” provision does not work penalty of forfeiture of principal as well as interest. Moore v. Beneficial Fin. Co., 158 Ga. App. 535, 281 S.E.2d 293, 1981 Ga. App. LEXIS 2297 (1981). Former provisions (see now O.C.G.A. § 7-3-50(f)) did not bear upon method of enforcement but rather conforms with general purpose of penalty provision to deter lender abuse. Landmark Fin. Corp. v. Cox, 2 B.R. 739, 1980 U.S. Dist. LEXIS 17788 (S.D. Ga. 1980). Chapter is applicable to loan contracts, not merely notes. - Statutory language of the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) refers to loan contracts and not merely notes. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). Subsection (c) of section cannot be retroactively applied to sanction loan fees which are excessive and which were contained in loan contracts made before the March 14, 1978, effective date of section. Sanders v. Liberty Loan Corp., 153 Ga. App. 859, 267 S.E.2d 286, 1980 Ga. App. LEXIS 2010, rev’d, 246 Ga. 292, 271 S.E.2d 218, 1980 Ga. LEXIS 1086 (1980), overruled, Financeamerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449, 1980 Ga. App. LEXIS 2402 (1980). Interaction of Industrial Loan Act and Truth-in-Lending Act. - Industrial Loan Act (see now Georgia

Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) penalties do not condition or limit application of federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Williams v. Public Fin. Corp., 609 F.2d 1179, 1980 U.S. App. LEXIS 21230 (5th Cir. 1980). Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., provide separate remedies for separate wrongs. The former limits what a lender subject to its provisions can charge for use of its money; the latter is designed to penalize and deter an independent wrong arising from nondisclosure. Williams v. Public Fin. Corp., 609 F.2d 1179, 1980 U.S. App. LEXIS 21230 (5th Cir. 1980). Lenders violating Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., are subject to penalties of both. Williams v. Public Fin. Corp., 609 F.2d 1179, 1980 U.S. App. LEXIS 21230 (5th Cir. 1980). Charge of notary fee is a violation of Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and entitles borrower to have contract declared null and void. Motor Fin. Co. v. Harris, 150 Ga. App. 762, 258 S.E.2d 628, 1979 Ga. App. LEXIS 2369 (1979). Violation of chapter’s regulations subject lender to administrative penalties; loan remains enforceable. - Loans which violate the Industrial Loan Act (see now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., were void under former Code 1933, §§ 25-217, 25-313, 25-317, and 25-9902 (see now O.C.G.A. § 7-3-50); United States Courts of Appeals have held that violations of the regulations subject lender only to administrative penalties, and that the loan remains enforceable. Robinson v. Central Loan & Fin. Corp., 609 F.2d 170, 1980 U.S. App. LEXIS 21624 (5th Cir. 1980) (decided prior to 1980 amendment of this section). Borrower may only recover money paid which exceeds actual cash advance. - Borrower may only recover moneys paid to the lender under contracts

Acceleration of Interest

General Consideration (Cont’d) violative of the Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., in excess of cash actually advanced to the borrower. Motor Fin. Co. v. Harris, 150 Ga. App. 762, 258 S.E.2d 628, 1979 Ga. App. LEXIS 2369 (1979) (decided prior to 1980 amendment of this section). No recovery permitted on loan which is usurious on face. - If note or loan contract made under Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) shows on its face that it is infected with usury it is absolutely void and there can be no recovery on it. Robinson v. Colonial Disct. Co., 106 Ga. App. 274, 126 S.E.2d 824, 1962 Ga. App. LEXIS 691 (1962) (decided prior to 1980 amendment of this section). Amendment of complaint. - When creditor demanded usurious interest, amendment to the creditor’s complaint does not erase objection of usuriousness. Liberty Loan Corp. v. Childs, 140 Ga. App. 473, 231 S.E.2d 352, 1976 Ga. App. LEXIS 1525 (1976). Good faith offer by lender suing on loan which violated Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) to amend complaint to correct excessive time price differential had no effect on penalty provisions. Douglas v. Dixie Fin. Corp., 139 Ga. App. 251, 228 S.E.2d 144, 1976 Ga. App. LEXIS 1760 (1976). Forfeiture of interest, but not principal. - Lender who violates the Georgia Industrial Loan Act (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) shall forfeit all interest and other charges, but not the principal sum advanced to borrower. Southern Disct. Co. v. Ector, 246 Ga. 30, 268 S.E.2d 621, 1980 Ga. LEXIS 1005 (1980); United States Life Credit Corp. v. Johnson, 161 Ga. App. 864, 290 S.E.2d 280, 1982 Ga. App. LEXIS 1990 (1982). Forfeiture of interest and other charges may be avoided. Southern Disct. Co. v. Ector, 246 Ga. 30, 268 S.E.2d 621, 1980 Ga. LEXIS 1005 (1980) (decided prior to 1980 amendment of this section).

Acceleration clauses are not per se invalid. Bragg v. HFC, 140 Ga. App. 75, 230 S.E.2d 55, 1976 Ga. App. LEXIS 1352 (1976). Collection of unearned interest is not per se improper under Georgia law. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904, 1975 U.S. Dist. LEXIS 13508 (N.D. Ga. 1975). Acceleration clause enforceable unless rendering note usurious. - Acceleration clause not providing for rebate of unearned interest is enforceable absent finding that clause, as applied, renders note violative of state usury laws. Once such finding has been made, however, the note becomes void. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904, 1975 U.S. Dist. LEXIS 13508 (N.D. Ga. 1975) (decided prior to 1980 amendment of this section). Acceleration clause which includes unearned interest voids the contract. - Provision for acceleration of unearned interest is a contract authorizing collection of more than is provided or approved by the Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) and thus authorizes a result contrary to its terms, and is in violation of the Act; thus, the loan is void. Frazier v. Courtesy Fin. Co., 132 Ga. App. 365, 208 S.E.2d 175, 1974 Ga. App. LEXIS 1691 (1974) (decided prior to 1980 amendment of this section). When acceleration of a debt, combined with a claim of unearned interest, renders obligation usurious, the obligation becomes void under the provisions of the Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.). Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904, 1975 U.S. Dist. LEXIS 13508 (N.D. Ga. 1975) (decided prior to 1980 amendment of this section). Acceleration clause in Industrial Loan Act, (see now Georgia Installment Loan Act, O.C.G.A. § 7-3-1 et seq.) contract which upon default permits the collection of entire balance due on contract without excluding unearned interest, is violative of the Act and voids contract. Diggs v.

Swift Loan & Fin. Co., 154 Ga. App. 389, 268 S.E.2d 433, 1980 Ga. App. LEXIS 2186 (1980) (decided prior to 1980 amendment of this section). When acceleration clause renders note usurious, note is unenforceable. - If effect of an acceleration clause is to render note as a whole usurious, the note is unenforceable in Georgia courts. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904, 1975 U.S. Dist. LEXIS 13508 (N.D. Ga. 1975) (decided prior to 1980 amendment of this section). Invalid acceleration clause in security agreement portion of contract voids obligation. - Provision found in security agreement portion of loan contract providing for acceleration of unaccrued interest voids contract notwithstanding presence of valid acceleration provision in note portion of

contract. General Fin. Corp. v. Sprouse, 577 F.2d 989, 1978 U.S. App. LEXIS 9750 (5th Cir. 1978). Provision authorizing usurious collection voids obligation even though not enforced. - Provision in note authorizing usurious collection alone is sufficient to void obligation even when the creditor does not attempt enforcement. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904, 1975 U.S. Dist. LEXIS 13508 (N.D. Ga. 1975) (decided prior to 1980 amendment of this Code section). Accelerated unearned interest usurious. - When the plaintiff accelerated and claimed unearned interest on unmatured installments, this amount was usurious. Liberty Loan Corp. v. Childs, 140 Ga. App. 473, 231 S.E.2d 352, 1976 Ga. App. LEXIS 1525 (1976).

RESEARCH REFERENCES Am. Jur. 2d. 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 34 et seq. C.J.S. 47 C.J.S., Interest and Usury Consumer Credit, § 460 et seq. 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. Doctrine of in pari delicto as applied to borrower seeking affirmative relief from loan contract made in violation of small loan act, 142 A.L.R. 644.

Usury as affected by acceleration clause, 66 A.L.R.3d 650. What constitutes Truth in Lending Act violation which “was not intentional and resulted from bona fide error not withstanding maintenance of procedures reasonably adapted to avoid any such error” within meaning of § 130(c) of Act (15 USCA § 1640(c)), 153 A.L.R. Fed. 193. Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.