45-1025 Installment loans; additional charges authorized; loan period; violation; effect.
45-1025. Installment loans; additional chargesauthorized; loan period; violation; effect.(1) Licenseesmay charge, contract for, or receive any amount or rate of interest permittedby section 45-101.03, 45-101.04, or 45-1024 upon any loan or upon any partor all of any aggregate indebtedness of the same person. Except as providedin subsection (2) of this section, the charging, contracting for, or receivingof a rate of interest permitted by section 45-101.04 does not exempt the licenseefrom compliance with the Nebraska Installment Loan Act.(2)(a) Loans made by a licensee pursuant to subdivision (4) of section 45-101.04 are not subject to the Nebraska Installment Loan Act if such loansare not made on real property.(b) Loans made by a licensee pursuant to subdivision (11) of section 45-101.04 on real property are not subject tothe Nebraska Installment Loan Act. A licensee making such loans shall complywith and be subject to the ResidentialMortgage Licensing Act with respect to such loans, except thatthe licensee shall not be required to obtain a mortgage banker license under the Residential Mortgage LicensingAct.(c) Any mortgage loanoriginator who works as an employee or independent agent of a licensee shallbe required to obtain a mortgage loan originator license and shall be subjectto the Residential Mortgage Licensing Act.(3) Exceptas provided in subdivision (2)(a) of section 45-1024, no licensee shall enterinto any loan contract under the Nebraska Installment Loan Act under whichthe borrower agrees to make any payment of principal more than thirty-sixcalendar months from the date of making such contract when the principal balanceis not more than three thousand dollars. Every loan contract precomputed pursuantto subsection (2) of section 45-1024 shall provide for repayment of principaland charges in installments which shall be payable at approximately equalperiodic intervals of time and so arranged that no installment is substantiallygreater in amount than any preceding installment. When necessary in orderto facilitate payment in accordance with the borrower's principal source ofincome or when the loan contract is not precomputed pursuant to subsection(2) of section 45-1024, the payment schedule may reduce or omit installmentpayments. Any loan contract made in violation of this section, either knowinglyor without the exercise of due care to prevent the violation, shall not onthat account be void, but the licensee has no right to collect or receiveany interest or charges on such loan. If any interest or other charges havebeen collected or contracted for, the licensee shall refund to the borrowerall interest and other charges collected and shall not collect thereafterany interest or other charges contracted for and thereafter due on the loaninvolved, as liquidated damages, and the licensee or its assignee, if foundliable, shall pay the costs of any action relating thereto, including reasonableattorney's fees. No licensee shall be found liable under this subsection ifthe licensee shows by a preponderance of the evidence that the violation wasnot intentional and resulted from a bona fide error notwithstanding the maintenanceof procedures reasonably adopted to avoid any such error. SourceLaws 1941, c. 90, § 16, p. 351; C.S.Supp.,1941, § 45-144; Laws 1943, c. 107, § 4, p. 371; R.S.1943, § 45-138; Laws 1953, c. 155, § 2, p. 490; Laws 1957, c. 193, § 2, p. 685; Laws 1963, Spec. Sess., c. 7, § 10, p. 94; Laws 1963, Spec. Sess., c. 9, § 2, p. 108; Laws 1971, LB 18, § 1; Laws 1979, LB 87, § 4; Laws 1982, LB 702, § 2; Laws 1984, LB 681, § 2; Laws 1994, LB 979, § 9; Laws 1997, LB 555, § 18; R.S.1943, (1998), § 45-138; Laws 2001, LB 53, § 53; Laws 2003, LB 218, § 15; Laws 2004, LB 999, § 41; Laws 2009, LB328, § 48. Cross ReferencesResidential Mortgage Licensing Act, see section 45-701. Annotations1. Usury as a defense2. Prohibited acts3. 1963 amendments4. Miscellaneous1. Usury as a defenseThe defense of usury based upon the usury statute is not assignable to a stranger who is not a surety for or in privity with the original borrower. General Electric Credit Corp. v. Best Refr'd Express, 222 Neb. 499, 385 N.W.2d 81 (1986).The defense of usury is personal to the borrower, his sureties, and those in privity with him. Commonwealth Trailer Sales, Inc. v. Bradt, 166 Neb. 1, 87 N.W.2d 705 (1958).Burden is on defendant to prove usury where instruments taken separately did not have on their face the appearance of usury. Nitzel & Co. v. Nelson, 144 Neb. 662, 14 N.W.2d 197 (1944).2. Prohibited actsUsurious loan disguised as conditional or time sale is subject to forfeiture of interest. Midstates Acceptance v. Voss, 189 Neb. 411, 202 N.W.2d 822 (1972).Where the indebtedness exceeds three thousand dollars, charge in excess of nine percent per annum is prohibited. Berg v. Midwest Laundry Equipment Corp., 175 Neb. 423, 122 N.W.2d 250 (1963).Violation of various prohibitions of Small Loan Act rendered entire contract void. Wood v. Commonwealth Trailer Sales, Inc., 172 Neb. 494, 110 N.W.2d 87 (1961).Loan repayable in sixty months violated this section. Robertson v. Burnett, 172 Neb. 385, 109 N.W.2d 716 (1961).Payment for an extension of time, in addition to interest charge at maximum rate, was usurious. Curtis v. Securities Acceptance Corp., 166 Neb. 815, 91 N.W.2d 19 (1958).Requirement of large final payment is prohibited. State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215 (1956).3. 1963 amendmentsLegislature at 1963 Special Session changed penalty for violation of this section. Highway Equipment & Supply Co. v. Jones, 182 Neb. 234, 153 N.W.2d 859 (1967).By terms of 1963 amendment, penalty for violation of section was changed to forfeiture of interest and charges. Dailey v. A. C. Nelsen Co., 178 Neb. 881, 136 N.W.2d 186 (1965).Legislative Bill 17 of the 1963 Special Session of the Legislature was sustained as constitutional. Kometscher v. Wade, 177 Neb. 299, 128 N.W.2d 781 (1964).Amendment to this section in 1963 Special Session by Legislative Bill 11 was unconstitutional as special legislation. State Securities Co. v. Ley, 177 Neb. 251, 128 N.W.2d 766 (1964).Contract which was held to be usurious and void under former provisions of this section was not void ab initio and did not bar assignee for value from obtaining adjudication of its rights. Industrial Credit Co. v. Berg, 388 F.2d 835 (8th Cir. 1968).4. MiscellaneousThe provision of recovery of interest or other charges collected in violation of this section applies only to installment loans. Seldin v. Northland Mortgage Co., 189 Neb. 175, 202 N.W.2d 174 (1972).Penalties under this section did not apply to downpayment on property which was no part of loan. Berg v. Midwest Laundry Equipment Corp., 178 Neb. 770, 135 N.W.2d 457 (1965).The equal payment provision of the Installment Loan Act carries the equal payment provision over into all loans under the act. Gruenemeier v. Commonwealth Co., 178 Neb. 66, 131 N.W.2d 713 (1964).This section is not violated if interest is not charged in excess of nine percent per annum. Moffitt-Harrison Builders, Inc. v. Sandman, 177 Neb. 425, 129 N.W.2d 524 (1964).Retroactive reduction in penalty for violation of this section sustained as constitutional. Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964).Where a loan contract has not been entered into, there can be no usury. Metschke v. Marxsen, 176 Neb. 240, 125 N.W.2d 684 (1964).Recovery of principal and interest paid for violation of Installment Loan Act is a proper exercise of the police power and is not a penalty. Abel v. Conover, 170 Neb. 926, 104 N.W.2d 684 (1960).Special statute prescribing specific penalty controls over general statute. Thompson v. Commercial Credit Equipment Corp., 169 Neb. 377, 99 N.W.2d 761 (1959).Terms of Installment Loan Act are broad enough to apply when consideration of loan is unpaid balance of a preexisting debt. State ex rel. Beck v. Associates Discount Corp., 168 Neb. 803, 97 N.W.2d 583 (1959).Usurious character of transaction is determined as of the time of its inception. Nelson v. General Credit Corp., 166 Neb. 770, 90 N.W.2d 799 (1958).Buyer must be informed of difference between time sale price and cash sale price to avoid charge of usury. McNish v. Grand Island Finance Co., 164 Neb. 543, 83 N.W.2d 13 (1957); McNish v. General Credit Corp., 164 Neb. 526, 83 N.W.2d 1 (1957).Installment loan made by licensee in excess of authorized rate is void, and neither principal nor interest may be recovered. Powell v. Edwards, 162 Neb. 11, 75 N.W.2d 122 (1956).