CARSON CITY (CN) - The amount of interest and fees that consumers are charged for pay-day loans counts toward a 25 percent limit in Nevada, the state Supreme Court ruled.
Unlike many other states, Nevada does not have a law against usury that limits the amount of interest lenders can charge on loans. The state does, however, limit so-called pay-day loans to no more than 25 percent of the borrowers expected gross income.
Nevada's Financial Institutions Division started including loan fees and interest toward the 25 percent pay-day loan limit in 2008.
This prompted a complaint by Lender Check City Partnership in June 2013, claiming that the state could count only the loan principal toward the 25 percent limit.
Though a judge granted the lender summary judgment last year, the Nevada Supreme Court unanimously reversed on Nov. 13.
The ruling highlights the trial judge's supposedly "plain-language, commonsense" interpretation of "deferred deposit loan," which helped him find that the phrase includes only the principal as the amount borrowed when referring to the maximum amount pay-day lenders could issue.
"However, we find that the language of NRS 604A.050 does not limit deferred deposit loans to just the amount borrowed, as it clearly contemplates that a deferred-deposit loan is a transaction based on a loan agreement," Justice Ron Parraguirre wrote for the court. "That loan agreement, in turn, is made up of various terms including both the amount borrowed and any fees charged."
Parraguirre added that "a deferred deposit loan transaction encompasses more than simply the amount borrowed but also includes some consideration to the lender beyond the customer's promise to repay the amount borrowed."
"Moreover, the amount of a deferred deposit loan must be fixed by the value of the entire loan transaction, including principal, fees, and interest," he continued.
The eight-page decision concludes "that NRS 604A.425's 25-percent cap on deferred deposit loans includes both the principal amount loaned and any interest or fees charged."
The Nevada Attorney General's office says there are up to 300 pay-day loan businesses operating in Clark County, where popular gambling destinations Las Vegas, Laughlin and Mesquite are located. State officials say many of these establishments charge anywhere from 400 percent to 1,000 percent on loans.
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