S.C. Dep't of Consumer Affairs v. Cash Cent. of S.C. LLC

• Decision Date: 01 September 2021
• Docket Number: Appellate Case No. 2017-002639,Opinion No. 5855
• Citation: 435 S.C. 192,865 S.E.2d 789
• Parties: SOUTH CAROLINA DEPARTMENT OF CONSUMER AFFAIRS, Appellant, v. CASH CENTRAL OF SOUTH CAROLINA LLC, Respondent.
• Court: South Carolina Court of Appeals

435 S.C. 192

865 S.E.2d 789

SOUTH CAROLINA DEPARTMENT OF CONSUMER AFFAIRS, Appellant,

v.CASH CENTRAL OF SOUTH CAROLINA LLC, Respondent.

Appellate Case No. 2017-002639

Opinion No. 5855

Court of Appeals of South Carolina.

Heard October 14, 2020

Filed September 1, 2021

Rehearing Denied October 26, 2021

James Cochran Copeland and Kelly Hunter Rainsford, both of the South Carolina Department of Consumer Affairs, of Columbia, for Appellant.

James Y. Becker and Mary M. Caskey, both of Haynsworth Sinkler Boyd, PA, of Columbia; and Sarah P. Spruill, of Haynsworth Sinkler Boyd, PA, of Greenville, for Respondent.

LOCKEMY, C.J.:

The South Carolina Department of Consumer Affairs (the Department) appeals the circuit court's order granting final judgment in favor of Cash Central of South Carolina, LLC (Cash Central) as to the Department's allegations that it failed to comply with sections 37-3-201 and 37-3-305 of the South Carolina Consumer Protection Code (the SCCPC).¹ The Department argues the circuit court erred by finding Cash Central was not required to refund excess charges to consumers because it substantially complied with the posting and filing requirements of sections 37-3-201 and 37-3-305 and established the bona fide error and excusable neglect defenses of sections 37-3-201(6) and 37-5-202(7) of the SCCPC. We reverse.

FACTS/PROCEDURAL HISTORY

Cash Central is an internet-based lender that provides short- and medium-term consumer loans ranging from $750 to $5,000. It is a wholly owned subsidiary of Direct Financial Solutions, LLC (Direct Financial), which, in turn, is a wholly owned subsidiary of Community Choice Financial, Inc. (Community Choice). Cash Central had no employees but instead used those of Direct Financial and Community Choice. In February 2013, Community Choice began preparing to do business in South Carolina, and in September 2013, Cash Central submitted two applications for supervised lender licenses—one for Cash Central and one for "www.cashcentral.com"—to the South Carolina Board of Financial Institutions (the Board). The Board issued two supervised lender licenses to Cash Central on October 2, 2013. Cash Central's website went live on October 23, 2013. From October 23, 2013, until April 10, 2015, Cash Central made 15,000 loans to South Carolina consumers, including 1,642 loans with loan finance charges over 239.99% APR.²

The Board audited Cash Central in March 2015 and informed Cash Central on April 3, 2015, that it had failed to file and post a maximum rate schedule. On April 10, 2015, Cash Central filed a maximum rate schedule with the Department, delineating a maximum rate of 246.9% APR. The Department determined Cash Central failed to file or post a maximum rate schedule from October 24, 2013, until April 10, 2015. The Department then brought this action against Cash Central on behalf of South Carolina consumers pursuant to section 37-6-113(A) of the SCCPC³ for violation of sections 37-3-201 and 37-3-305 of the SCCPC and sought a refund of excess charges.

The circuit court held a trial on the matter. At trial, James Copeland, then-acting commissioner of the Board, testified that when the Board issued a supervised lending license, it would send the license to the business's headquarters along with a letter stating that the lender must file and post its maximum rate schedule. Carolyn Grube-Lybarker, of the Department, testified supervised lenders must file a maximum rate schedule with the Department before they can assess finance charges in excess of 18% APR.

Assistant general counsel for Community Choice, Rebecca Fox, was responsible for ensuring Community Choice complied with state law when it began business in a new state. To accomplish this, she created a "compliance outline" specific to each state. To make the outline, Fox downloaded state statutes, visited websites, and summarized the information. She confirmed she obtained a copy of a "guide for business" from the Department's website and acknowledged this document discussed the maximum rate schedule. Fox stated she saved this and other documents pertaining to compliance with South Carolina law to her electronic file during the first week of February 2013. She could not recall if she realized two regulatory agencies oversaw supervised lenders in South Carolina or that Cash Central was required to file a maximum rate schedule with a different agency.

Fox testified that after Cash Central made its first loan, she reviewed the loan documents, compared them to her outline, and discovered Cash Central had failed to post the maximum rate schedule or the 127-word disclosure on its website.⁴ Fox informed Cash Central's head of marketing of these discrepancies. Cash Central then added the 127-word statutory disclosure and posted the rate schedule showing eight different APRs based on loans of $1,000; $2,000; and $4,000. The website included a calculator feature, which allowed the user to adjust the terms and amount of the loan to view different rates based on those factors. Fox believed the rate schedule on the website satisfied the posting requirement but agreed the website did not state the maximum rate was 246.64%.

Todd Jensen, CEO of Direct Financial, admitted that between October 23, 2013, and April 10, 2015, the maximum APR did not appear on the website, and he agreed the schedules Cash Central provided on its website did not provide the applicable rates for a $750 loan. He stated a consumer could use the loan calculator to determine the maximum APR but a consumer would have to enter forty-two possible variations to determine the highest possible APR. Jensen acknowledged Cash Central collected $11 million in interest on the loans it made between October 2013 and April 2015.

Cash Central presented the testimony of an expert in the field of consumer and firm behavior in household-financial settings, who opined the rate calculator on Cash Central's website provided consumers with more "salient and timely" information than the static disclosure that section 37-3-305 required.

The circuit court found subsection 37-5-202(7) excused Cash Central's admitted failure to file the maximum rate schedule. Next, it found Cash Central substantially complied with sections 37-3-201 and 37-3-305 because its website's disclosures "better promote[d] the purposes of [s]ection 37-3-305 than the [m]aximum [r]ate [s]chedule issued by the Department." In addition, the circuit court concluded any monetary liability for Cash Central's failure to file was strictly limited by the provisions of section 37-3-201(6) because its failure to file was a good faith error and qualified as excusable neglect. It further found section 37-3-201(6) must apply to initial failures to file to avoid the absurd result of requiring Cash Central to recast its loans to 0% APR. However, the circuit court ordered Cash Central to pay a civil penalty of $5,000 under section 37-3-201(6) for each of the three years it failed to file its maximum rate schedule with the Department. This appeal followed.

ISSUES ON APPEAL

1. Did the circuit court err by finding Cash Central was not required to refund excess charges to consumers because it substantially complied with the filing and posting requirements of sections 37-3-201 and 37-3-305 ?

2. Did the circuit court err by finding Cash Central was not required to refund excess charges to consumers pursuant to the bona fide error defenses of sections 37-3-201(6) and 37-5-202(7) ?

STANDARD OF REVIEW

"Statutory interpretation is a question of law subject to de novo review." Barton v. S.C. Dep't of Prob. Parole & Pardon Servs. , 404 S.C. 395, 414, 745 S.E.2d 110, 120 (2013). This court is free to decide questions of law without any deference to the circuit court. CFRE, LLC v. Greenville Cnty. Assessor , 395 S.C. 67, 74, 716 S.E.2d 877, 881 (2011).

LAW/ANALYSIS

I. Filing and Posting Requirements of Sections 37-3-201 and 37-3-305

The Department argues Cash Central was not authorized to charge more than 18% APR pursuant to section 37-3-201 because it never filed its maximum rate schedule with the Department. The Department contends that when construed in light of the SCCPC's primary purpose of protecting consumers, sections 37-3-201(2) and 37-6-113(A) do not require a consumer to pay—or allow a creditor to retain—an excess charge. The Department therefore asserts the charges in excess of 18% APR that Cash Central collected between October 24, 2013, and April 10, 2015, were excess charges in violation of 37-3-201(2), and as a matter of law, it was required to return the excess charges collected to consumers. We agree.

"The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature." Hodges v. Rainey , 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000). "Whe[n] the statute's language is plain and unambiguous, and conveys a clear and definite meaning, the rules of statutory interpretation are not needed and the court has no right to impose another meaning." Id.

"A court should not consider a particular clause in a statute in isolation, but should read it in conjunction with the purpose of the entire statute and the policy of the law." Peake v. S.C. Dep't of Motor Vehicles , 375 S.C. 589, 599, 654 S.E.2d 284, 290 (Ct. App. 2007). "A statute as a whole must receive practical, reasonable, and fair interpretation consonant with the purpose, design, and policy of lawmakers. In interpreting a statute, the language of the statute must be read in a sense that harmonizes with its subject matter and accords with its general purpose." Sparks v. Palmetto Hardwood, Inc. , 406 S.C. 124, 128, 750 S.E.2d 61, 63 (2013) (quoting Town of Mt. Pleasant v. Roberts , 393 S.C. 332, 342, 713 S.E.2d 278, 283 (2011) ). "General and special statutes should be read together and harmonized if possible. But to the extent of any conflict between the two, the special statute must prevail." Criterion Ins. Co. v. Hoffmann , 258 S.C. 282, 293, 188 S.E.2d 459, 464 (1972).

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