McKenzie Check Advance of Florida v. Betts

• Citation: 928 So.2d 1204
• Decision Date: 27 April 2006
• Docket Number: No. SC04-1825.,SC04-1825.
• Parties: McKENZIE CHECK ADVANCE OF FLORIDA, LLC., etc., et al., Petitioners, v. Wendy BETTS, etc., Respondent.
• Court: Florida Supreme Court

Page 1204

928 So.2d 1204

McKENZIE CHECK ADVANCE OF FLORIDA, LLC., etc., et al., Petitioners, v. Wendy BETTS, etc., Respondent.

No. SC04-1825.

Supreme Court of Florida.

April 27, 2006.

Virginia B. Townes of Akerman, Senterfitt, Orlando, FL, and Mitchell Berger of Berger Singerman, Fort Lauderdale, FL, for Petitioner.

Christopher C. Casper of James Hoyer, Newcomer and Smiljanich, P.A., Tampa, FL, E. Clayton Yates of Yates and Mancini LLC, Fort Pierce, FL, and Richard A. Fisher, Cleveland, TN, for Respondent.

Warren H. Husband and James R. Daughton, Jr. of Meetz, Hauser, Husband and Daughton, P.A., on behalf of the Community Financial Services Association of America and the Financial Service Centers of Florida, Inc.; and Lynn Drysdale of Jacksonville Area Legal Aid, Inc., Jacksonville, FL, and Deborah Zuckerman of AARP Foundation, Washington, D.C., on behalf of AARP, National Association of Consumer Advocates and National Consumer Law Center, for Amici Curiae.

ANSTEAD, J.

We have for review the decision in Betts v. McKenzie Check Advance of Florida, LLC, 879 So.2d 667 (Fla. 4th DCA 2004), which certified conflict with the decision in Betts v. Ace Cash Express, Inc., 827 So.2d 294 (Fla. 5th DCA 2002). We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. The issue before this Court is whether chapter 560, Florida Statutes (Supp.1994), which is titled the "Money Transmitters' Code" (herein referred to as "the Code"), authorized certain financial transactions referred to as deferred presentment transactions. We approve the holding of the Fourth District in McKenzie that the Legislature did not approve or authorize such transactions when it created the Code in 1994 and that these transactions are, in effect, loans subject to Florida's usury laws.¹ We disapprove of the Fifth District's contrary holding in Ace Cash.

FACTS AND PROCEDURAL HISTORY

The factual transactions that gave rise to the present dispute are summarized in the Fourth District's opinion:

Betts's business relationship with NCA [National Cash Advance] began in August 1997 when she gave NCA two checks, each in the amount of $115. In return, she received $200 in cash and NCA's promise to defer presentment of the checks for a specified time. Approximately one week later, Betts redeemed the checks for cash. Less than one week later, Betts gave NCA three more checks, each for $115, in exchange for $300 and the same promise by NCA. Approximately two weeks later, Betts replaced the checks with three new checks, which she ultimately replaced with cash two weeks thereafter. A number of similar transactions subsequently took place, with Betts continuing to replace one check with another check, each time paying a fee, until December 1997 when she redeemed all checks with cash.

McKenzie, 879 So.2d at 668-69 (Fla. 4th DCA 2004) (footnote omitted). A similar, although not identical, set of circumstances was presented in Ace Cash, 827 So.2d at 294. Following a trial court decision against Betts based on the Fifth District's earlier decision in Ace Cash, the Fourth District reversed and held that the deferred payment transactions between Betts and NCA were essentially loan transactions and were not authorized with the Legislature's enactment of the Money Transmitters' Code in 1994. McKenzie, 879 So.2d at 674-75. The Fourth District decided that the short-term loan agreements entered into between Betts and NCA contrasted sharply with the check cashing transactions authorized by the Code:

There is no question that what takes place is something more than simple check cashing. In a deferred presentment transaction, the customer is advanced money in exchange for a check which the lender agrees not to immediately cash. In exchange for agreeing to defer presentment of the check, the lender exacts a fee. As Betts argues in this case, one might wonder why anyone would utilize the services of a "check casher" and pay for what he or she could otherwise obtain for free at a bank. Clearly, it is because the customer does not have the funds readily available to honor the check. Thus, there can be no question that what takes place is essentially an advance of money or a short-term loan.

McKenzie, 879 So.2d at 672. The Fourth District certified that its holding was in conflict with the Fifth District's holding in Ace Cash, and this review follows.

BACKGROUND

As outlined in the Fourth District's opinion, the Florida Legislature enacted the Money Transmitters' Code in 1994. This Code sought to regulate the practices of the money transmitter industry, including check cashing. The Code's definition of "money transmitter" referred to "any person located in or doing business in this state who acts as a payment instrument seller, foreign currency exchanger, check casher, or funds transmitter." § 560.103(10), Fla. Stat (Supp.1994). The Code defined "check casher" as "a person who, for compensation, sells currency in exchange for payment instruments received, except travelers checks and foreign-drawn payment instruments." § 560.103(3). "Sell" was defined as "to sell, issue, provide, or deliver." § 560.103(19). A "payment instrument" meant "a check, draft, warrant, money order, travelers check or other instrument or payment of money, whether or not negotiable." § 560.103(14). Moreover, "cashing" was defined as "providing currency for payment instruments, except for travelers checks and foreign-drawn payment instruments." § 560.302(1). Finally, the Department of Banking and Finance was charged with interpreting and enforcing the Code. §§ 560.102(1), 560.105.

The following year, on February 24, 1995, the Florida Check Cashiers Association (FCCA),² a group representing the Florida check cashing industry, solicited and received an informal opinion letter from the Department of Banking and Finance concerning certain deferred check cashing practices. The Department's letter stated that "Chapter 560, Florida Statutes, does not explicitly prohibit the concept of deferred deposits" so long as the service would be offered and managed in accordance with the provisions and fee caps of the Code.

Subsequently, on September 24, 1997, the Department adopted rules regulating check cashing transactions. These rules permitted a check casher to accept a postdated check,³ and capped the transaction fees for such transactions at ten percent and the verification fees at five dollars. Fla. Admin. Code R. 3C-560.801 (transferred to R.69V-560.801), 3C-560.803 (repealed 2001), and 3C-560.905 (transferred to R.69V-560.905).

On May 5, 1998, the Department sent a letter to Advance America, Cash Advance Centers of Florida, Inc., regarding cashing checks, fees associated with deferred deposit checks, and rollover transactions of deferred deposit checks. This letter stated that customers cashing checks must receive currency, not another check or other type of payment instrument. In referencing deferred presentment transaction practices, the letter described the limitations on fees that can be charged by check cashers and explicitly referenced Florida's Usury Law in section 687.02, Florida Statutes (1997), stating that "it is illegal to charge a higher rate of interest than 18 percent per annum simple interest. Any `rollover,' `extension' or `renewal' of a deferred deposit check for an additional fee may constitute interest." In the final paragraph of the letter, the Department put Advance America on notice that the Department would fully enforce chapter 560 and that Advance America should "refrain from issuing payment instruments [for which it is] not properly licensed."

On May 1, 2000, the Florida Attorney General's Office issued an advisory legal opinion to the Comptroller of Florida in response to the question: "Are so-called `payday loans' or like transactions subject to the state laws prohibiting usurious rates of interest?" Op. Att'y Gen. Fla. 00-26 (2000). The opinion stated:

"Payday loans" or like transactions are subject to the state laws prohibiting usurious rates of interest. A company registered under Chapter 560, Florida Statutes, may cash personal checks for the fees prescribed in that chapter without violating the usury laws only if such transactions are concluded and are not extended, renewed or continued in any manner with the imposition of additional fees.

. . . .

Thus, to the extent that a transaction comports with the provisions of this act [chapter 560], it would not violate the usury provisions in Chapter 687, Florida Statutes. In the absence of statutory authorization for these types of transactions, cashing a check or exchanging currency for a fee outside the scope of Chapter 560, Florida Statutes, would constitute a loan, subject to the usury provisions of Chapter 687, Florida Statutes.

Op. Att'y Gen. Fla. 00-26 (2000).

In 2001, Betts filed an administrative challenge to Department rule 3C-560.803, Fla. Admin. Code, claiming that the rule, in seeming to authorize the acceptance of postdated checks by a check casher, was an invalid exercise of delegated legislative authority; furthermore, the rule improperly enlarged, modified, or contravened specific provisions of the Code it was meant to implement. After a hearing, an Administrative Law Judge (ALJ) upheld the rule, finding it did not enlarge, modify, or contravene the Code and it was a proper exercise of delegated legislative authority. Betts v. Dep't of Banking & Fin., No. 01-1445RX (Fla. DOAH order filed Sept. 7, 2001). However, the ALJ concluded that the Department's rule did not authorize deferred deposit transactions or the fees to be charged for such transactions. Id. The order stated that "[t]he Department has no rule, order, or declaratory statement authorizing deferred deposit transactions or repeated, consecutive deferred deposit transactions by a registered check casher." Id. at 11. Moreover, the order stated that "[t]he rule does not establish the fees nor does it authorize `rollover transactions' or `payday...