BankWest, Inc. v. Oxendine
| Decision Date | 22 March 2004 |
| Docket Number | No. A03A2356, No. A03A2357. |
| Citation | 266 Ga. App. 771,598 S.E.2d 343 |
| Parties | BANKWEST, INC. et al. v. OXENDINE. Oxendine v. BankWest, Inc. et al. |
| Court | Georgia Court of Appeals |
OPINION TEXT STARTS HERE
Troutman Sanders, Alan W. Loeffler, Martin M. Wilson, McKenna, Long & Aldridge, Robert A. Bartlett, James T. Mast, Larry D. Floyd, Jr., Atlanta, for appellants.
Thurbert E. Baker, Attorney General, Isaac Byrd, Deputy Attorney General, Sidney R. Barrett, Jr., Senior Assistant Attorney General, Elizabeth J. Simpson, Atlanta, for appellee.
The first of these companion cases (Case No. A03A2356) involves the issue of whether the trial court properly held that Georgia's Industrial Loan Commissioner has the authority to investigate a business involved in making loans to Georgia citizens to determine if that business is violating the Georgia Industrial Loan Act (GILA) or whether the court should have held that the business is exempt from the Commissioner's investigative reach because of its affiliation with a federally regulated bank. In the second case (Case No. A03A2357), the issue is whether the trial court properly ordered that certain documents submitted in connection with motions for summary judgment be filed under seal. For reasons that follow, we affirm in Case No. A03A2356 and reverse in Case No. A03A2357. We remand the second case for further proceedings.
BankWest, Inc., is a federally insured state bank chartered and located in South Dakota. BankWest and Advance America, Cash Advance Centers of Georgia, Inc. make small, short-term consumer loans to Georgia citizens. Because the maturity date of these loans is usually set to coincide with the borrower's next payday, the loans are often called "payday loans." The relationship between BankWest and Advance America is outlined in their Marketing and Servicing Agreement (the M & S Agreement).
In July 2002, the Commissioner authorized an investigation into Advance America's activities in Georgia to determine if the company was in compliance with GILA. BankWest was not a target of the investigation. When the Commissioner's agents arrived at Advance America's Macon office, they were initially provided with a few documents, but were later denied access to any files or documents related to loans made by BankWest through Advance America. According to one of the investigators, the documents and information gathered showed that "payday loans" were being made from Advance America's offices at an annual interest rate of 443.21 percent.
In August 2002, BankWest and Advance America filed a declaratory judgment action, seeking a declaration that the Commissioner's investigation interfered with their rights to be free from investigation, supervision or regulation by a state official having no authority or jurisdiction over them or over loans made by BankWest to Georgia borrowers. After the action was filed, the Commissioner continued the investigation and issued administrative subpoenas to BankWest and Advance America, seeking documents and testimony. The Commissioner also asserted a counterclaim in the declaratory judgment action, seeking enforcement of the subpoenas and cooperation in his examination of Advance America. BankWest and Advance America moved to quash the subpoenas.
The Commissioner then moved for summary judgment on all claims raised in the complaint and on his counterclaim. After obtaining a protective order allowing the M & S Agreement and certain other documents to be filed under seal, which was opposed by the Commissioner, BankWest and Advance America also filed a motion for summary judgment.
In February 2003, the superior court granted the Commissioner's motion for summary judgment, dismissed the declaratory judgment action and ordered BankWest and Advance America to comply with the Commissioner's subpoenas. In Case No. A03A2356, BankWest and Advance America challenge all of these actions. In its order, the trial court had stated that the protective order would remain in effect until further order of the court. In Case No. A03A2357, the Commissioner appeals that ruling and the trial court's initial entry of the protective order.
1. BankWest and Advance America claim that the trial court erred by granting the Commissioner's motion for summary judgment. They argue that OCGA § 7-3-22(a)(2), which allows the Commissioner to examine the records of "[a]ny person who advertises for, solicits, or holds himself out as willing to make loans in amounts of $3,000.00 or less," does not apply to them because, pursuant to OCGA § 7-3-6, banks and their agents are expressly excluded from regulation under GILA and exempt from its provisions.
We review the grant or denial of a motion for summary judgment under a de novo standard of review.1 We consider the evidence with all reasonable inferences therefrom in favor of the party opposing the motion for summary judgment.2
The purpose of GILA is "to define and prevent usury."3 It was enacted to provide a source of regulated loans "for those who had been borrowing at usurious [interest] rates from loan sharks, street shylocks and wage-buyers."4 GILA applies to all "persons," defined as " individuals, copartnerships, associations, corporations, and all other legal and commercial entities,"5 engaged in the business of making loans in amounts of $3,000 or less, unless such persons are expressly exempted.6 State or federally chartered banks are excluded from regulation under GILA and exempted from the operation of its provisions.7
To discover violations of GILA, the Commissioner or his representative may examine the books, accounts and records of any person who "advertises for, solicits, or holds himself out as willing to make loans in amounts of $3,000.00 or less"8 or any person he has reason to believe is violating the act.9 The Commissioner has the authority to subpoena witnesses and documents, conduct hearings and take testimony under oath when conducting an examination.10
Advance America is admittedly engaged in the business of making loans to Georgia citizens in amounts of $3,000 or less and does not have an industrial loan license, which is required for all persons to whom GILA applies.11 Thus, it appears that Advance America is a proper target for examination under OCGA § 7-3-22. But Advance America argues that BankWest is the real lender and that because BankWest and Advance America, as BankWest's agent, are operating under the authority of federal banking law, OCGA § 7-3-6 exempts them from regulation or examination by the Commissioner.
By reaching the conclusion that the Commissioner has the authority to continue his investigation of Advance America, we are not holding that the Commissioner has the authority to regulate Advance America or BankWest. We recognize a distinction between the Commissioner's investigative powers and his enforcement powers and find that he must be allowed to continue his investigation to determine if Advance America's activities fall within his regulatory authority.16
We also note that there is support for the Commissioner's decision to investigate Advance America and its relationship with BankWest. A "payday loan" has been defined as "a loan of short duration, typically two weeks, at an astronomical annual interest rate."17
In an attempt to circumvent state usury laws, some payday lenders have contracted with federally chartered banks or state chartered banks insured by the FDIC to take advantage of federal banking laws that allow such banks to make loans across state lines without regard to that state's interest and usury laws in "rent-a-charter" or "rent-a-bank" contracts. 18
Whether this is an appropriate description of the relationship between BankWest and Advance America in Georgia and whether BankWest is the real lender or Advance America is the de facto lender form the basis for the Commissioner's investigation.19
Relying on OCGA § 7-4-13,20 Advance America and BankWest argue that the choice of law provision in their M & S Agreement controls and that therefore the usury statute in South Dakota, not Georgia, would apply. We disagree. The parties to a private contract who admittedly make loans to Georgia residents cannot, by virtue of a choice of law provision, exempt themselves from investigation for potential violations of Georgia's usury laws.
The terms of the M & S...
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