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State v. Dollar Loan Center, LLC

Supreme Court of Nevada

December 26, 2017

THE STATE OF NEVADA DEPARTMENT OF BUSINESS AND INDUSTRY, FINANCIAL INSTITUTIONS DIVISION, Appellant,
v.
DOLLAR LOAN CENTER, LLC, A DOMESTIC LIMITED LIABILITY COMPANY, Respondent.

         Appeal from a district court order in a proceeding under NRS 29.010. Eighth Judicial District Court, Clark County; Mark R. Denton, Judge.

          Adam Paul Laxalt, Attorney General, Lawrence J.C. VanDyke, Solicitor General, William J. McKean, Chief Deputy Attorney General, David J. Pope, Senior Deputy Attorney General, and Rickisha L. Hightower- Singletary and Vivienne Rakowsky, Deputy Attorneys General, Carson City, for Appellant.

          Holland & Hart LLP and Patrick John Reilly and Erica C. Smit, Las Vegas, for Respondent.

         BEFORE THE COURT EN BANC.

          OPINION

          HARDESTY, J.

         In this appeal, we must determine whether a payday loan licensee can sue to collect on the recovery of a loan made for the purpose of refinancing prior loans under NRS 604A.480(2). We conclude that NRS 604A.480(2)(f) bars a licensee from bringing any type of enforcement action on a refinancing loan made under NRS 604A.480(2). Because the district court erred in concluding that NRS 604A.480 does not prohibit certain payday loan licensees from filing suit against borrowers who default on the loans, we reverse.

         I.

         Responding to a so-called "debt treadmill, " the 2005 Legislature enacted Assembly Bill (A.B.) 384, later codified as NRS Chapter 604A, to regulate the payday loan industry. See A.B. 384, 73d Leg. (Nev. 2005); 2005 Nev. Stat., ch. 414, at 1683.

         Included in the statutory scheme is the regulation of deferred deposit loans and high-interest loans. Id. Deferred deposit loans are those in which the borrower provides a check or authorization for the electronic transfer of funds on a future date in exchange for a loan. NRS 604A.050. A high-interest loan is a loan that charges an annual interest rate greater than 40 percent. NRS 604A.0703. Both deferred deposit and high-interest loans generally have an original loan term limited to 35 days. NRS 604A.408. If a borrower cannot repay the loan within 35 days, NRS 604A.480 is implicated. When the Legislature passed A.B. 384, it included a provision which allowed for a refinancing agreement with a 60-day extension beyond the term of the original loan. NRS 604A.480(1); see 2005 Nev. Stat., ch. 414, at 1683.

         Under subsection 1 of NRS 604A.480, a licensee must not "establish or extend the period for the repayment, renewal, refinancing or consolidation of an outstanding loan. . . beyond 60 days after the expiration of the initial loan period, " Further, the licensee must "not add any unpaid interest or other charges accrued during the original term of the outstanding loan or any extension of the outstanding loan to the principal amount of the new deferred deposit loan or high-interest loan." Id. However, under NRS 604A.480(2), certain new deferred deposit or high-interest loans are exempt from subsection 1's restrictions.

         NRS 604A.480(2) allows a licensee to offer a new loan to satisfy an outstanding loan for a period of not less than 150 days and at an interest rate of less than 200 percent. NRS 604A.480(2)(a)(1), (3). However, the licensee must follow all of the specific requirements in NRS 604A.480(2) for the new loan to be exempted from the provisions of subsection 1. The requirement at issue in this appeal is NRS 604A.480(2)(f), which permits a loan to be made under subsection 2 so long as the licensee "[d]oes not commence any civil action or process of alternative dispute resolution on a defaulted loan or any extension or repayment plan thereof."

         Over the years, NRS 604A.480(2)(f) has been interpreted by appellant Nevada Department of Business and Industry, Financial Institutions Division (the FID); the Office of the Attorney General; and the Legislative Counsel Bureau (LCB). In December 2009, the FID issued a declaratory order and advisory opinion regarding mandatory disclosures for loans made pursuant to NRS 604A.480(2). State, Dep't of Bus. & Indus., Fin. Inst. Div., Declaratory Order and Advisory Opinion Regarding Mandatory Disclosures for Loans Made Pursuant to NRS 604A.480 (2009). In that opinion, the FID stated that "civil action and alternative dispute resolution are specifically prohibited in loans made pursuant to NRS 604A.480." Id. at 5. The FID also determined that a "consumer should not feel that he is subject to civil action when, in fact such actions are prohibited by law." Id. at 6.

         Similarly, in October 2012, the Office of the Attorney General responded to a request for an opinion on whether the language in NRS 604A.480(2)(f) applies only to actions to collect on the outstanding loan, or also to the new loan being used to pay the balance of an outstanding loan. 2012-06 Op. Att'y Gen. 1 (2012). Referencing both the FID opinion and the legislative history and public policy behind NRS Chapter 604A, id. at 1-3, the Attorney General concluded that NRS 604A.480(2)(f) "applies to both an outstanding loan as well as a new loan" used to pay off the outstanding loan, id. at 4.

         However, in July 2011, the LCB issued an opinion that the restrictions and requirements in subsection 2 "are not affirmative prohibitions against a licensee." Letter from Brenda J. Erdoes, Legislative Counsel, to Assemblyman Marcus Conklin (July 26, 2011) (discussing the provisions of NRS 604A480). The LCB further determined that subsection 2(f) does not prohibit licensees from "commencing any civil action or process of alternative dispute resolution against a customer who subsequently defaults" on a new loan made under NRS 604A.480(2). Id.

         Respondent Dollar Loan Center (DLC) sought judicial interpretation of NRS 604A.480(2)(f) by filing a declaratory relief action against FID in the district court. The parties thereafter agreed to convert the controversy into a proceeding under NRS 29.010.[1]

         After the district court concluded that NRS 604A.480(2) "contains no prohibition of any kind against a licensee, but are merely the conditions precedent that must be satisfied for a licensee to be exempt from" NRS 604A.480(1)'s requirements, FID filed this appeal.

         II.

         The parties in this appeal disagree as to whether: (1) NRS 604A.480(2)(f) bars a licensee that provides a loan under NRS 604A.480(2) from bringing any type of enforcement action on that refinanced loan when the debtor defaults; or (2) the provision operates as a condition precedent to making a refinancing loan under that statute, and therefore, does not bar a subsequent action to enforce the refinanced loan. We are presented with the narrow question of whether a ...


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