07-003953 Office Of Financial Regulation vs. Ezpawn Florida, Inc., And Integrity Florida Funding, L.P. Status: Closed Recommended Order on Tuesday, March 25, 2008.

Summary: Two lenders that charge aggregate interest in excess of 18 percent on one loan must cease and desist.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF FINANCIAL REGULATION, )

)

Petitioner, )

)

vs. ) Case No. 07-3953

)

EZPAWN FLORIDA, INC., AND )

INTEGRITY FLORIDA FUNDING, )

L.P., )

)

Respondents. )

)

RECOMMENDED ORDER

Administrative Law Judge (ALJ) Daniel Manry conducted the

final hearing of this case for the Division of Administrative

Hearings (DOAH) on January 16, 2008, in Orlando, Florida.

APPEARANCES

For Petitioner: Peter Fisher, Esquire

Gregg Morton, Esquire

Office of Financial Regulation

Post Office Box 8050

Tallahassee, Florida 32399-8050

For Respondents: Charles L. Stutts, Esquire

Calvin Hayes, Esquire

Holland & Knight, LLP

100 North Tampa Street, Suite 4100

Tampa, Florida 33602

STATEMENT OF THE ISSUE

The issue for determination is whether Respondents engaged

in loan transactions with Florida consumers in which the

combined rate of interest for each of the loans exceeded

18 percent in violation of Subsection 516.02(2)(a), Florida

Statutes (2007). 1

PRELIMINARY STATEMENT

The procedural history of this proceeding is too lengthy to

summarize here. The procedural history is captured in the

record of the DOAH file and is not material to the issue to be

determined.

Petitioner filed an Administrative Complaint on July 26,

2007. Respondent timely requested an administrative hearing.

On October 26, 2007, Petitioner filed a motion to amend the

Administrative Complaint. The motion was granted without

objection, and Respondents timely filed another Request for

Hearing on January 2, 2007, in response to the Amended

Administrative Complaint.

At the hearing, the parties jointly introduced one exhibit,

the Amended Pre-hearing Stipulation, which was admitted into

evidence. Petitioner presented the testimony of eight witnesses

by deposition and submitted 35 exhibits for admission into

evidence. Respondents presented the testimony of three live

witnesses and four witnesses by deposition. Respondents

submitted 19 exhibits for admission into evidence.

The identity of the witnesses and exhibits and the rulings

regarding each are recorded in the Transcript of the hearing

filed with DOAH on February 11, 2008. The parties filed their

respective Proposed Recommended Orders on February 21, 2008.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for the

enforcement of Chapter 516 (the Florida Consumer Finance Act)

and Chapter 560, part IV (the Deferred Presentment Act). The

Florida Consumer Finance Act regulates consumer lending

transactions of amounts less than $25,000. The Deferred

Presentment Act regulates deferred presentment transactions and

provides an exception to the requirements of Chapter 516 for

entities registered thereunder. Neither of the respondents is

registered with Petitioner pursuant to Chapters 516 or 560, or

any other chapter regulated by Petitioner.

2. Respondent, EZPawn Florida, Inc. (EZPawn), is a

Delaware corporation with its principal offices located at

1901 Capital Parkway, Austin, Texas 78746. EZPawn is licensed

in Florida as a credit services organization (CSO), operating

pursuant to Chapter 817, Part III, the Credit Service

Organizations Act (CSO Act).

3. Respondent, Integrity Florida Funding, L.P.

(Integrity), is a Florida Limited Partnership with its principal

place of business located at 84 Villa Road, Greenville, South

Carolina 29615. Integrity lends money to Florida residents in

consumer finance transactions.

4. EZPawn and Integrity are independent entities. The

entities are not affiliated entities and do not otherwise share

common ownership, control, or management. Neither entity

discloses to the other information regarding their cost of

funds, profit margins, or overhead expenses.

5. On November 30, 2005, EZPawn and Integrity entered into

a business arrangement pursuant to written contract. The

contract is identified in the record as the Credit Services

Organization and Lender Agreement (the CSO/Lender Agreement).

6. The CSO/Lender Agreement, in relevant part, authorizes

EZPawn to take loan applications from Florida residents and

submit them to Integrity for approval. Integrity charges an

interest rate of 18 percent on each loan. EZPawn charges a fee

of either $15.00 or $30.00 for each $100.00 loaned by Integrity.

7. If Integrity approves a loan, Integrity funds the loan

through the local EZPawn office. The EZPawn fee is added to the

loan amount.

8. If the fee charged by EZPawn was aggregated with the

interest charged by Integrity, the rate of interest for the loan

would exceed 18 percent. The factual issue is whether the fee

charged by EZPawn is a "cost of obtaining a consumer finance

loan" (cost of the loan) within the statutory definition of

interest in Subsection 516.01(5).

9. The quoted statutory phrase is not defined by statute

or rule. Nor did the parties cite any controlling judicial

decisions defining the quoted phrase in Florida.

10. The trier-of-fact finds the evidence to be clear and

convincing that the fee charged by EZPawn is a cost of the loan

and must be aggregated with the interest charged by Integrity to

determine the total amount of interest. Although EZPawn

structures the legal form of its services as those provided by a

CSO, the legal form is without economic substance. Economic

reality demonstrates that the EZPawn fee is a cost of the loan.

11. EZPawn casts its fee in the form of a charge for CSO

services. The CSO agreement between EZPawn and each of its

customers states that EZPawn will assist customers in preparing

applications and compiling documentation necessary to apply for

loans, will issue letters of credit (LOCs) on behalf of the

customer to improve the customer's creditworthiness, will assist

the customer in obtaining a loan, and will enroll customers in a

credit reporting service, identified in the record as the PRBC,

to report their loan payments.

12. The enumerated CSO services are expressly authorized

in the CSO Act. EZPawn does not share any of its fee with

Integrity, and Integrity does not share any of the loan

principal or interest with EZPawn. The two entities have

separate rating, or underwriting requirements, and they do not

share that proprietary information.

13. Integrity determines the total amount of loans it will

make and funds the loans out of its own capital. The LOC issued

by EZPawn does not eliminate the risk of loss to Integrity.

14. The economic substance of the loan transactions is

substantially different than the legal form in which Respondents

have chosen to cast the transactions. The legal form of the

transactions has no economic effect.

15. The EZPawn fee is not a fee for separate CSO services.

EZPawn does not receive a fee unless Integrity funds a loan. If

Integrity does not fund a loan, nothing happens, the EZPawn

customer owes EZPawn nothing, and there are no loan payments to

be reported by PRBC to improve the customer's creditworthiness.

16. The EZPawn customer owes EZPawn no fee for separate

CSO services unless Integrity funds a loan. No customer of

EZPawn obtains a loan from Integrity unless the customer agrees

to pay the EZPawn fee.

17. Each of the approximately 36,000 loans at issue in

this case share meaningful characteristics of payday loans.

Each loan is a short-term single payment loan for a relatively

low dollar amount that is more than $100.00 and less than

$1,000.00. Payment is due on the next day the customer is paid

between seven and 37 days after the date of the loan.

18. Integrity charged an annualized percentage rate of

interest of 18 percent on each of the loans. The EZPawn fee

varies directly with the amount borrowed. Payment of the EZPawn

fee is financed and is due and payable at the same time the

principal and interest is due and payable to Integrity.

19. The fee charged by EZPawn is an economic function of

the amount and term of the loan from Integrity. EZPawn charges

a fee on loans with a term of seven to 23 days in an amount

equal to $15.00 per $100.00 borrowed. For loans with a term of

24 to 37 days, EZPawn charges a fee of $30.00 per $100.00

borrowed.

20. EZPawn charges an additional fee, in addition to the

accumulated interest charged by Integrity, each time a borrower

refinances his or her loan. A borrower may refinance a loan up

to six times. The first six refinances result in no payment on

the loan principal.

21. After refinancing a loan six times (a rollover loan),

a borrower may continue to roll the loan over. However, the

borrower must pay $50.00 toward principal for each rollover loan

after six.

22. An economically significant amount of the fees that

EZPawn charged for titular CSO fees consist of rollover fees.

Of the total fees that EZPawn charged for denominated CSO

services, approximately 28,829 transactions were charged in

rollover loans and approximately 11,631 transactions were for

first-time loans.

23. EZPawn charges a fee for every loan that Integrity

makes. Integrity has not made any loans to any Florida

borrowers to whom EZPawn did not provide alleged CSO services.

24. Each note conditions the loan on the agreement to pay

the 18 percent interest to Integrity and the charge identified

as a CSO fee to EZPawn. Each note requires the borrower to,

“promise to pay [Integrity] the Total of Payments in 1 payment

on the due date indicated.” The "Total of Payments" includes

the reputed CSO fee.

25. Customers do not pay the alleged CSO fee to EZPawn

independently from the loan made by Integrity. Rather, the

EZPawn fee is included on the face of each loan note as part of

the finance charge and total of payments. The EZPawn fees are

payable only through an electronic debit transaction that

deducts the money from the borrowers bank account automatically

on payday (ACH).

26. The loan documents processed by EZPawn treat the so-

called CSO fee as an interest charge for federal reporting and

disclosure requirements. The documents that memorialize the

loans are substantially the same in substantive form for each of

the approximately 36,000 loans.

27. The note treats the CSO fee as a finance charge for

purposes of the federal Truth in Lending Act (TLA). The note

specifically recognizes that the CSO fee is part of, “[t]he

dollar amount the credit will cost you [the borrower].”

28. The CSO fee is also included in the TLA calculation of

the actual percentage rate (APR) of finance charge. The loan

documents acknowledge the charge to be part of, “[t]he cost of

your credit as an annual percentage rate.”

29. The economic substance of the charge identified in the

loan documentation as a CSO fee, in relevant part, is a charge

by EZPawn for its extension of credit to the borrower. The

extension of credit is cast in the form of an LOC.

30. The charge for the extension of credit by EZPawn, in

the form of an LOC, is not for a separate loan of a different

sum of money. The charge by EZPawn and the interest charged by

Integrity are each part of the aggregate economic cost of the

loan to the borrower.

31. EZPawn agrees in the LOC to pay Integrity principal,

interest, and a non-sufficient funds fee in the event of default

by the borrower. In every one of the loan transactions at

issue, EZPawn issued an LOC. In response to over 36,000 loan

applications, Integrity made a loan every time EZPawn issued an

LOC. Integrity never made a loan without an LOC.

32. EZPawn applies its own loan guidelines or underwriting

requirements. Once EZPawn approves a loan application, EZPawn

issues an LOC in favor of Integrity in an amount not to exceed

principal, interest, and dishonored item fee as applicable to

the loan arranged by EZPawn.

33. The LOC provides that EZPawn will pay Integrity the

principal and interest owed upon the loan: (1) becoming past

due and unpaid, (2) the dishonoring of any ACH debit or other

payment device, and (3) not more than three days elapses since

the latter of the above things occurs.

34. Upon default, Integrity collects on the LOC

automatically. Integrity immediately receives payment of its

principal along with any accrued interest and a non-sufficient

funds fee.

35. The economic reality of each loan transaction is that

the risk of loss and burden of collection is on EZPawn. Any

risk of loss shouldered by Integrity is limited to the financial

health of EZPawn, which has been significantly enhanced after

entering into the CSO/Lender agreement with Integrity.

36. Integrity requires EZPawn to issue an LOC as a

prerequisite for each loan. An LOC is an underwriting

requirement that a borrower must satisfy to obtain the loan.

Integrity will not approve a loan without an LOC.

37. EZPawn controls the distribution of loan proceeds to

the borrower. Integrity sends an electronic direct draft to

EZPawn (the draft). EZPawn prints the draft, which is payable

to the borrower. EZPawn then immediately provides cash to the

borrower in exchange for the draft.

38. EZPawn employees instruct borrowers that the draft can

only be cashed with EZPawn or Integrity. No borrower ever

leaves an EZPawn store without cash. The Operation Manual

adopted by EZPawn contains specific instructions emphasizing

that EZPawn employees should not give a draft to a borrower.

39. The economic effect of each loan transaction is that

two lenders charge for the same loan. Integrity funds the loan

and charges interest as a cost of the loan. EZPawn charges a

fee for extending credit to the borrower, assuming the risk of

loss, and undertaking the burden of collection. The economic

reality is that the charges imposed by both lenders are

aggregated to determine the cost of the loan to the borrower.

40. EZPawn’s Operations Manual identifies the "CSO fee" as

interest in Florida. In the table identifying “Interest Rates

by State” the entry for the Interest Rate in Florida includes

“18% APR Lender Fee $15 per hundred broker fee.”

41. A determination that the charge imposed by EZPawn is

part of the cost of the loan to the borrower is made based on

the finding that EZPawn and Integrity are separate and

independent businesses which are not associated, affiliated, or

engaged in a joint venture. If two separate lenders charge

interest for the same loan, and the aggregate interest exceeds

the legal amount, neither party informed the ALJ of any legal

authority that exonerates the two lenders.

42. A determination that the charge imposed by EZPawn is

part of the cost of the loan is not dependent on a determination

that EZPawn is a loan broker for Integrity. However, the trier-

of-fact considers findings relevant to the broker issue to be

appropriate given the ample hearing time and evidence that the

parties devoted to the issue.

43. EZPawn is a loan broker. In addition to maintaining

the exclusive contractual right to market, offer, and promote

Integrity loans, EZPawn performs numerous functions on behalf of

Integrity pursuant to the CSO/Lender Agreement.

44. The CSO/Lender Agreement identifies EZPawn customers

as joint customers of both entities. EZPawn is permitted to use

Customer Information to market and sell other loan products

without Integrity’s consent. However, Integrity must obtain

written consent from EZPawn before using Customer Information in

a similar fashion. Similarly, EZPawn may assign its rights or

obligations to an affiliate without written consent from

Integrity, but Integrity must obtain EZPawn’s permission to do

so.

45. A borrower completes one four-page application for

both the stated CSO services from EZPawn and the loan from

Integrity. Customers complete the application at one of

EZPawn’s stores located in Florida.

46. Before the loan is ever evaluated by Integrity, EZPawn

uses the information on the application to make an independent

determination based on its own underwriting criteria of whether

to issue an LOC. EZPawn gives each borrower a document entitled

a Credit Services Organization Disclosure Statement (CSO2).

47. The CSO2 lists the services EZPawn will provide to the

borrower for the fee identified as a CSO fee. The services

include all collection functions related to the loans,

maintaining substantially all records, issuing all adverse

action notices on behalf of Integrity, and delivering all

legally required disclosures on behalf of Integrity.

48. The third document that EZPawn provides to a borrower

is the Credit Services Organization Agreement (CSO3). The CSO3

is the actual agreement between EZPawn and the borrower

regarding the services identified as CSO services. The CSO3

identifies the same CSO services as those disclosed in the CSO2.

49. The fourth document that EZPawn provides to a borrower

is the promissory note, which includes the TLA disclosure (the

CSO4). The CSO4 prescribes the terms of the loan from

Integrity.

50. The cost of each loan at issue in this proceeding

exceeds 18 percent. The details of the 36,000 loan transactions

are well documented in the record.

51. At the hearing, Petitioner introduced paper copies of

files that contain loan documents for two representative

borrowers as sample documents. The sample documents were also

attached to the Amended Administrative Complaint. Respondents

also introduced paper copies of representative loan documents.

52. Petitioner’s Exhibit N is a printout of a spreadsheet

file listing the name and other pertinent information of each

customer. Each customer on the spreadsheet is associated with a

unique Customer identification (ID) number.

53. Petitioner’s Exhibit GG contains an electronic

spreadsheet with a number of pieces of data associated with each

of the loans. The information includes the customer ID number

and loan number for each transaction.

54. The disclosed APR for each of the loans is far in

excess of 18 percent. The APR listed for every loan exceeds

18 percent by hundreds of percentage points. The APRs range

from 210.31 percent to 1,472.23 percent.

55. The loan made to borrower Y.M. on June 7, 2006,

carries an APR of 439.18 percent. The loan made to borrower

N.H. on June 6, 2006, carries an APR of 626.34 percent. The

loan made to the borrower in the example loan note provided by

Respondents carries an APR of 515.85 percent.

56. On June 6, 2006, N.H. obtained a loan of $1,000.00

that matured on June 15, 2006. On May 15, 2006, N.H. obtained a

rollover loan of $270.00 that matured on May 30, 2006.

57. In the first loan to N.H., the cost of the loan

included an annualized rate of interest of 18 percent, or

$4.44, payable to Integrity and a stated CSO fee of $150.00

payable to EZPawn. The cost of the loan for the rollover loan

to N.H. included an annualized rate of interest of 18 percent,

or $1.86, payable to Integrity and a stated CSO fee of $40.50

payable to EZPawn.

58. The TLA disclosure in the first loan to N.H. stated

that the true cost of her credit was an APR of 626.34 percent.

The TLA disclosure in the rollover loan stated the true cost to

be an APR of 409.03 percent.

59. The loan documents in each of the loans to N.H.

required N.H. to authorize Integrity to execute an ACH debit

transaction from the borrower’s checking account. The cost of

the $1,000.00 loan to N.H. was $154.44, which was financed and

rolled into the loan amount.

60. The loan documents authorize EZPawn to collect a fee

of $150.00 from the $154.44, or 97.1 percent of the cost of the

loan. The balance of $4.44 represented interest payable to

Integrity at an annualized rate of 18 percent.

61. The rollover loan did not result in the distribution

of any loan proceeds to N.H. Rather, the loan amount of $270.00

was paid on the existing account. Nevertheless, loan documents

authorize EZPawn to collect $40.50 and Integrity to collect

$1.86 in annualized interest. EZPawn collected approximately

95 percent of the cost of the rollover loan.

62. The workings of the original and rollover loan to N.H.

are illustrative of those in the other borrower files Petitioner

entered into evidence. On May 26, 2006, Y.M. obtained a loan of

$500.00 that matured on June 8, 2006. On June 7, 2006, Y.M.

obtained a rollover loan of $500.00 that matured on June 22,

2006.

63. The cost of the first loan included $3.21 charged by

Integrity at an annualized rate of interest of 18 percent and a

charge of $75.00 by EZPawn for a stated CSO fee. The cost of

the rollover loan included a charge by Integrity of $3.45 at an

annualized interest rate of 18 percent and a charge of $75.00 by

EZPawn for a stated CSO fee.

64. The TLA disclosure for the first loan to Y.M.

disclosed that the true cost of credit was 439.18 percent. The

true cost of credit for the rollover loan was 409.06 percent.

65. A preponderance of the evidence showed intent to

violate the statute. However, the trier-of-fact finds the

evidence less than clear and convincing that Respondents

intentionally violated Florida law. The legal structure of the

business conducted in Florida is fashioned after a similar

mechanism that is lawful in Texas. Although the statutes in the

two states are different, there is ample evidence that

Respondents undertook reasonable due diligence, including

appropriate legal opinions, to ensure that the mechanism used in

Florida complies with Florida law.

66. This proceeding is apparently the first enforcement

effort of this type by Petitioner in the state. Petitioner has

not previously advised either of the respondents that Petitioner

considers their business practice to be unlawful. Petitioner

has not promulgated a rule, has not issued a written policy, has

not issued a personal letter of advisement, and has not

conducted public seminars to publish its statutory

interpretation.

CONCLUSIONS OF LAW

67. DOAH has jurisdiction over the subject matter of this

proceeding and the parties. DOAH provided the parties with

adequate notice of the final hearing. §§ 120.569 and 120.57,

Fla. Stat.

68. Petitioner has the burden of proof in this proceeding.

Petitioner must prove by clear and convincing evidence that

Respondents committed the acts alleged in the Amended

Administrative Complaint and that the proposed penalty is

reasonable. Department of Banking and Finance, Division of

Securities and Investor Protection v. Osborne Stern and Company ,

670 So. 2d 932, 935 (Fla. 1996).

69. Petitioner seeks to impose a cease and desist order in

this proceeding. A cease and desist order is a remedy

equivalent to disciplinary action against a licensee because a

cease and desist order would deprive Respondents of the ability

to engage in their chosen business. An agency that seeks the

equivalent of license discipline action must prove the factual

allegations by clear and convincing evidence. Department of

Banking and Finance v. Santa Cruz Marketing, Inc. , Case No. 91-

2462 (DOAH March 12, 1992).

70. For reasons stated in the Findings of Fact and not

repeated here, Petitioner showed by clear and convincing

evidence that the cost of the loans at issue include the charge

by EZPawn for stated CSO services and that the cost of the loan

exceeds an annualized interest rate of 18 percent in violation

of Subsection 516.02(2)(a). However, Petitioner did not show by

clear and convincing evidence that the violation was

intentional.

71. Section 516.02(2) states in relevant part:

(a) A person who is engaged in the business

of making loans of money, except as

authorized by this chapter or other statutes

of this state, may not directly or

indirectly charge, contract for, or receive

any interest or consideration greater than

18 percent per annum upon the loan, use, or

forbearance of money, goods, or choses in

action, or upon the loan or use of credit,

of the amount or value of $25,000 or less.

(b) The prohibition in paragraph (a)

applies to any lender who, as security for

any such loan, use, or forbearance of money,

goods, or choses in action, or for any such

loan or use of credit, makes a pretended

purchase of property from any person and

permits the owner or pledgor to retain the

possession thereof or who by any device or

pretense of charging for services or

otherwise seeks to obtain a greater

compensation than is authorized by this

chapter.

(c) A loan for which a greater rate of

interest or charge than is allowed by this

chapter has been contracted for or received,

wherever made, is not enforceable in this

state, and each person who in any manner

participates therein in this state is

subject to this chapter. However, this

paragraph does not apply to loans legally

made to a resident of another state by a

person within that state if that state has

in effect a regulatory small loan or

consumer finance law similar in principle to

this chapter.

72. Subsection 516.01(5) defines the term "interest" to

mean:

[T]the cost of obtaining a consumer finance

loan and includes any profit or advantage of

any kind whatsoever that a lender may

charge, contract for, collect, receive, or

in anywise obtain, including by means of any

collateral sale, purchase, or agreement, as

a condition for a consumer finance loan.

Charges specifically permitted by this

chapter, including commissions received for

insurance written as permitted by this

chapter, shall not be deemed interest.

73. The prohibition against interest in excess of

18 percent applies to any lender who by any device or pretense

charges for services in excess of the statutory limit.

§ 516.02(2)(b). Each entity that participates in any manner in

a prohibited loan transaction violates the relevant statutory

provisions. § 516.02(2)(c).

74. The loans at issue in this case were made for less

than $25,000.00. Each borrower paid the aggregate cost of his

or her loan to EZPawn and Integrity, and the aggregate cost

exceeded the statutory limit.

75. The parties supplied ample evidence concerning

legislative intent underlying the statute and the need, or lack

thereof, for agency expertise to define the phrase "the cost of

the loan" and whether the term "cost" should be construed

liberally or strictly. The term "cost" is not defined by

statute or rule. The term is defined by its plain and ordinary

meaning and that definition requires no agency expertise or

legislative history. Nor does the term "cost" require a liberal

or strict interpretation in order to be defined.

76. The issue of whether the charge imposed by EZPawn is a

cost of the loan is a factual issue within the exclusive

province of the trier-of-fact. The fact-finder must resolve

conflicts in the evidence and decide the question one way or the

other. Dunham v. Highlands County School Board , 652 So. 2d 894,

896 (Fla. 2d DCA 1995); Heifetz v. Department of Business

Regulation, Division of Alcoholic Beverages & Tobacco , 475 So.

2d 1277, 1281 (Fla. 1st DCA 1985); Department of Professional

Regulation v. Wagner , 405 So. 2d 471, 473 (Fla. 1st DCA 1981).

77. The trier-of-fact resolved the evidential issue in

favor of Petitioner. The fact-finder is the sole arbiter of

credibility. Bejarano v. State, Department of Education,

Division of Vocational Rehabilitation , 901 So. 2d 891, 892 (Fla.

4th DCA 2005); Hoover, M.D. v. Agency for Health Care

Administration , 676 So. 2d 1380, 1384 (Fla. 3d DCA 1996); Goss

v. District School Board of St. Johns County , 601 So. 2d 1232,

1234 (Fla. 5th DCA 1992).

78. The plain and ordinary meaning of the term "cost" is

an "amount paid or required in payment for a purchase." The

American Heritage Dictionary of the English Language , page 414

(4th ed. 2000). The evidence is clear and convincing that

EZPawn and Integrity each required the amount charged by EZPawn

as a cost of the loan. No borrower received his or her money

unless the borrower paid the fee charged by EZPawn. EZPawn

required payment of the stated CSO fee as consideration for the

credit it extended, the risk of loss it assumed, and the burden

of collection that EZPawn undertook. EZPawn controlled the

distribution of the loan proceeds.

79. The EZPawn charge does not fall within in any of the

statutory exceptions to the definition of interest. In the

absence of an express legal exception and in the absence of a

legal definition by statute or rule, the plain and ordinary

meaning of the term "cost" is properly determined by the

economic reality of the transaction. The economic effect of the

charge by EZPawn was a cost requirement for the loan. The legal

form in which EZPawn and Integrity cast each loan transaction,

as a separate payment for CSO services that were not connected

to the loan, lacks economic substance.

80. One of the statutory exceptions to the definition of

interest is a brokerage fee on a loan or line of credit of more

than $10,000.00. § 516.031(3)(a)3. The parties spent ample

time and effort on the issue of whether the statutory exception

for a brokerage fee is legislatively intended to be limited to

mortgage brokers.

81. Even if EZPawn is a broker for purposes of the

statutory exception, none of the loans were more than

$10,000.00. When a statute expressly excepts brokerage fees for

loans in excess of $10,000.00, the statute is reasonably

construed not to except brokerage fees charged on loans of

$10,000.00 or less. It is clear and convincing that none of the

loans at issue satisfied the statutory amount to qualify for the

broker exception.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that Petitioner enter a final order requiring

Respondents to cease and desist the business practices proven in

this proceeding.

DONE AND ENTERED this 25th day of March, 2008, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 25th day of March, 2008.

ENDNOTE

1/ References to chapters, sections, and subsections are to

Florida Statutes (2007), unless otherwise stated.

COPIES FURNISHED :

Peter Fisher, Esquire

Gregg Morton, Esquire

Office of Financial Regulation

Post Office Box 8050

Tallahassee, Florida 32399-8050

Charles L. Stutts, Esquire

Calvin Hayes, Esquire

Holland & Knight, LLP

100 North Tampa Street, Suite 4100

Tampa, Florida 33602

Don B. Saxon, Commissioner

Office of Financial Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0350

Robert Beitler, General Counsel

Department of Financial Services

200 East Gaines Street, Suite 526

Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.