Small loan company exempted from consumer law

Although a consumer lender imposed interest rates in violation of certain statutes, the commonwealth cannot sue it under the Virginia Consumer Protection Act because the lender falls within the Act’s exclusion as a small loan company.

Background

Allied Title Lending LLC is engaged in consumer lending, with 23 physical locations in Virginia. Since 2013, Allied has provided Virginia consumers with open-end lines of credit.

On Sept. 12, 2017, the commonwealth filed suit against Allied, alleging that, from July 28, 2013 through at least July 24, 2017, Allied imposed an annual interest rate of 273.25 percent on its open-end credit plan loans. Allegedly, in issuing the loans, Allied charged a $100 origination fee on each loan, which constitutes a “finance charge” within meaning of Code §6-2.312, before the running of the mandatory 25-day grace period. In doing so, the commonwealth contends Allied failed to comply with the statutory requirements to qualify for an exemption of Virginia’s consumer finance statutes, and is thus in violation of those statutes. Similarly, the commonwealth alleges that Allied violated the Virginia Consumer Protection Act in its lending practices.

Motion Craving Oyer

Allied seeks oyer of its full website found at www.alliedcash.com. It contends that the complaint is based at least in part on certain allegations about statements appearing on the company’s website. The court disagrees. The court finds that the commonwealth properly attached the documents material to its claims. Because the website does not form the basis of the commonwealth’s cause of action, the court denies the motion to crave oyer.

Demurrer

Considering the allegations under count I in the light most favorable to the commonwealth, which the court must do when considering a demurrer, the court does not find that they are insufficient as a matter of law. The complaint sufficiently pleads facts that state the company violated the Virginia Consumer Finance Act, either as an unlicensed consumer finance lender or as an open-end credit plan lender. The company imposed annual interest rates on consumer loans in excess of 12 percent without meeting any of the exceptions laid out in Code § 6.2-303. Specifically, the company charged more than 12 percent interest without having a license as required by Code § 6.2-1501, and without abiding by the requirements of open-end credit lenders pursuant to Code § 6.2-312. The statutes at issue are not ambiguous and therefore the rule of lenity does not apply. Because the factual allegations under count I sufficiently state a cause of action, the court overrules the demurrer to count I.

However, considering the allegations under count II in the light most favorable to the commonwealth, the court finds that they are insufficient as a matter of law to state a violation of the Virginia Consumer Protection Act. The court finds that the company falls within an exclusion to the Act under Code § 59.1-199(D) as a “small loan company.” There is no Virginia law defining “small loan company,” and the statute at issue is unambiguous. As such, the court applies the plain meaning of the language. The court finds that “small loan company” means companies, such as the one in the present case, which issue small loans. Because the company is exempt from the Virginia Consumer Protection Act, the court sustains the demurrer to Count II.

Motion granted in part, denied in part.

Commonwealth v. Allied Lending LLC, Case No. CL17-4286, Jan 22, 2018. Richmond Cir. Ct. (Markow). VLW No. 018-8-098, 7 pp.