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Click here for the full text of this decision FACTS:Betty Lovick secured a $2,000 title loan from CPCWA Co., where Ritemoney Ltd. was designated as the lender, and CPCWA was designated as the broker. The promissory note Lovick signed included a provision that Lovick would pay a $1,500 to CPCWA for “loan brokerage or other credit services.” The interest rate for the loan was set at 10 percent. The note specifically addressed payment of third-party fees to CPCWA for arranging the loan. Lovick filed a class action suit against Ritemoney, CPCWA and their general partners. She asserted claims under the Racketeer Influenced and Corrupt Organizations Act, which was in turn premised on unlawful usurious debt under 18 U.S.C. �1962(c) and Texas Financial Code ��342.004, -.005, -.051 and -.403. Lovick claimed the $1,500 fee was disguised interest charged by Ritemoney, which, when combined with the stated 10 percent interest, exceeded Texas law on allowable interest charges. The district court agreed with the defendants that the brokerage fee was not usurious interest under Texas law. However, instead of granting the defendants’ motion to dismiss for failure to state a claim, the district court gave Lovick 30 days to plead a factual basis for an improper relationship among the defendants. The district court found the amended complaint still did not state a claim, and so dismissed the case. HOLDING:Affirmed. As evidence of a relationship that would allow CPCWA’s brokerage fee to be imputed to Ritemoney, Lovick claimed: “1. CPCWA handled all the usual tasks of the lender, including arranging advertising, credit review, collateral inspection, approval decision, paperwork preparation, issuance and cashing of checks, collection of payment, and deciding when to repossess collateral, and, in this way, Ritemoney shifted substantially all of its overhead to CPCWA; 2. CPCWA acted as an agent of, or joint participant with, Ritemoney, as evidenced by CPCWA’s brokering all of its title loans to Ritemoney as lender and Ritemoney’s making all of its title loans through CPCWA, and CPCWA was authorized to act as Ritemoney’s agent for the purposes of disbursing cash advances by signing checks on Ritemoney’s account and collecting loan payments; 3. because all borrowers were expected to pay a brokerage fee to CPCWA to obtain a loan from Ritemoney, payment of the fee was effectively a prerequisite for a Ritemoney loan, and Ritemoney was aware from the Note and payment of the fees from loan proceeds that borrowers were expected to pay those fees to obtain a loan; and 4. these facts demonstrate a scheme both to evade the ten percent Texas usury ceiling for unlicensed lenders and to falsely suggest that CPCWA is separate from Ritemoney.” The court acknowledges that a $1,500 fee for a $2,000 loan “is more than questionable,” and that Lovick may have had a case under earlier case law. However, passage of the Texas Credit Services Organization Act largely overruled that case law, and the statute’s terms allow the type of set-up at issue here. Nonetheless, the court first analyzes Lovick’s claims under pre-CSOA case law and still finds that the fee would have been allowable. Under these cases, the rule was to treat fees paid to third parties, if they constituted a condition imposed by the lender or with the lender’s knowledge, on the borrower for the loan, as fees paid directly to the lender. There had to be a special agency relationship. The court finds that, at best, Lovick’s allegations imply a benefit to Ritemoney through its shifting of some of its exposure to CPCWA, which is insufficient to demonstrate the requisite lender benefit for general agency. The codification of the usury laws and the passage of CSOA overruled by implication the scant case law that interpreted brokerage fees as potentially usurious interest when backed by a finding of general agency. Lovick cites no post-CSOA cases that so hold. CSOA allows a credit service organization to charge a credit service fee by complying with certain requirements. CPCWA complied with those requirements. The usury statutes regulate lenders, and Ritemoney, as the lender, has complied with those statutes’ terms. The usury statutes and CSOA work in harmony, allowing a credit service organization like CPCWA to charge a brokerage fee as long as they provide valuable services for those fees and are penalized if they provide too few. CSOA does not restrict the amount a credit service organization can charge, however, and Lovick has not provided evidence to show that the fee was unreasonable per se. OPINION:Rhesa Hawkins Barksdale, J.; Jolly, Jones and Barksdale, JJ. DISSENT:E. Grady Jolly, Circuit Judge. “I respectfully dissent because I sense that something strange may be going on here and there has been no discovery. When the broker is getting 90% of the profit on a transaction, it is not unreasonable to think that perhaps the lender is somehow being benefitted[.] . . . Now, I do not disagree with the majority’s scholarly analysis of Texas usury law and how it is affected by the CSOA, but it does seem that Lovick stated a litigable claim here.”

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