IN THE SUPREME COURT OF OHIO

OHIO NEIGHBORHOOD FINANCE, INC.,

Plaintiff-Appellant,

V.

RODNEY SCOTT,

Defendant-Appellee.

Case No. 2013-0103

On Appeal from the Ninth JudicialDistrict Court of AppealsCase No. I1CA010030

BRIEF O F A:FIICI CURIAE THE CENTER FOR RESPONSIBLE LENDINGAND NATIONAL CONSUMER LAW CENTERIN SUPPORT OF APPELLEE RODNEY SCOTT

Amy E. Gullifer, 0074218CANNIZZARO, BRIDGES, JILLISKYSTREhrG, LLC302 South Main StreetMarysville, OH 43040(Tel) 937.644.9125(Fax) 937.644.0754agullifer@t,,c#bjs.com

Frederick E. Mills, Esq.& Vorys, Sater, Seymour and Pease LLP

52 East Gay StreetColumbus, Ohio 43215(Tel) 614.464.8395(Fax) 614.719.5279femills^aivorys.com

Counself.aNAmici Cztf°iaeThe Center faf° Responsible Lending andNationalConsumer Iuit> Center

Rodney Scott250 13th StreetElyria, Ohio 44035

I)efendarzt-Appellee, Pro Se

Counsel fof° Anziczss CuYicreThe Ohio Council of'Retail Merchants

Sara Bruce, Esq.The Ohio Automobile Dealers Association655 Metro Place South, Suite 270Dublin, Ohio 43017(Tel) 614.923-2243(Fax) 614.766.9600sbruce Coacla.com

Cnz.cnsel foY Arnicus CuriaeOhio Automobile Dealers Association

1:if.ii" hi:.Ma 3

Jol-in W. Zeiger, Esq.Stuart G. Parsell, Esq.Zeiger, Tigges & Little LLP41. Sout11 Hig11 Street, Suite 3500Columbus, Ohio 43215(Tel) 614.365.9900(Fax) 614.365.7900zeiger(i^litohio.comparsell@litoh.io.com

CounsEl foY Plaint ff-AFpellantOhio Neighbot^hood Finance, Inc.

Pierre H. Bergeron, Esq.Colter L. Paulson, Esq.Squire Sanders (US) LLP221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202(Tel) 513.361.1238(Fax) 513.361.1201pierre.bergeron cLsquiresanders.comcolter.paulson@squiresanders.com

Counsel forAmicus CuriaeThe Ohio Chamber of Commei°ce

Paul J. Minnillo, Esq.Minnillo & Jenkins Co., LPA2712 Observatory AvenueCincinnati, Ohio 45208(Tel) 513.723.1600(Fax) 513.7231620pjminnillo@minnillojenkins.com

Co-Counselfor ATraici C_"uriaeThe Centerfoi- Responsible Lending andNational Consumer La1v Center

Darrell Dreher, Esq.Elizabeth L. Anstaett, Esq.Dreher TornkiesScheiderer LLP2750 Huntington Center41 South High StreetColumbus, Ohio 43215(Tel) 614.628.8000(Fax) 614.628.1600ddreher@'dltlaw.comeanstaett (n dltlaw.com.

Attor•nevs for Amicus Curiae Ri.charcl F.Keck, FoYn2e1° DeRuty Superintendent andC:"hief Examiner, Division of FinancialInstitutions of The Ohio Departynent ofCommeYce

Joel H. Mirman, Esq.The Mirman Law Firrn, LLC5 East Long Street, Suite 200Columbus, Ohio 43215(Tel) 614.395.1. $ 84j oel@themirmanl awfiran. com

Attor°ney:s for Am.ici CuriaeNoi°fleet (Bill) Rives and 17aniel 0glevee

ii

TABLE OF CONTENTS

EM

TABLE OF AUTHORITIES . ................... ................................................................................... v

INTRODUCTION .................................................................................................. ....... .. .......... .. ... I.

STATEMENT OF INTEREST ...:.............. ......... ......... ......... ......>.. ......... :..,............................ 3

STATEMENT OF FACTS .....................................................................................,....................... 4

A. What is a Payday Loan?..... ....... ... ... ..... .... ..... ........ ...... ......... . .... .............................. 4

B. Payday loans have always been subject to targeted legislation as part ofOhio's overall lending regulatory scheme . ................................................ ........... 6

i. The Small Loan Act ... .................... ........... .......................7ii. Check-Cashing Lender Law . ..... ... ....... .......... ............. ......8iii. The Short-Term Loan Act .. . . .. . .. . . . ... . .. . . . .. .... . . . . . . . . . ... . . . . . . ... .. :9iv. The Second Mortgage Act ...... ......... ... ...................... . ... ... 1

ARG UMENT ................................ .. ......... ......... ................ ..... ......... .......... . ........... .. . ..... ... I 1

PROPOSITION OF LAW NO. 1: 'The plain and unambiguous language of Section 1321.57 ofthe Ohio Mortgage Act does not perinit MLA registrants to make single installment, interestbearing loans. ..... ..... .............. .......... ..... ................................................................................. 12

A. The MLA contemplates multiple payments, not a single paymen.t. ..................... 12

B. Prior to the STLA, the MLA was never interpreted to permit singlepayment payday loans . .................................................:..............................:.......... 16

C. Cashland's current purported reliance on the MLA's "interest-bearing"provision is belied by its previous actions . ........ . ......... . ........................................ 18

D. Recognition that the MLA does not authorize Cashland's payday loanswill lead to less litigation, notinore ................... .................. ......... .:....... ......... 21

PROPOSITION OF LAW NO. 2: The Short Term Loan Act, R.C. 1321.35, et sey., prohibitsMLA registrants from making single installment loans of short duration ............., .................,. 22

A. STLA was intended to be the exclusive lending authority for payday loans........ 22

B. The Referendum language influences interpretation of the STL<A ....................... 25

C. The lower courts' decisions correctly reflect the sound policy decisionsmade by the General Assembly and Ohio voters to restrict payday lending. ....... 28

iii

D. 'I'he absurd tautology identified by the Municipal Court cannot staiid .................. 3 3

E. Reading the MLA and the STLA "In Pari Materia" compels theconclusion that Cashland's payday loan is not authorized by the MLA......,........ 34

CONCLUSION . .. ..... .. ........................................................................................... 36

CERTIPICATE OF SERVICE ^................................,........................,......................... ... . ^7

iv

TABLE OF AUTHORITIES

CASESPage

Barnet v. Superior Caurt of'Haricopa Cty., 124 Ariz. 467, 468 (Ariz. 1979)......... ... ..... .13

Cain v. People's SalcrYy Loan Co., 24 Ohio C.D. 115, 1912 Vv'L 709, at * 1,affirmed, 88 Ohio St. 550 (1913), .. .. ............. ............... ... ......... ........................ 6

Castleberry v. I;vatt, 147 Ohio St. 30, 35, 67 N.E.2d 861 (1946).. .... .................... 34

Dunn v. State, 122 Ohio St. 431, 436 (1930) .......... ............................................. 7

Georgia Cash Am., Inc. v. Strong, 649 S.E.2d 548, 550 n.2 (Ga. Ct. App. 2007) ............. 33

Greer-Burger v. Temesi, 116 Ohio St.3d 324, 330, 2007 Ohio 6442, 879 N.E.2d 174,T25.. 20

Guisinger v. Ayndt, 5th Dist. No. CA-955, 1990 Ohio App. LEXIS 2458 (June 8, 1990) ... 14,21

In re Barnhart, 91 F. Supp. 453, 455 (N.D. Ohio 1950) ............. .... ..... ..... .... 7

Independent Foods, Inc. v. Lucas Ctv. Sav. Bank, 70 N.E.2d 139, 144 (8th Dist. 1946)..... 7

Novelty, Inc. v. Drug Enforcernent Adnain., 571 F.3d 1176, 1194 (D.C. Cir. 2D09). .. .<. .. ... 13

Ohto Neighborhood Finance,Inc. v Christie, 8th Dist. No. CA-10-094821,

2010 Ohio 5017 ... . .... . .. .. . . . .. . . . . . . . . ... . . . . . ..... ... . . . ... .. . ... . . . . .. .. . . . . .. . . .. . .. .. . . . . . ... 19,20

Ohio 14'eighborhood Fin, Inc: v. Massev, l 0th Dist. No. lOAP-1020, 2011 Ohio 2165.,..... 19

Ohio Neighborhood Fin., Inc. v. McGeorge, 9th Dist. No. 10 CA 25410, 2011 Ohio 577... 19

Ohio NeighborhoodFin., Inc. vKing, 9t11 Dist. No. 10 CA 25409, 2011 Ohio 438 ........... 19

Ohio Neighborhood Fin., Inc. v Mackendrick, 2nd Dist. No. CA 023978, 2010 Ohio 6098.> 19

Painter v, Gralev, 70 Ohio St. 3d 377, 385, 1994-Ohio-334, 639 N.E.2d 51, 57.. ............. 32

Pfeifer v. Graves ( 1913), 88 Ohio St. 473, 486, 104 N.E. 529, 533 ...............................27

Russin v. Shepherd, 1 l th Dist. No. 2006-G-2708, 2007-Ohio-3206 atT,55 . .. .. . . . . . .. .. . . ... .. 14

Sanning v. Cincinnati, 81 Ohio St. 142, 90 Ohio LEXIS 94, at *7-8 (1909) .. . .... .. . . . . . . ..... 6

State v. Nickles, 159 Ohio St. 353, 112 N.E.2d 531, at ¶1 syllabus ( 1953) ...:.................. 34

v

State v. Snnorgala; 50 Ohio St.3d 222, 553 N.E.2d 672, 674 (1990) .......................... 32

Sfnith v. Lanctfizir, 135 Ohio St. 89, 94, 2012-Ohio-5692, 984 N.E.2d 1016 ............... 13

State ex rel. Greenlund v. Fulton, 99 Ohio St. 168, 187, 124 N.E. 172, 177 (1919)... 27

State ex rel. Hodges v. Taft, 64 Ohio St. 3d 1, 4, 591 N.E.2d 1186, 1189 (1992)...... 27

State ex rel. KelZyeY v. F'orney,108 Ohio St. 463, 466, 141 N.E. 16 (1923) ............. 27

State ex rel. Marcolin v. Smith, 1.05 Ohio St. 570, 586, 138 N.E. 881, 885 (1922)..... 28

Sutton v. Tornco Machining, Inc., 129 Ohio St. 3d 153, 156, 2011-Ohio-2723,

950 N.E.2d 938... .................................................................. ............. 32

Used Equip. Sales v. £)ep't of'Transp., 54 F.3d 862, 865 (D.C. Cir. 1995) .................. 13

Wessell v. Timberlake, 95 Ohio St. 21, 35 (1916) ............................................... 6

STATUTES AND LEGISLATIVE BILLS

10 U.S.C. § 987 ............................................................................ .. ......32

1981 H.B. 134 . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . .11

2008 Ohio Atty.Gen.Ops. No. 2008-036 ......................................... ............. .17

Am.H.B. No. 511, 138 Ohio Laws 2939 ................ ..........................................11

G.C. §5624-65(a) ........................................................... ...... ................7

G. C . 8 624-62 ( a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 7

R.C. 1231.57 ........................................................................................ ...21

R.C. 1315.35-1315.44.. . . . ....... ....... .. ... ... ... .................... ........ .. ........ ....... .... ....8

R.C. 1315.39 ............................................................................. .... .8

R.C. 1321.01. ......... ..............................................................................7 , 12

R.C. 1321.32. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .5, 8

R.C. 1321.35 - 1321.48... .... .............. . .. .. ....... ... .. . . .. ... ............... ......... .............9

R.C. 1321.36 . . . .. . .. . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . .. .. . . . . ... . . .. . ...9, 33

vi

R.C. 1321.39.. ..... ............... .... ............. .. .. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . ..33,34

R.C. 1321.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

R. C. 1321.41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..34

R.C. 1321.47 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,33

R.C. 1321.51... ............ ........... ... ... .........................................10

R.C. §1321.57..... ... ............................... ... ............................... . . . .... ... . 10, 12-14; 35

Ohio Adm.Code 1301:8-3-07 (G)(2)......... . . ............ ...........................16

OTHER AUTHORITIES

76 Ohio Report No. 119, Gongwer News Serv., at 3 (June 15, 2007) ........................22

77 Ohio Report No. 84, Gongwer News Serv., at 1, 4 (Apr. 30, 2008) ......... ........t........1,2,23

77 Ohio Report No. 92, Gongwer News Serv., at 2(Vlay 12, 2008) ...... ... ... ... ......... ....23

77 Ohio Report No. 98, Gongwer News Serv., at 2(iVlay 20, 2(l08). ,..... ....... ...... ....24

77 Ohio Report No. 119, Gongwer News Serv., at 3 (June 19, 2008) ...... ... ..................24

77 Ohio Report No. 153, Gongwer News Serv., at 2 (August 7, 2008).. . .. . . . . . . . . .. .. ..24

78 Ohio Report No. 183, Gongwer News Serv., at 4 (September 21, 2009) ...................25

Black's Law Dictionary 800 (7th ed. 1999) ... ... ... ... ... .. ... . .... .. ... ... ...... . 14

Merriam-Webster Dictionary 370 (1974) ............................................................

vii

INTRODUCTION

In 2007, there were more payday lending storefronts in Ohio than McDonald's, Burger

King, and Wendy's restaurants combined. Policy Matters Ohio, 7f°czpped in Debt: The GYVwth e3f

Payday Lending in Ohio, at 3 (Feb. 2007).' Enabled by a statutoiy framework that perrnitted

lending charges as high as 391 % APR on a 14 day loan, the payday loan industr-y (including

Cashland) 2 thrived, as it always has whenever it is autllorized to exist. The Ohio General

Assembly took notice and spent nearly five months to hear 50 witnesses discuss the damage

wrought on Ohio consumers and communities by these mostly out-of state corporations, which

were driving thousands of Ohioans into cycles of debt, bankruptcy, and foreclosure. No fewer

than six. bills that would regulate the industry in various ways were introduced in 2007-2008.

In 2008, the Ohio General Assembly passed, over vigorous industry opposition, what it

labeled as "the most stringent law in the United States" to regulate the payday loan industry.3

This new law, 2008 Am.Sub. H.B. No. 545 ("H.B. 545"), repealed the prior Check-Cashing

Lender Law which perniitted the 391% APR 14-day loan, and replaced it with the new Short-

Term Loan Act which permitted a maximum of 28% APR on a minimum 31 day loan. After its

passage, the bill's sponsor, Rep. Chris Widener, stated, "It's obvious that we will, with this bill,

eliminate check cash lending f.rom Ohio law."4

1 Available at http:l/www.policymattersohio.org/wp-content/uploadsl201 i/09ITrappedInDebt2007.pdf (last accessed. July 22, 2013).

2 Appellant Ohio Neighborhood Finance, hic. is referred to herein as "Cashland," the dba underwhich it operates most of its Ohio stores. Notably, Ohio Neighborhood Finance is a DelawareCoiporation with its principal place of business in Texas. Ohio Neighborhood Finance is also awholly-owned subsidiary of Cash America, Inc,, a publicly-traded corporation with its principalplace of business in Texas.

3 77 Ohio Report No. 84, Gongwer News Serv., at 1(Apr. 30, 2008).

4 77 Ohio Report No. 84, Gongwer News Seiv., at 1(.Apr. 30, 2008).

l

When the payday loan industry organized a referendum (known as Ballot Issue 5) to undo

these legislative changes, at a cost of $15 million, the Governor joined four of his predecessors,

the Attorney General, two of his predecessors, and both candidates then r-unning for attorney

general, to publicly oppose it. And in the November 2008 general election, Ohio voters spoke

with a clear and unequivocal voice wheii they upheld the new stringent restrictions on payday

lending by nearly a 2 to I margin (64% to 36%). Ohio Secretary of State, llmendfnent and

Legislation: Proposed Constitutional Amendments, Initiated Legislation, and Laws Challenged

by IZef'erendusn, Subnzitted to the Electors, at 24-25.5 Nearly two-thirds of the Ohio voters cast

their ballots in favor of the new Short-Terni Loai1 Act, so that, according to the ballot language

of Issue 5, "all short terms lenders, including check cashing lenders, would be subject to the

following limitations:

• The maximum loan amount would be $500;

• Borrowers would have at least 30 days to repay the loan; and

• The maximum interest rate would be 28% annual percentage rate (APR) on all

loans."

Ohio Secretary of State, Ohio Issues Repoznt: State Ballot InforYnation.foN the November 4, 2008

General Election, at 17 (emphasis added).6

Cashland would have this Court believe that this tale, though full of sound and fury,

signifies nothing. Cashland maintains that although the 391% APR loan product it previously

offered is no longer available, Ohio law has always permitted it to charge 680% APR on a

5 Available at http:/Iww.sos.state.oh.us%sos/uploa.d/elections/historical/issuehist.pdf (accessedJuly 17, 2013).

6 Available at bttp://www.sos.state.oh.us/sos/upload/publications/election/Issues_08.pdf(accessed July 17, 2013).

2

typical $100 payday loan pursuant to the longstanding Second Mortgage Act, and nothing in the

newly enacted legislation changed that option. Cashland even has the audacity to suggest that

the very legislators who were working to craft the new legislation wanted them to charge

Ohioans higher APR's than the 391% available under the previous law.

Cashland's position is, in a word, baseless. Amici will demonstrate that for more than

100 years Ohio has experimented with sanctioning payday lending. Inevitably, and on multiple

occasions, the excesses of the payday indu.stry have caused its own demise. Payday lending is

not now, nor has it ever been, authorized in Ohio as a default lending option under Ohio's

general lending laws.

STATEMENT OF INTEREST

The Center for Responsible Lending ("CRL") is a nationwide nonprofit, non-partisan

organization that works to protect homeownership and family wealth by fighting predatory

lending practices. Its focus is on consumer lending: primarily mortgages, payday loans, credit

cards, bank overdrafts and auto loans.

The National Consuzner Law Center ("NCLC") is a nationwide nonprofit organization

designed to use its expertise in consumer law and energy policy to work for consumer justice and

economic security for low-income and other disadvantaged people, including older adults, in the

United States. NCLC works with nonprofit and legal services organizations, private attorneys,

policymakers, and federal and state government and courts across the nation to stop exploitive

practices, help financially stressed families build and retain wealth, and advance economic

fairness.

The undersigned An.lici file this brief in support of Appellee Rodney Scott, and urge the

Court to affirm the decision of the Ninth District Court of Appeals.

3

STATEMENT OF FACTS

Amici defer to and adopt the Statement of Facts presented by the Amiei team led by the

Legal Aid Society of Cleveland, However, Amici believe that the Court may benefit from the

following additional background information on payday loans, their history in Ohio, the

devastating effects they cause, and the General Assembly's and voters' various attempts over the

years to provide a check against their abuses.

A. What is a Payday Loan?

A typical paydav loan begins when borrower writes a personal check (or authorizes an

Electronic Funds Transfer (EFT)) payable to the lender for the amount the person wants to

boz'row, plus the fees and interest they must pay for borrowing. The lender gives the borrower

the amount of the check less the fees and interest, and agrees to bold the check until the loan is

due, usually the borrower's next payday. By the very nature of the transaction, the borrower

does not have enough money in their current account to cover the check, otherwise they would

not need the payday loan (which carries with it substantially higher interest and fees tlian

conventional loans).

If the borrower has insufficient funds to cover the check when it comes due, the borrower

generally has three options. One is to essentially "roll over" or "extend" the loan for another two

weeks with the same lender by taking out a new loan and paying additi_onal interest and fees.

Another is to take out a new loan with another lender to pay off the original loan. The third

option is to do nothing and then deal with the fallout when the lender unsuccessfully tries to cash

the check or initiate the EFT.7

7 Cashland offers a fourth option that permits customers once every twelve montlis to opt into an"extended paytnent plan." This option is contained in one boilerplate paragraph of Cashland'smulti-page consumer contract and is unlikely to be seen, understood, or used by its customers.

4

Most often, the borrower will "extend" the loan by agreeing to pay additional fees and

interest to cover what becomes a new, two-week loan period. The borrower is charged new fees

each ti.me the sanle loan is extended or "rolled over." Irrespective of whether the repeat

transactions are cast as "renewals," or "new loans," the result is a continuous flow o'Fpayments at

very short intervals that never reduces the principal. The debt hangs around the consumer's neck

like a metaphorical albatross.

The danger with payday loans is that a borrower cannot simply surrender his security and

walk away; he or she remains legally obligated to pay the principal, interest, and fees on the loan,

and he or she must deal with the consequences if a lender tries to cash his or her post-dated

overdrawn check or initiate his or her equally worthless EFT. When a payday loan customer's

check bounces, t-vvo things typically happen. First, the payday ledlder reports that person to the

local prosecutor for criminal prosecution or initiates proceedings under a court-supported private

mediation program.8 Second, the lender files a complaint in municipal court to collect and

ultimately garnish the customer's wages.

The consumer's inability to walk away is what separates payday loans from the other

legal predatory lending schemes, and it is also what makes payday loans ominously similar to

illegal lending schemes such as salary selling (discussed irzf^cx) and loan sharking. See R.C.

1321.32 (generally prohibiting "assignment of, or order for wages or salary"). The never-ending

cycle of debt forces desperate people to perforni desperate acts.

8 In Hamilton County, for example, the payday lender may file with the Hamilton CountyMunicipal Court Pre-Filing Mediation Program, or Private Complaint Mediation Service(PCMS). This is an official program to mediate misdemeanor criminal cases on a private basisto avoid crizninal prosecution, The debtor gets an official looking notice advising that the lenderhas filed with the program rather than a criminal complaint, but the possibility of criminalcharges remains if thc case is not settled. The PCMS offers "a special service for businesses thathave complaints against parties who have written the businesses bad checks." Available athttp://www.hamilton-co.org/anunicipalcourt/mediation/mediation_of c,Yriminal.htm.

5

B. Payday loans have always been subject to targeted legislation as part ofOhio's overall lending regulatory scheme.

Cashland asserts that "it has been politically popular in recent years to criticize the short-

terrn consumer lending industry.'° Appellant's Brief at 31 (emphasis added). But abuses inherent

to the practice of loaning money for future wages have been well-known, scrutinized, and

regulated by cultures across the globe for thousands of years, from the Roman Republic to the

Ming Dynasty China to the United States of America during the Civil War. See Graves and

Peterson, "Pyedatory Lending and the Military: The Law and Gcograpky of 'Payday' Loans in

Militazy Towns," 66 Ohio St. L.J. 653, 660-665 (2005). Oliio is no exception.

Well over a century ago, the Ohio General Assenlbly passed G.C. § 3670, which gave

Municipal Corporations the right to regulate salary lenders. When that delegation of authnrity

was challenged as unconstitutional, this Court observed the following:

We take it as well established that no court, appellate or otherwise, will or iscalled upon to profess ignorance of that which is well known, and nothing is moregenerally or better known than this, to-wit, that the business in which the plaintiffin error is engaged, commonly called that of a`salary loan shark,' is inherentlyoppressive, is fraught in its very nature with grave abuses, is the means ofinflicting unnecessary misery and unhappiness, and leads, through the individual,to the members of society at large, producing in the latter a dangerous andunsound economic condition and this condition leads, in turn, to added povertyand improvidence, entailing upon the state as a consequence, additional burdensof varied sorts.

Sanning ti% Cincinnati, 81 Ohio St. 142, 90 Ohio LEXIS 94, at *7-8 (1909). See also Wessell v.

Trn.beYlake, 95 Ohio St. 21, 35 (1916) (citing the Bible, the Koran, and Abraham Lincoln as

denouncing usurious lending).

In 1911, the Ohio General Assembly first enacted state-wide regulation of salary lenders

by passing G.C. § §6246-1, et.seq. The law required licensing of salary lenders and regulated the

pernlissible interest rates and charges for such loans, In Cain 1% People's Salary Loan Co., 24

6

Ohio C.D. 115, 1912 NVL709, at *1, affirmed, 88 Ohio St. 550(1913), the court noted that "The

extortion practiced by a class of money lenders is a matter of common knowledge. And to

prevent and punish such practices was the evident purpose of the enactment."

When the 1911 law was challenged as unconstitutional, this Court again spoke out

against usurious payday loans:

The charge of interest at exorbitant rates to needy workers who because ofimmediate exigencies have to secure small loans, not only because of the extent ofthe evil, but also because of the nature of the transaction, is clearly affected withthe public interest. From early days the charge of usury has been the subject ofpublic regulation, upon the express ground that the public interest requires suchregulation. The purchase of salaries at such a rate of discount as 10 per cent perhalf month period is clearly tantamount to an excessive rate of usury, and hencelies within the scope of the police power.

Dunn v. S'tate, I22 Ohio St. 431, 436 (1930).

i, The Small Loan Act

In 1943, foreshadowing H.B. 545 by 65 years, Ohio's General Assenibly repealed the

existing laws governing salary lending and enacted a new law, G.C. §§8624-50, which

effectively abolished payday loans. This new law would eventually become Ohio's current

Small Loan Act, now codified at R.C. 1321.01, et seq. As enacted in 1943, any "money, credit,

goods or things in action" valued at $300 or less given as a consideration for any sale or

assignment of, or order for, the payment of wages, salary, commissions, or other compensation

for services" becazne governed as a small loan. G.C. §5624-65(a). Lenders were granted the

authority to charge more than 8% on small loans, but there were strings attached - most notably

that all such loans had to be repaid "in substantially equal installments ... at approximately equal.

periodic intervals of time." G.C. 8624-62(a). See In re I3arnhai°t, 91 F. Supp. 453, 455 (N.D.

Ohio 1950) ("the purpose of the Small Loan Act is to protect small borrowers from harsh and

oppressive charges"); Inci'ependent Foods, Inc. v. Lucas C'ty. Sav. Bank, 70 N.E.2d 139, 144 (8th

7

Dist. 1946) ("Collection of more than eight percent on small chattel loans is legalized only by

statute and would not be legal were there no statute.... The Ohio Small Loans Act was passed to

legalize what otherwise would have been illegal, namely, charging more than eight percent on

small loans with chattel security.").

As recognized by the Magistrate in his Findings of Fact and Conclusions of Law

("Magistrate's Decisions") below, "Ohio's Small Loan Act was enacted with the manifest

purpose of abolishing the type of short terna, lump sum loans made to Defendant here, in favor of

installments spread out over time." Magistrate's Decision at 8. The Act has been subsequently

amended at various times, including in 1981 when the General Assembly modified the interest

calculation provisions to allow loans to be either "precomputed" or "interest-bearing,"9 but as the

Magistrate recognized, "nothing in any amendment even remotely suggests that this original

purpose for the enactment of the Small Loan Act changed." Magistrate's Decision at 9.

ii. Check-Cashing Lender Law

Ohio was substantially free of payday loans for more than 50 years after the Small Loan

Act effectively abolished payday loans in Ohio. However, the General Assembly resurrected the

practice by enacting the Check-Cashing Lender Law, R.C. 1315.35-1315.44, popularly known as

the Payday Loan Act, in 1995. As the magistrate described it below, "Lenders no longer had to

pretend to purchase wages or salaries of borrowers, -vvhich continued to be prohibited in that

form. R.C. 1321.32 ('assignment of, or order for wages or salaries of borrowers' invalid). In the

modern age, the ubiquitous checking account became the target." Magistrate's Decision at 8.

Utider the Payday Loan Act, Ohio experienced a veritable explosion of payday lending, The Act

allowed lenders to make cash advances to customers for up to $500 at 5%, interest per month,

9 See 1981 H.B. 134.

8

repayable by a single lump sum payxnent. R.C. 1315.39. Just as what happened a half century

earlier prior to the Smal.l Loan Act, complaints and controversy over payday lenders' abuses

ensued.

lii. The Short-Term Loaii Act

In 2008, the General Assembly acted in bipartisan fashion to curb the growing abuses of

the payday lending industry by simultaneously repealing the Payday Loan Act and enacting H.B.

545, commonly known as the Short-Term Loan Act ("STLA"), R.C. 1321.35 - 1321.48. At the

time, it was proclaimed to be a "major step toward protecting Ohio consutners who are already

struggling with debt by strictly regulating payday lenders and lowering the maximum interest

rate for short-term Ioans." Ohio Governor's Message, June 2, 2008. The STLA prohibits any

lender from engaging "in the business of making short-term, loans to a borrower in Ohio ...

without first having obtained a license," R.C. 1321.36(A), and covers not only licensed

businesses but also those "required to be licensed." R.C. 1321.47. The STLA reduced the

maximum permisszble annual percentage rate ("APR") to 28% and set a minimum loan tenn of

31 days, among other new restrictions. The legislature's intent in passing the STA was crystal

clear: to strictly regulate all short-term, unsecured, single payment payday loans.

Perceiving the STLA as a threat to their profit margins, Cashland and its fellow Ohio

payday lenders spent millions of dollars organizing a voter referendum seeking to undo the

STLA and reinstate the Check-Cashing Lender Law.14 Ballot Issue 5 of the Noveznber 2008

election asked Ohio voters to decide whether Section 3 of H.B. 545 --- described as "delet[ing] the

old provisions of the law regulating check cashing lenders, sometimes known as `payday

10 Cashland alone spent $4.4 million in support of the voter referendum, known as Ballot Issue 5.See Cash America, 2009 Form 10-K Annual Report (Feb. 26, 2010), at 55, available athttp://www.cashamerica.com/InvestorRelations/Sa3CFilings a.aspx,last visited July 27, 2013.

9

lenders,' in favor of the new provisions" - should go into effect. Ohio Secretary of State, Ohio

Issues Report: Stcate Ballot Inf'oa•niation.for the Movcmber 4, 2008 General Election, at 17. The

Official Ballot language provided that "If a majority of Ohio voters approve Section 3 of H.B.

545, all shoi°t term lenders, including check ctzslting lenders, would be subject to the [new

STLA] limitations." Id. (emphasis added). The majority of Ohio voters -- nearly two-thirds of

them (63.6%) - voted to make "all short term lenders, including check cashing lenders" subject

to the new STLA limitations, Ohio Secretary of State, Anaendment and Legislation: Proposed

Constitutional Ainendrnents, Initiated Legislation, and Laws Challenged by Refereraduna,

Submitted to the Electors, at 24-25. "

Thus both the Oliio voters and a bipartisan majority of their duly elected representatives

have spoken in a clear voice in favor of imposing the stringent restrictions set forth in the STLA

upon payday lenders like Cashland. Their will should be respected.

iv. The Second Mortgage Act

Long before the ink dried on the official results of its unsuccessful referendum, Cashland

began looking for a loophole to allow it to continue conducting its payday lending business as

usual in Ohio. Cashland believes it found one it can exploit in the "interest-bearing" loan

provision of the Second Mortgage Act, R.C. 1321.51-1321.60,

The Ohio General Assembly enacted the Seeoiid Mortgage Act (or "MLA") in 1965 to

regulate lenders who took second mortgages as security. When first enacted, the Second

Mortgage Act's provisions paralleled those of the Small Loan Act in many important ways,

including that each loan had to be "repayable in substantially equal installments." 131 v. 444,

codified at R.C. § 1321.57. The maximum interest rate available under it was 8%. Id.

11 Available at http:/%www.sos.state.oh.us/sos/upload/elections/historical/issuehist.pdf (accessedJuly 17, 2013).

10

In 1979, faced with rising interest rates that exceeded the 8% cap, the Ohio General

Assembly increased the MLA's maximum interest rate from 8°/® to 18%, but clarified that

interest was to be calculated according to the actuarial method, the most accurate (and borrower

friendly) method. Am.H.B. No. 511, 138 Ohio Laws 2939. This Amendment also provided

more detailed instructions on permissible interest calculation methods, offering the lender the

option to lend either "interest-bearing" or "precomputed" loans. Id. Importantly, at the time of

the Amendment, the MLA applied only to second mortgages and similar long-term secured loans

that are by their nature installment-based.

In defining "precomputed" loans, the General Assembly natLirally carried over the

previous definition that the loans be repayable in "substantially equal installments." However,

when defining "interest-bearing" loans, the "substantially equal installments" language so

obviously applicable to "precomputed" loans was not included. As will be discussed below, the

omission of "substantially equal installments" from the "interest-bearing" loans was not intended

by the General Assembly to eliminate the requirement that MLA loans be repaid in multiple

installments because other language of the MLA continued to contemplate multiple installments,

and the MLA continued to only govern second mortgages and similar secured long term

installment loans.

The MLA was subsequently amended in 1981 to pen-nit unsecured loans. See 1981 H.B.

134. However, as will be discussed in greater detail infra, the fact that the legislature left

unfettered nearly two dozen references to "each" payment, "installment," and "installments" in

the statute demonstrates that the General Assembly did not intend to eliminate the requirement

that MLA loans be paid in multiple install7nents.

ARGUMENT

11

PROPOSITION OF LAW NO. 1: The plain and unambiguous lauguage of Section 1321.57of the Ohio Mortgage Act does not permit MLA registrants to make single installment,interest bearing loans.

A. The MLA contemplates multiple payments, not a single payment.

When the General Assembly amended the MLA in 1979 to specify that interest may be

calculated on either a "precomputed" or "interest-bearing" basis, it deleted the then-existing

language (under the prior R.C. 1321.57(A)) that all MLA loans must be "repayable in

substantially equal installmen-ts." Based on this, Cashland reasons that the legislature intended to

fundamentally modify the nature of the statute by eliminating the requirement that MLA loans be

repayable in multiple installments. Accordingly, Cashland argues that the MLA should be

construed to authorize single payinent payday loans simply because the debt is "expressed as the

principal amount and interest is computed, charged, and collected on unpaid principal balances

outstanding from time to time, for the time outstanding." R.C. 1321.57(C). Cashland's position

cannot be squared with the statutory text of the MLA, its purpose, or its role within Ohio's

lending regulatory scheme. Therefore, it must be rejected.

First of all, when the General Assembly amended the MLA in 1979 to permit "interest-

bearing" loans, the MLA orily applied to second mortgages and other secured loaiis. At that

time, the Small Loan Act, R.C. 1321.01, et seq., by contrast governed the lending of small

unsecured loans in Ohio. At the time of the amendment, the General Assembly could not have

known that 30 years in the future, payday lenders would try to shoehorn their predatory payday

lending practices under the "interest-bearing" loan provision of the MLA to evade explicit and

stringent payday lending restrictions.

Moreover, even though the MLA no longer requires all loans to be repaid in

"substantially equal installments," it still contains multiple provisions that clearly contemplate

12

that loans will be subject to multiple payinents. For instance, R.C. 1321.57(C)(1)(c) provides

that regardless of wliether a loan is "precomputed" or "interest-bearing," "each payment shall be

applied first to unpaid charges, then to interest, and the remainder to the unpaid principal

balance." (emphasis added). Because "each" is not defined in the MLA, it must be given its

"plain, common, ordinary meaning" as construed "according to the rules of grammar and

common usage." Smith ^^. .Land-faiz°, 135 Ohio St. 89, 94, 2012-Ohio-5692, 984 N.E.2d 1016

(citing R.C. 1.42). "Each" is defined by Merriam-Webster to mean "being one of two or more

distinct individuals having a similar relation and often constituting an aggregate."'2 See also

Novelty, Inc. v. DYUg Enfarcement Admin., 571 F.3d 1176, 1194 (D.C. Cir. 2009) ("Section

822(e), by use of the word `each,' contemplates multiple such places."); Used Equip. Sales v.

Dep't ofTransp., 54 F.3d 862, 865 (D.C. Cir. 1995) ("the provision of a separate penalty for

`each'offense suggests that `multiple penalties are recoverable for a multiplicity of

occurrences"'); I3arnet v. Superior Court vf'11%faricopa Cty., 124 Ariz. 467, 468 (Ariz. 1979) ("By

referring to `each claim against each defendant,' the legislature clearly contemplated more than

one finding in a medical malpractice action where there is more than one defendant.").

Therefore, by requiring "each paynient," the General Assembly clearly required at least two

payments, and did not authorize single-installment loans.13

12 Available at http;//www.merriam.-webster.com/dictionary/each (accessed July 26, 2013).

13 Additionally, Subsection (A) of R.C. 1321.57 provides that regardless of whether a loan is"precomputed" or "interest-bearing," interest must be "calculated according to the actuarialmetd2ocl, at a rate or rates not exceeding twenty-one per cent per year on the unpaid principalbalances of the loan." (emphasis added). The MLA expressly defines "actuarial method" as the"method of allocating payments made on a loan between the principal amount and interestwhereby a payment is applied to the accumulated interest and the rernainder to the unpaidprincipal amount." R.C. 1321.51(H) (eznphasis added). That thedefinition of "actuarial method"expressly contemplates the existence of multiple "payments," and instructs how "a" paynient(rather than "the" payment) should be applied is telling.

13

Additionally, R.C. 1321.57 contains no fewer than 22 references to "installment" or

"installments," which in itself suggests the existence of more than one such payment. See, e.b.,

R.C. 1321.57(C)(1)(b) ("a registrant may charge and collect interest for the first installment

period based on elapsed time from the date of the loan to the first scheduled payment due date,

and for each succeeding installment period from the scheduled payment due date to the next

scheduled due date"); R.C. 1321.57(L) ("[A] registrant may collect a default charge on any

installment not paid in fizll within ten days of its due date .... The amount of the default charge

shall not exceed the greater of five per cent of the scheduled installment or fifteen dollars."). See

also Black's Law Dictionary 800 (7th ed. 1999) (defining "installment" as "periodic partial

paynient of a debt"); Merriam-Webster Dictionary 370 (1974) (defining "installment" as "1: one

of the parts into which a debt or sum is divided for payment 2: one of several parts presented at

intervals"). Cashland's single lump sum paynient payday loan is not paid in "installments." See

Cruisingei• v. Arndt, 5th Dist. No. CA-955, 1990 Ohio App. LEXIS 2458 ( June 8, 1990) (mere

fact that loan "due and payable" in two years could have been paid in multiple payments within

two-year period did not mean the loan was payable in "installments"); Russin v. Slaepherd, 11th

Dist. No. 2006-G-2708, 2007-Ohio-3206 at ¶55 (similar). Cashland's position that it is

authorized to issue a two-week lump sum single payrnent loan under the MLA just because it

calls it "interest-bearing" defies the purpose, histoiical context, and plain language of the Ohio's

lending laws.

Cashland's suggestion that the 1979 amendment of the MLA was intended to be a sea

change by which the General Assembly eliminated the requirement of repayment in multiple

installments for interest bearing loans also ignores other aspects of the ainerAdment which

14

strongly suggest alternative reasons why the legislature revised "interest-bearing" loan language.

For instance, the General Assenibly first introduced the open-end loan under the MLA as part of

the 1979 amendment.1a Because open-end loan balances necessarily vary, it would be

impossible to require the lender to offer open-ended loans repayable in "substantially equal

installments." Therefore, the General Assembly amended the MLA to authorize "interest-

bearing" loans that need not be payable in "substantially equal installments." But this

amendment was not intended to open the floodgates to allow payday lenders to issue loans under

the MLA. Indeed, at that time, the MLA had not been expanded to cover unsecured loans.

In fact, to interpret the MLA to permit two-week lump sum single payment loans as

Cashland suggests would contravene long established regulations adopted by the division of

financial izistitutions. R.C. 1321.54(A) authorizes the division to adopt "rules that are necessary

for the enforcement or adininistration of sections 1321.51 to 1321.60 of the Revised Code and

that are consistent with those sections and rules to carry out the purposes of those sections."

Pursuant to legislative delegation of authority, the division promulgated Ohio Adm.Code 1301:8-

3-07 (G)(2), which provides, "In the instance of a non-amortized or partially amortized interest-

bearing loan, the registrant shall provide the borrnwer with written notice of maturity at least

ninety but not more than one hundred twenty days prior to the expected maturity date." Under

this longstanding provision of the Ohio Administrative Code, it would be impossible for a

14 Notably, in contrast to closed-end loans, in the 1979 MLA amendments the General Assemblyspecified that borrowers of open-end loans shall have the "privilege of paying the account in fullat any time." See Am.H.B. No. 511, 138 Ohio Laws 2939, changes to R.C. 1321.58. Incomparison, the "interest-beaiingloan" provision in R.C. 1357.57(C)(1) did not provide thesame "privilege." Instead, it stated that "Fach payment shall be applied first to the accumulatedinterest and the renlainder of the paynient applied to the unpaid principal balance." The"privilege" language suggests that the legislature intended to grant open end borrowers theoption to opt out (i.e. the exception) from multiple installments (i.e. the rule).

15

payday lender such as Cashland to provide the required notice when making an interest-bearing

14-day payday loan, t 5

B. . Prior to the STLA, the MLA was never interpreted to permit single paymentpayday loans.

Unhappy with the Ohio voters' decision to impose the STLA's strict restrictions on "all

short term lenders, including check cashing lenders," droves of the payday lenders sought to

continue to ply their trade pursuant to the MLA, a statute that was never intended by the General

Assembly to apply to single payment payday loans. Cashiand and its supporting amici

repeatedly assert that the Department of Commerce has "for more than 30 years" pcrmitted

single-payment loans under the MLA. But remarkably, they provide no evidence whatsoever to

support the bald assertion. Certainly there is no proof that the Depart_ment of Commerce ever

permitted under the MLA the 14-day single payment payday loans at issue here at any time prior

to 2008. In fact, as noted sul)ra, the Deparfiment has adopted a Regulation that explicitly forbids

such a loan. See Ohio Adm.Code 1301:8-3-07 (G)(2).

To the contrary, all empirical evidence suggests that single payment payday loans only

started being offered under the MLA after the 2008 referendum. Department of Commerce

statistics reflect a dratnatic shift in the number and values of MLA loans from 2006, before the

STLA was enacted, to 2011, the most recent data available;16 In 2006, 2,574 lenders made

's In h_is brief, Amicus Keck states that he "reniexnbers advising one MLA registrant" that singlepayment loans were perrnissible under the MLA. Brief of Amicus Curiae Richard F. Keck at 9.With all due respect to what Mr. Keck "remembers advising one MLA registrant" at soineunknown time, the Department clearly spoke tllrough Ohio Adm.Code 1301:8-3-07 (G)(2) toindicate that Cashland's 14-day single installment loan is not pernissible under the MLA.

16 See Second Mortgage Registrants & Small Loan Licensees Annual Reports for 2006 and 2011,available from the Department of Commerce (www.com.ohzo.gov).

16

315,345 MLA loans at an average value of $16,950." In 2011, 1,352 lenders made 6,109,834

MLA loans at an average value of$630.1s These Reports clearly show a very recent migration of

payday lenders to the MLA.

Therefore, the allegedly "historic position" of the Department that "for over 30 years" has

allowed 14-day, single payment loans under the MLA is revealed to be merely an after-the-fact,

post hoc justification devised by Cashland and its cohorts in the payday lending industry to

evade the STLA and the will of the people. There is no such historic position. In reality, the

Departinent has a five year history of allowing MLA registrants to violate the Ohio R.evised

Code, and the Ohio Administrative Code. Such indulgence is hardly entitled to deference.

Cashland contends that bv issuing its decision below, the Ninth District became "the first

appellate court in this state to hold that the MLA does not permit single installment loans."

Appellant's Brief at 5. But other than the courts below in this case, no court has ever been

squarely presented with the question of whether a single-installment loan is permissible under

the MLA. Accordingly, Cashlan.d's touted record of success in undefended appeals of default

judgments against unrepresented borrowers does not carrv the weight Cashland suggests it does.

See Appellatit's Brief at 22-23 (listing cases). In reality, every single court that has squarely

addressed the issue - the Elyria Munieipal Court Magistrate, the Elyria Municipal Court Judge,

and the Ninth District Court of Appeals - has agreed that the single-installment loans are not

perrnissible under the MLA.

Cashland and the amici supporting it spend considerable effort arguing that the Ohio

Attorn.ev General endorsed using the MLA for payday loans in 2008. See 2008 Ohio

17 Id.

18 Icl.

17

Atty.Gen.Ops. No. 2008-036. But even a casual review of the Attorney General's opinion

reveals that the MLA was never mentioned let alone substantively addressed in it. Rather, the

Attorney General actually merely opined that while the Cashland-funded referendum was

ongoing, payday lenders could continue to make loans under either the new Short-Term Loan

Act or the old Check-Cashing Lender Law.

Cashland takes excessive liberties by suggesting that the Attorney General found that

"the STLA does not preclude short-terzn, single installment loans under alternative lender-

licensing statutes ...." Appellant's Brief at 15 (emphasis added). Nowhere does the Attorney

General say anything even remotely close to that. While the Attorney General does recognize

that pursuant to H.B. 545, a license holder under the Check-Cashing Lender LaNv may apply for a

license under the Small Loan Act, that does not mean that the a lender may use that Small Loan

Act license to make "short-term, single installment loans," or even that a licensee may hold both

licenses concurrently. Indeed, a Check-Cashing Lender Law license expires on December 31,

while a Small Loan Act license expires on June 30. By offering a one-half reduction in the

licensing fee for the Small Loan Act, H.B. 545 easily could be interpreted as offering a reduction

for the time period of January 1 through June 30, the time period after which the previous license

expires. After all, a lender seeking to be licensed under the Small Loan Act must apply for a

license and await a determination --- such licenses are not granted pro fortna.

But most importantly, nothing in H.B. 545 or the Attorney General's Opinion states that

14-day, single payment payday loans are permissible under the Small Loan Act or the Mortgage

Loan Act. Any suggestion to the contrary is pure bluster.

C. Cashland's current purported reliance on the MLA's "interest-bearing"provision is belied by its previous actions.

18

While Cashland now claims to be making "interest-bearing" MLA loans, Cashland has

repeatedly asserted the position to other Ohio courts that its payday loaiis are "precomputed"

loans under the MLA. This fundamental change of position with regard to the statutory basis for

its entire lending business further reveals that Cashland is desperately grasping for straws in

order to offer a post hoc justification for its illicit lending practices. The Court should not

tolerate such behavior.

In Ohio Ncighborhood Fin. Inc. v. Massey, Cashland represented to the court in that "As

a registered lender under the OMLA, on December 17, 2009 and Decenlber 4, 2009, Cashland

made pYe-conaputed loans to Mills and Massey in the ainounts of `fi500.00 and $225.00,

respectively." Appellant's Br. at 3, Ohio Neighborhood Fin. Inc. v. Massey, 10th Dist. No.

10AP-1020, 2011 Ohio 2165 (emphasis added). Likewise, in Ohio lijeighborhood Ittn., Iiac. v

1VIcGeorge, Cashland represented that "In [its] capacity as a registered lender [under the MLA]

... ONF made a pre-computed loan to McGeorge in the ainount of $500." Appellant's Br. at 1,

Ohio .11TeigdiboYhood Fin., Inc, v. McGeorge, 9th Dist. N. 10 CA 25410, 2011 Ohio 577

(emphasis added). Cashland hasrnade similar representations in many other cases as well.19

Ohio courts have relied upon these representations in their decisions, often in undefended

cases where there is no opposing party to challenge the representation. See McGeorge, 2011

'9 S'ee, e,g., Appellant's Br. at 1, Ohio Neighborhood Fin., Inc. v King, 9th Dist. No. 10 CA25409, 2011 Ohio 438 ("ONF is registered ... under the OhioMortgageLoan Act, R.C. 1321.51et seq. In that capacity as a registered lender, on September 10, 2009, ONF made a. pre-conaputed loan to King in the ainount of M0.") (emphasis added); Appellant's Br. at 1, OhioNeigh_boyhood Finance. ITac. v Christie, 8th Dist. No. CA-10-094821, 2010 Ohio 5017("Appellant is registered ... under the Ohio Mortgage Loan Act, R.C. 1321.51 et seq. In thatcapacity as a registered lender, on May 15, 2009, Appellant made a pre-con2puted loan toAppellee in the ainount of $890.00.") (empliasis added); Appellant's Br. at 1-2, OhioNeighborhood Fin., Inc. v Muckc. ndf•iclc, 2nd Dist. No, CA 023978, 2010 Ohio 6098 ("Appellantis registered as a lender ... under the Ohio Mortgage Loan Act, R.C. 1321.51 et seq. In thatcapacity as a registered lender, on March 18, 2009, Appellant made a pre-computed loan toAppellee in the amount of $250.00.") (emphasis added).

19

Ohio 577 at ¶2 ("On September 10, 2009, Cashland made a pNe-computed loan to Rebecca

iVlcGeorge.") (emphasis added); Kinq, 2011 Ohio 43$ at ¶2 ("On June 5, 2009, Cashland made a

pa°e-cornputcd loan to Melissa King.") (emphasis added); Christie, 2010 Ohio 5017 at ¶3

("According to the terms of the loan agreement, Cashland loaned Christie $$90 on May 15,

2009 in exchange for Christie agreeing to pay (1) a loan origination charge of $ 100, (2) a credit

in.vestigation fee of $ 10, (3) the pYecompitited loan of $ 890, and (4) interest at a rate of 25

percent per annum -- all due on May 29, 2009, for a combined total of $ 1,009.56.") (emphasis

added).

The "doctrine of judicial estoppel forbids a party `from taking a position inconsistent

with one successfully and unequivocally asserted by the saine party in a prior proceeding."'

GreeY-Burgej° x?'emesi, 116 Ohio St.3d 324, 330, 2007 Ohio 6442, 879 N.E.2d 174, ¶25

(internal citations omitted). "Courts apply judicial estoppel in order to `preserve [] the integrity

of the courts by preventing a party from abusing the judicial process through cynical

gamesmanship, achieving success on one position, then arguing the opposing to suit an exigency

of the moment. "' Id. (citations omitted). Here, because Cashland advocated to multiple appellate

courts (and presumably countless trial courts) that its loans were issued as precomputed loans

under the MLA, and those representations led to successful appeals based on the courts'

acceptance of Cashland's representations, Cashland is judicially estopped from changing its

mind and calling these loans "interest-bearing" in order to avoid unfavorable MLA restrictions

on "precomputed" loans.

Cashland presumably changed its proverbial tune wlten it realized that single payment

loans fall outside the definition of "precomputed" loans under the MLA. But that does not

change the fundamental nature of the payday loans Cashland offers, which are, as the Municipal

20

Court found below, inherently precomputed. Mr. Scott gave Cashland one-time authorization to

withdraw a specific, precomputed amount from his checking account on a specil'ic date. In

Guisinger v. Arndt, 5th Dist. No. CA-955, 1990 Ohio App. LEXIS 2458, the defendant signed a

note for $ 25,000, which provided the principal was "due and payable on or before two years

from the date of this note." Id. at *2. The court held that the principal attd interest were due in

one installment. Id. at *4. The fact that the note could have been paid in multiple payments

within the two-year period did not mean the note was payable in installments. Id. Similarly,

here, the fact that Mr. Scott theoretically could have come in to the Cashland store to pay off his

loan a day or two early to save himself a few pennies in interest does not alter his inherently

20"precomputed" loan into an "interest-bearing" one,

D. Recognition that the MLA does not authorize Cashiand's payday loans willlead to less litigation, not more.

Cashland and the amici supporting it predict that a rash of lawsuits will be filed in Ohio

courts if the Court upholds the decisions below and finds that Cashland's payday loan product is

not authorized by the MLA. Amici disagree that the vindication of consuzner rights is something

to be feared. But in any event, the supposed "flood" of lawsuits over Cashiand's lending

practices is already upon us, and. will only be abated by such a ruling. A. review of any

searchable Municipal Court docket in Ohio reveals hundreds of lawsuits filed by Cashland

against its customers. Most if not all of these lawsuits involve default judginents, followed by

collection efforts that involve ongoing court supervision, such as wage garnishment.

20 Nor is the fact that Mr. Scott's loan provided him the option of repaying the loan earlyinconsistent with a "precomputed" loan. See R.C. 1231.57(D)(3) (requiring lenders to refundinterest charges whenever a borrower pays off a precomputed loan before its final installment isdue).

21

Furthermore, Cashland can refer for criminal prosecution those individuals whose accounts have

insufficient funds to cover the checks or AFT authorization given.

In contrast, an aggrieved individual wishing to sue Cashland must face its arbitration

agreement, which Cashland contends prevents a lawsuit in any forum other than small claims

court and offers no possibility of class actions or class arbitrations. Given the one-sided zi.ature

of this agreement - only the customer purports to waive his or her riglit to file in court, Cashland

waives nothing - should this Court find that Cashland's payday loan product is unavailable under

the MLA, the only likely effect on Ohio's court system will be to stop Cashland from filing

thousands of collection Iawsuits.21

PR4POSITION OF LAW NO. 2: The Short Term Loan Act, R.C. 1321.35, et seq:,prohibits MLA registrants from making single installment loans of short duration

A. STLA was intended to be the exclusive lending authority for payday loans.

Cashland argues that the legislative history of the Short-Term Loan Act shows that the

General Assembly did not intend to regulate all payday loans through its passage, but only those

loans made by lenders who opted-in to its terms. Appellant's Brief at 25. Cashland even argues

that the very legislators who were creating the Short-Tern1 Loan Act wanted the industry to

continue to make payday loans at interest rates in excess of 391 %. These arguments are patently

incorrect.

x'This case reveals in stark terms the fallacy of the argument that arbitration is a cheaper andeasier way to resolve disputes. Cashland obviously does not believe this is true, or it would notburden the Ohio court system with thousands of lawsuits. In fact, this case lays bare the purposeof many inodern-day arbitration agreements to insulate bad actors such as Cashland from anymeaningful court review. The only reason this case is before a coui-t is because Cashland wantsit to be. Cashland would surely argue that Mr. Scott could oot have brought this case to thisCourt of his own accord. Therefore, this Court has the unique opportunity to enforce Ohio lawas written and intended by the Ohio General Assembly, and as voted on by the Ohio people. Inall likelihood, it is an opportunity that will not come again.

22

In June, 2007, Rep. William Batchelder began crafting a bill to address payday lending

abuses, noting that "391% is excessive." 76 Ohio Report No. 119, Gongwer News Serv., at 3

(June 15, 2007). This legislative process was lengthy and involved, with committee members

spending nearly five months reviewing tlie issue and hearing testimony from about 50 witnesses.

77 Ohio Report No. 84, Gongwer News Serv., at 4 (April 30, 2008). At least six bills were

introduced in 2007 (H.B. 156, 333, 337, 358 and SB 72 and 253), with H.B. 545 becoming the

compromise bill introduced in 2008.

After H.B. 545 was introduced, R.ep: Chris Widener said, "We believe this will be the

most stringent law in the United States." 77 Ohio Report No. 84, Gongwer News Serv., at 4

(April 30, 2008). "It's obvious that we will, with this bill, eliminate check cash lending from

Ohio law. We've offered up a couple other small loan products and I would just ask those that

are currently in the industry to take a long hard look at it," he said, referring to a provision that

would create a new small loan linked deposit program and other options. Id.'`2 "If they can't

offer that to folks, then essentially they will not be able to do what they're doing today. And that

is all in the best interest of consumers." Id.

Cashland cites a May 12, 2008 report in which Rep. John Carey (R-Wellstori) is quoted

as stating, "We're looking at ways to encourage payday lender to go under the Small Loan Act as

it is in current law. You can have origination fees under the Sin.all Loan Act." Appellant's Brief

22 HB 545 set up the short term installment loan linked deposit program designed to make short-term loans funded by state certificates of deposit in "eligible lending institutions." Eligiblelending institutions can enter into agreements with the State Treasurer in which the state willgive the lending institutions a linked deposit from which to make short-term loans. These shorttenn loans can carry an interest rate not to exceed an annual percentage rate of 28%, calculatedin the manner provided in the Truth-in-Lending Law, and have a duration of not less than 90days.

23

at 11 (quoting 77 Ohio Report No. 92, Gongwer News Serv., at 2(1VIay 12, 2008). Cashland

ignores that the saine source described this reaction from Rep. Widener just eight days later:

`We feel like the consumers in the state of Ohio need some help,' Mr. Widenersaid in regard to the two-week loan schemes that the legislature authorized in themid-1990s. `It's a product that consumers in Ohio ... cannot handle under anycircumstance.'

77 Ohio Report No. 98, Gongwer News Serv., at 2 (May 20, 2008). House Speaker Husted also

confirmed that H.B. 545 was intended to address the two-week loan product: "We didn't ban

small loans. We banned a defective product." 77 Ohio Report No. 153, Gongwer News Serv., at

2 (August 7, 200$).

Cashland fails to explain how Rep. Widener's statement that two-week loan schemes are

"a product consuxners in Ohio ... cannot handle under any circumstance" fits with their argument

that he intended payday lenders to simply switch regulatory sehemes and continue making two-

week loans. Lndeed, Rep. Widener later stated, "I designed House Bill 545 to protect Ohioans

fi-ona a dangerous product that has been sold at an egregious price." 77 Ohio Report No. 119,

Gongwer News Serv., at 3(3une 19, 2008). It is notable that Rep. Widener's bill created the new

short-tenn installment linked loan deposit prograni as an alternative to payday lending, and that

such loans must be for no less than 90 days.

Cashland also argues that by failing to adopt suggested language offered by the

Department of Commerce a week before the vote on the compromise bill, the General Assembly

intended to allow lenders to make 680% APR loans under the MLA. This argument ignores the

reality of how difficult the legislative process was, and how hard the payday industry fought to

defeat the bill. Last-minute ainendments were being offered by legislators sympathetic to the

industry to try and defeat the bill. But while the language suggested by the Department would

24

have perhaps provided additional (redundant) clarity to the already evident restrictions on payday

lending under the SLA and MLA, it was by no means necessary.

That is equally if not more clear with respect to H.B. 209, the failure of which to become

law Cashland argues shows "compelling evidence" that the General Assembly agrees with the

Cashland's interpretation of the MLA as authorizing 14 day, single payment loans. Appellant's

Brief at 28. First of all, H.B. 209 never even made it out of committee. Second, in response to

H.B. 209, "Sen. Chris Widener (R-Springfield), who spoilsored the bill eliminating payday

lending while in the House (HB 545, 127th General Assembly), said additional legislation is

unnecessary .... `We already did the fix. Now it's up to the department to enforce it,' he said in

a recent interview." 78 Ohio Report No, 183, Gongwer News Serv., at 4 (September 21, 2009).

In other words, H.B. 209 was rejected as unnecessary because the Department already had the

mandate aind tools to address illicit practices under the MLA. This is hardly the same as an

endorsement of Cashland's position. The STLA was clearly intended to be the exclusive lending

authority for payday loans.

B. The Referendum language influences interpretation of the STLA.

On November 4, 2008, Ohio's electorate voted by a nearly two to one margin. in a

statewide referendum to uphold the key provision and subject G4cdl shoirt term lenders, including

check ccz.rhing lenders" to heightened restrictions of the STLA. Even the ballot measure's title

made clear that the legislation at issue would effect a change in payday lending practices in Ohio

- "Referendum on Legislation Making Changes to Check Cashing Lending, Sometimes Known

as `Payday Lending,' Fees, Interest Rates and Practices." Ohio Secretary of State, Ohio lssues

25

Report: State Ballot Information foY the November 4, 2008 General Election, at 17 (emphasis

added).21

The official ballot explained the meaning of a "yes" vote as follows:

If a majoi-ity of Ohio voters approve Section 3 of H.B. 545, all short term lenders,including check cashing lenders, would be subject to the following limitations;

• The maximum loan amount would be $500;

• Borrowers would have at least 30 days to repay the loaii; and

• The maximum interest rate would be 28% annual percentage rate (APR)

on all loans.

Id. (Eniphasis added).

More than 63 percent of Ohio voters voted "yes" and upheld the Short Term Lending Act

with the unequivocal understanding that all short term lenders - identified in the measure's title

as "payday" lenders like Cashland - would be subject to these limitations. Ohio Secretary of

State, Amendment and Legislation: Proposed Cofzstitutional A.mendments, Initiatecl Legislation,

and Latit.s Challengecl by Referendum, Submitted to the Electors, at 24-25.24 Cashland and the

payday lending industry approved of the language of the ballot measure and spent aggressively

to try to obtain a "no" vote, and lost.25 However, now that the voters overwhelmingly rejected

Cashland's position, Cashland makes no mention whatsoever of the referenduni in its Brief,

23 Available at http•/%www.sos.state.oh.us/sos/upload/publications/election/Issues_08.pdf(accessed July 17, 2013).

24 Available at http://uivw.sos.state.oh.us/sos/upload/elections/liistorical/issuehist.pdf (accessedJuly 17, 2013).

25 See Kevin O'Brien, "Ohio payday lenders win the ballot word game," Cleveland Plain Dealer,August 24, 2008.

26

apparently content to ask the Court to adopt its strained interpretation of the Revised Code and

wholly ignore the will of the people,

The will of the people is no small matter to be blithely cast aside or ignored. Article 11

section 1 of the Ohio Constitution provides that the legislative power of the state shall be vested

in a General Assembly, "but the people reserve to themselves" the power to adopt or reject any

such legislation by referendum.

The grant to the General Assenlbly is a delegated power. Initiative andreferendum are reserved powers. "[They] coinprehen[d] all of the sovereignpower of legislation not thus delegated. * * * [The powers are] not to berestricted by any limitations, except such as are imbedded [sic] in the federalconstitution." Tfei,fer v. Graves (1913), 88 Ohio St. 473, 486, 104 N.E. 529, 533.The powers of initiative and referendum should be liberally construed toeffectuate the rights reserved.

State ex nel. Hodges v. Ta,f't, 64 Ohio St. 3d 1, 4, 591 N.E.2d 1186, 1189 (1992).

When the people speak by referendum, as they have in this case, the Court has long

recognized that it must respect their will and resist efforts such as Cashland's to dismantle such

enactments under the guise of interpretation. See e.g. State ex rel. Greenlund v. Fzalton, 99 Ohio

St. 168, 187, 124 N.E. 172, 177 (1919) ("Where is the authority of a court to add to, or subtract

from, a solemn document prepared and filed pursuant to explicit terins of the Constitution for the

purpose of altering the charter of the people's governn7ent? We cannot believe that the

fundamental law can be taken apart, built up, amended, or dealt with, in that manner."). Indeed,

when considering an action adopted by referezidum or initiative, the Court has repeatedly noted

that the peoples' intent is found in "the simple language of the plain people and it is to receive

such meaning as they usually give to it in political discussions and arguments." State ex Yel,

Kellver° v. Fo7°nev, 108 Ohio St. 463, 466, 141 N.E. 16 (1923). "Technical hair-splitting

27

distinctions," such as the position advanced by Cashland in this case "are not favored when

applying the com.mon. words of the people." Icl: at 201.

The people exercised their constitutionally reserved legislative power and clearly

expressed their desire in simple and plain language that all pay day lenders in Ohio be subject to

the limitations of the Short Term Loan Act. Cashland is a payday lender, and the loans at issue

are payday loans, but Cashland would have the Court nullify the voters' exercise of their

reserved power. This Court has strongly cautioned against entertaining any proposition of law

which would impair, undennine or cede any of the referendum power of the people to the

judicial or executive branches. See State ex rel. AlaYcolin v. SrfPith, 105 Ohio St. 570, 586, 138

N.E. 881, 885 (1922) ("It is a novel doctrine, to say the least, that a public servant is greater than

his master. Nineteen centuries ago it was written: `Is the servant greater than his Lord?"'). Yet

this is precisely what Cashland suggests the Court should do. The people of Ohio have spoken in

clear and unequivocal terms - payday lenders in Ohio like Cashland should be subject to the

limitations of the Short Term Loan Act. To hold otherwise would be tantamount to a rejection of

their will and the power reserved to the people by the Constitution, all in favor of a predatory,

pernicious and destructive industry.

C. The lower courts' decisions correctly reflect the sound policy decisions madeby the General Assembly and Ohio voters to restrict payday lending.

To say that payday lending is a destructive and dangerous industry is an understatement.

Payday loans are designed to burden consumers with oppressive debt for several months at a

tiine, causing them to incur hundreds of dollars in fees. Despite the disclaimers that payday

loans are intended to be short-term solutions for unexpected expenses, the payday lending

industry only profits when borrowers fall into a cycle of renewing the high-fee loans, one after

28

another. Borrowers' desperation, lack of sophistication, and fear of criminal prosecution in the

event of default are all key components of the payday lending business model.

To curb the abuse of financially distraught Ohioans, the Legislature enacted the STLA.

The STLA reflects a sound public policy choice to curb predatory lending practices that have

plagued many communities and subjected many consumers to a vicious cycle of debt,

dependency and bankruptcy. Cashland's argunlent that it is entitled to avoid the STLA's

restrictions by lending under the MLA is nothing more than a scheine to circumvent the will of

both the General Assembly and Ohio voters. This Court should not submit to the desire of the

payday lending industry and enable lenders like Cashland to evade the legislature's expression of

sound public policy.

Payday Loans "trap borrowers in a usurious and uncnnscionable cycle of debt."26 Recent

studies highlight the dangers of the payday lending market. lt does not function as advertised,

and as a result, the "industry is selling a product ... that is consistently more costly than

advertised." The Pew Charitable Trusts. Payday Lending in America: Who Borrows, YFhere.

Thcy Borrow, and Orhy, at 29 (July 2012) .27 Payday lenders promote the loans as a short-term

solution that should not be used on a long-term basis, while knowing that the loan's

unaffordability makes this long-terrn use widespread. Id. at 20. This subterfuge is particularly

alarming because "the payday loan business model fundamentally relies upon repeat usage-often,

renewals by borrowers who are unable to repay the full loan ainount upon their next payday-for

26 Btuch, Titkin,g thel'ay out ofPayday Loans: Putting an End to the Usurious andzsnconscionable Interest Rates C'harged bypayday Lenders, 69 U. Cin. L. Rev. 1257, 1270(2000-2001).

27 Available at http:l/www.pewstates.org/uploadedFileslPCS_Assets/2012%Pew Payday_

Lending_Report.pdf (accessed July 17, 2013).

29

its profitability." Id. A report commissioned by the U.S. Department of Defense ("D.O.D.")

similarly found that "[m]ost of the predatory lending business models take advantage of

borrowers' inability to pay the loan when due and encourage extensions through refinancing and

loan flipping. These refinances often include additional high fees and little or no payinent of

principal." U.S. Dept. of Defense, Report on Predatoy~v Lending Practices Directed at Members

of the Ai-naccl Forces and their Dependents, at 4 (August 9, 2006). As a report by the Federal

Reserve Bank of Kansas City Economic Research Departinent concluded, "the profitability of

payday lenders depends on repeat borrowing." The Pew Charitable Trusts, at 15.

State regulatory data shows that payday borrowers take out eight loans per year, spending

about $520.00 in interest with an average loan size of $375.00. Id. at 4. Althougli they are sold

as two-week credit products that provide fast cash, borrowers are actually indebted for an

average of five months per year because only 14% of borrowers can afford enough out of their

monthly budget to pay off an average payday loan. Id. at 14.

Why is the payday lending reality so different from the model touted by lenders? Payday

lenders target inexperienced and marginalized consumers who feel they are in desperate need of

cash. Statistics provided by the Federal Reserve Bank of Boston reveal that store-front payday

lenders outnumber banks in poverty-stricken areas by a ratio of twelve-to-one. Bruch, Tak-ing

the Pay out of .Payday I,oczns: Putting an End to the Usurious ancl unconscionabde Interest Rates

Charged by Padday Lenders, 69 U, Cin. L. Review 1257, 1272 (2000-2001). (intern-a1 citations

omitted). The industry admits that most customers "live on the verge of financial ruin, living

from paycheck to paycheck." Id. at 1271. Borrowers are using payday loans to deal with

persistent cash shortfalls ratherthan temporary emergeticies. The Pew Charitable Trusts, Pcaydcay

Lending In ArneYica: Report 2, How Borrowers Choose and Repay Payday Loans, at 6 (February

30

2013). Sixty-nine percent use payday loans to cover recurring expenses such as utilities, credit

card bills, rent or mortgage payments, or food. The Pew Charitable Trusts, Paydqv Lending in

America: no BoYroivs, U'heYe They BoYrorov,and tJ'hy, at 5 (July 2412).Thus, it is no surprise

that consumers who do not have enough money to pay for their basic living expenses will need

to extend their loan period, or roll-over their loans, week after week, unless they get relief frozn

another source, such as family, a tax refund, or an unexpected windfall. Id. at 36-37.

Further, payday loans are marketed to low-income workers who often do not

comprehend the real cost associated with borrowing from lenders like Cashland. They rely upon

the lenders themselves to provide accurate information about the cost of the loan, and they are

oflen unable compare the cost of a payday loan in comparison to using a credit card or other

extension of credit. Id. at 1 i.

Another driving force for borrowers' serial borrowinp is the fall-out from defaulting on a

payday loan. Payday lenders frequently employ intimidation and coercion to collect debts from

consumers. Hayes, A Noose AYound the Neck: Preventing Abusive Payday Lending Practices

and Promoting Loiver• Cost Alternatives, 35 William Mitchell L.Rev., 1134, 1143 (2009)

(intez-nal citations omitted). They threaten to pursue civil and criminal remedies under bad-check

statutes, often collecting treble damages and fees. Id. Borrowers believe the collectors who

claim that they will lose their jobs or get arrested for allegedly writing bad checks. They feel

they have no choice but to get another extension of credit, no matter the cost.

The General Assembly and Ohio voters clearly stated their intent to restrict the payday

lending industry's operations by subjecting it to key limitations on the amount, duration and

interest rate of payday loans to protect Ohio consumers. Cashland's efforts to avoid the STLA

by seeking shelter under Ohio's Mortgage Loan Act are nothing but another example of payday

31

lenders "work[ing] outside of established usury limits, either by attempting to obtain exemptions

from federal and state statutes or by developing schemes designed to circumvent existing laws."

U.S. Dept. of Defense, Report on PYedatory Lendinb Pf^creticas Directed at 111etnbeYs of the

AYrnecl Force.s and their Dependents, at 4 (August 9, 2006). In the 2006 study, the D.O.D. found

that states failed to enforce their own predatory lending laws. Id. at 48. The D.O.D. found

further that because payday lenders were routinely circumventing state law, federal legislation

was necessary to protect military families from these abusive lending practices. See id. at 47; 10

U.S.C. § 987 (prohibiting loans to military fainilies in which debt is renewed or rolled over, or

where the annual percentage rate would be greater than thirty-six percent).

Cashland and other payday lenders have refused to comply with the STLA and now look

to Ohio's highest coui-t to effectively endorse their continuing predation on Ohio consumers in

contravention of the plain and unainbiguous will of people. This Court should not provide the

means to underznine the will of the General Assembly and Ohio's voters. Where the General

Assembly has spoken, and in so speaking violated no constitutional provision, the courts of this

state must not contravene the legislature's expression of public policy. SttatE r; Smof°gala, 50

Ohio St.3d 222, 553 N.E.2d 672, 674 (1990) ("3udicial policy preferences may not be used to

override valid legislative enactments, for the General Assenzbly should be the final arbiter of

public policy."); Painter f>. Gr-aley, 70 Ohio St. 3d 377, 385, 1994-Ohio-334, 639 N.E.2d 51, 57.

"[W]hen the general assembly enacts laws that are constitutional, the courts may not contravene

the legislature's expression of public policy. " Szttton v. Tomco Maihinin_q, Ine., 129 Ohio St. 3d

153, 156, 2011-Ohio-2723, 950 N.E.2d 938.

32

D. The absurd tautology identified by the Municipal Court cannot stand.

The Elyria Municipal Court below correctly identified in Cashland's arguments what it

described as "an absurd tautology." Municipal Court Opinion at 3. Specifically, the court

rejected Cashland's contention that its loans, which are in fact and substance payday loans

intended to be limited by the STLA, are not "short-term loans" covered by the STLA simply

because Cashland chose to refrain from getting a license under the STLA. Cashland attempts to

justify this hair-splitting positioii by reference to R.C. 1321.35(A), which defines a"short-term

loan" as a "loan made pursuant to sections 1321.35 to 1321.48 of the Revised Code," which

sections, in several instances, apply to "licensees under 1321.35 to 1321.48." See, e.g., R.C.

1321.39. In other words, according to Cashland, a payday loan is only a short term loan subject

to the Act when a payday lender foolish enough to do so chooses to get a license under the Short

Term Loan Act.

Unfortunately for Cashland, the General Assembly did not intend to make the STLA a

voluntary or "opt-in" set of liznitations. Cashland's argument, aside from being absurd on its

face, simply ignores the plain language of the statute, which clearlv requires all lenders who are,

in fact, making short terrn pay day loans in Ol1io to obtain a license under the STLA. See R.C.

1321.36(A) ("no person shall engage in the business of making short term loans to a borrower in

Ohio, or, in whole or in part, make offer, or broker a loan, or assist a borrower in Ohio to obtain

such a loan, without first having obtained a license ..."). [ndeed, the STLA includes a provision

that specifieally contemplates application of the Act to lenders like Cashland who make payday

loans but choose to try to subvert and avoid the law by refusing to get a license. See R.C.

1321.47(A) ("A person licensed, and anv person required to be licensed under sections 1321.35

to 1321.48 of the Revised Code, in addition to the duties imposed by other statutes or common

33

law, shall do all of the following ....") (emphasis added). If, as Cashland apparently contends, a

payday lender can choose whether to make identical payday loans under the STLA or the MLA,

and therefore avoid the STLA, no one is "required to be licensed" under the STLA as

contemplated by the General Assembly in R.C. 1321.47(A). See also Georgia Cash Arn., Inc. v.

Strong, 649 S.E.2d 548, 550 n.2 (Ga. Ct. App. 2007) ("A payday loan has been defined as a loan

of short duration, typically two weeks, at an astronomical annual interest rate. Payday loans are

the current version of salary buying or wage buying.") (brackets omitted).

This absurd construction of legislation duly enacted by the General Assembly would

essentially render an entire regulatory regime meaningless, a result abhorrent to fundamental

principles of Ohio law. See State v. Nickles, 159 Ohio St. 353, 112 N.E.2d 531, at gIl syllabus

(1953) ("In determining the intention of the General Assembly as to the meaning and operation

of statutes, a court, if possible, should avoid absurd and grotesque results."); Castleberiy v.

Evatt, 147 Ohio St. 30, 35, 67 N.E.2d 861 (1946) ("Ttis elementary that in the construction of a

constitutional provision or legislative enactment unreasonable or absurd consequences should, if

possible, be avoided."). Cashland would have the Court read all meaning out of the STLA to

give it license to do exactly that which the General Assembly and Ohio's voters have clearly said

cannot lawfully be pennitted - engage in unbridled predatorv and pernicious payday lending in

Ohio. Such a holding would be anathema to the intent of the General Assembly, the will of the

people and this Court's prior holdings.

E. Reading the MLA and the STLA. "[n Pari Materia" compels the conclusionthat Cashland's payday loan is not authorized by the MLA.

What is fundamentally at issue is the interplay between two enacted statutes. The first

one is the 200$ "Short Term Leiiding Act," a statute that was unequivocally designed to govern

the type of single payment payday loans at issue here, and cap the total an-iount of the loan at

34

$500. R.C. 1321.39(A). The STLA also requires that the duration of the loan be not less than 31

days. R.C. 1321.39(B). Lenders are also specifically prohibited from charging an interest rate

higher than 28 percent or additional fees such as aloan initiation fee. R.C. 1321.40(A)', R.C.

1321.41(C)> The STLA has the added force of having been expressly ratified by nearly two third

of all Ohio voters in the 2008 election, who cast their ballot in order to apply its provisions to

"all short ter-m lenders, including check cashing lenders." Ohio Secretary of State, Ohio Issues

Report: State Ballot In, forn2cztion foY tlae Novemher 4, 2008 General Election, at 17 (emphasis

added).`s

The second statute is the "Second Mortgage Act," a statute that was enacted a half-

century ago to regulate lenders who take second mortgages as security. As originally enacted,

the Second Mortgage Act limited interest rates to 8% and required all loans to be "repayable in

substantially equal installments." 731 v. 444, codified at R.C. §1321.57. It was not until 1979 -

36 years after payday lending was effectively abolished in Ohio by enactment of the Small Loan

Act and 16 years before payday lending resumed in Ohio upon passage of the Check-Cashing

Lender Law - that the "substantially equal installment" language was removed from the statute

when the legislature introduced a new, more consumer-friendly "interest-bearing" interest

calculation method. And it was not even until several years later that the Act was expanded to

cover non-secured loans.

Notwithstanding that the STLA is newer and specifically tailored to address the precise

type of short terin lump sum single payznent payday loan at issue here, and has been ratified by

an overwhelming majority of the Ohio voting public who voted to have it apply to "all short tenn

lenders, including check cashing lenders," Cashland asks the Coart to read the "interest-bearing"

28 Available at http://www.sos.state.oh.us/sos!upload/publications%election/Issues_08.pdf(accessed July 17, 2013).

35

provision of the MLA so expansively as to swallow and effectively nullify the STLA. If the

General Assembly intended to allow lenders to choose between the STLA and the MLA, as

Cashland maintains, "no payday lender will ever register under the Short=I'erm Lender law, and

payday-loan lenders would be allowed to issue loans in greater amounts and shorter durations

than allowed by the Short-Term Lender Law, all the while charging fees prohibited un.der the

Short-Term Lender law." Ninth Dist. Op. at ¶11. "The effect would be to nullify the very

legislation that is designed to regulate payday-type loans-a result at odds with the intent of the

General Assembly." Id.

Because the General Assembly clearly intended the STI,A to proscribe the type of loan

issued here, i.e. a loan that was to be repaid in full in two weeks, the Court of Appeals below

correctly determined that the only way to reconcile the com.peting provisions of the STLA and

the MLA is to cvnsti-ue the "interest-bearing" provision of MLA as applying only to loans where

interest is computed, charged, and collected from time to time. Id. at ^12.

CONCLUSION

For all the reasons stated above, Amici respectfully request that this Court affirm the

decision of the Ninth District Court of Appeals.

AAm .. Gullifer, 607421.8CANNIZZARO, BRIDGES, JILLISKY &STRENG, L,LC302 South Main StreetMarysville, OH 43040(Tel) 937.644.91.25(Fax) 937.644.0754agullifer a^cfbjs.com

36

Counsel for Amici Curiae The Center forResponsible Lending and National Consumer LawCenter

Paul J. Miniiillo; 0065744Minnillo & Jenkins Co., LPA2712 Observatory AvenueCincinnati, Ohio 45208(Tel) 513,723.1600(Fax) 513.7231620pjminnitlo@minniflojenkins.com

Co-Counsel forAmici Cur-iae7he Center.for Responsible Lencling andNational Consumer Law Center

CERTIFICATE OF SERVICE

I certify that a copy of the foregoing was sent by ordinary U.S. mail to the following on

July 29, 2013:

John W. Zeiger, Esq.Stuart G. Parsell, Esq.Zeiger, Tigges & Little LLP41 South I-Iigh Street, Suite 3500Columbus, Ohio 43215

Pierre H. Bergeron, Esq.Colter L. Paulson, Esq.Squire Sanders (US) LLP221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202

Counsel fbr Pltzinli ff-Appellant

Ohio Neighborhood Finance, Inc

Sara Bruce, Esq.The Ohio Automobile Dealers Association655 Metro Place South, Suite 270Dublin, Ohio 43017

Counsel for Amicus CuYiaeOhio Autornobile Dealers Association

Joel H. Mirman, Esq.The Minnan Law Firm, LLC5 East Long Street, Suite 200Columbus, Oliio 43215

Attorneys for Atnici Curiae

CCounsel for Anaiccss Cuy°iaeThe Ohio Charnber af Conzmer•ce

Frederick E. Mills, Esq.Vorys, Sater, Seymour and Pease LLP52 East Gay StreetCohimbus, Ohio 43215

Counsel, for :4micus CuriaeThe Ohio Council ofRetail.tVlerchants

Darrell Dreher, Esq.Elizabeth L. Anstaett, Esq.Dreher Toinkies Scheiderer LLP2750 Huntington Center41 South High StreetColumbus, Ohio 43215

37

Norfleet (Bill) Rives and Daniel Oglevee

Rodney Scott250 13i3' StreetElyria, Ohio 44035

Defendant Appellee; Pro Se

Attorrzeys, foy- Amicus Curiae Richard F.Keck,. Former Deputy Superintendent andChief Examiner, Division of'£'inancialInstitutions of The Ohio Department ofCommerce

Arn -,. Gullifer, 0074218

38