Ruby v. Cashnet, Inc.

From March 2005 to November 2007, Appellee Wilma Ruby entered into a total of 33 payday loan agreements with Appellant Cashnet, Inc. The amount of each loan increased over time. Appellee failed to pay her last loan. In 2008, Appellee brought suit against Cashnet alleging that with each loan she made, she was refinancing, renewing or extending the previous loan, in violation of state law. She further alleged that the annual percentage rate for each loan exceeded the finance fee allowed under state law. Appellee sought the return of interest paid or statutory damages and attorney's fees. A bench trial was held on Appellee's claims; the circuit court ruled in Cashnet's favor, holding that the loans did not constitute a refinance, renewal or extension, and were not in violation of the law. On appeal, the Supreme Court gave ordinary meaning to the terms at issue in the lower court's ruling: "refinance" and "renew." The Court found that "refinancing" is the exchange of an old debt for a new one; "renewal" is the recreation of a legal relationship or the replacement of an old contract with a new one. By looking at the substance of the transactions between Cashnet and Appellee, the Court deduced that the proceeds from each new loan were being used to repay the previous loan, therefore each transaction was refinanced. The Court held that Cashnet's practice of making loans to Appellee immediately after she repaid a previous loan was a refinancing in violation of state law. It reversed the circuit court's decision and remanded the case for further proceedings.