STATE OF NEVADA DEPARTMENT OF BUSINESS AND INDUSTRY, FINANCIAL INSTITUTIONS DIVISION, Appellant,
CHECK CITY PARTNERSHIP, LLC, D/B/A CHECK CITY, A NEVADA LIMITED LIABILITY COMPANY, Respondent
Appeal from a district court order in a declaratory relief action. Eighth Judicial District Court, Clark County; Kenneth C. Cory, Judge.
Catherine Cortez Masto, Attorney General, and Christopher Eccles, Daniel D. Ebihara, and David J. Pope, Deputy Attorneys General, Carson City, for Appellant.
Holland & Hart LLP and Patrick J. Reilly and Nicole E. Lovelock, Las Vegas, for Respondent.
PARRAGUIRRE, J. We concur: Gibbons, C.J., Pickering, J., Hardesty, J., Douglas, J., Cherry, J., Saitta, J.
BEFORE THE COURT EN BANC.
NRS 604A.425 limits the amount of a deferred deposit loan to 25 percent of a borrower's expected gross monthly income. In this appeal, we are asked to determine whether that cap includes only the principal borrowed or the principal amount plus any interest or fees charged. We conclude that NRS 604A.425 unambiguously provides that the 25-percent cap includes both principal and any interest or fees charged. Accordingly, we reverse the district court's order granting declaratory relief in Check City's favor.
A deferred deposit loan is a transaction wherein a borrower is given a loan that must be repaid in full within a relatively short time frame. The lender generally charges a flat fee based on a very high interest rate. As collateral, the borrower gives the lender a
post-dated check that includes the principal amount and any interest or fees to be incurred. The lender then holds that check during the term of the loan. At the end of the loan's term, the borrower may either pay the lender, who will return the post-dated check, or the lender may deposit the check. The loan is for a short, fixed period that cannot exceed 35 days. NRS 604A.408. Loans for longer periods are referred to as " high-interest loans," which are governed by separate provisions of NRS 604A.425. NRS 604A.408(2).
As an example, the record in this case includes a loan agreement under which a customer borrowed $300 and agreed to pay $321 the following week. The federal Truth in Lending Act requires lenders to disclose fees as an annual percentage rate (APR). 15 U.S.C. § 1601 et seq. (2012); 12 C.F.R. § 226.17 (2014). According to the loan document, the $21 " Finance Charge" was based on a 1-week loan term and an APR of 364. Nevada does not have a usury law, so there is no statutory cap on interest rates.
However, NRS 604A.425 limits the amount of a deferred deposit loan to 25 percent of the borrower's expected gross monthly income. In 2008, the Nevada Financial Institutions Division (FID) began enforcing the 25-percent cap as including both the principal borrowed and interest charged. In two separate Reports of Examination issued to Check City, the FID informed Check City of this interpretation, but did not fine or cite it for issuing loans that violated the FID's interpretation of NRS 604A.425.
In June 2013, Check City filed a complaint for declaratory relief in the Eighth Judicial District seeking clarification of NRS 604A.425. The FID filed a motion to dismiss, arguing that there was no justiciable controversy and Check City had not exhausted its administrative remedies. The district court rejected these arguments and granted Check City's motion for summary judgment, ...