STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF BANKING AND )
FINANCE, )
)
Petitioner, )
)
vs. ) CASE NO. 93-0911
) CREDICORP, INCORPORATED, a Texas )
corporation, JOHN RHEINFRANK, ) individually and as President of ) Credicorp, Inc., and STEVAN W. ) BROWN, individually and as Vice ) President of Credicorp, Inc., )
)
Respondents. )
)
RECOMMENDED ORDER
This matter came on for hearing in Tallahassee, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings, on July 23, 1993. The Division of Administrative Hearings received the hearing transcript on August 4, 1993, and the parties filed proposed recommended orders on August 16, 1993. The attached appendix addresses the parties' proposed findings of fact.
APPEARANCES
For Petitioner: Bridget L. Ryan, Esquire
Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399
For Respondent: William E. Williams, Esquire
Rex Ware, Esquire
106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
STATEMENT OF THE ISSUES
Whether petitioner should impose fines and other administrative sanctions against respondents, and order them "to cease and desist from further violating Florida laws and take appropriate corrective action," for the reasons alleged in the administrative complaint?
PRELIMINARY STATEMENT
By administrative complaint served January 13, 1993, petitioner alleged that respondent Credicorp, Incorporated (Credicorp), a Texas Corporation not authorized to do business in Florida and holding no license under Chapter 520, Florida Statutes, had as its president respondent John Rheinfrank and as its vice-president, treasurer and secretary, respondent Stevan W. Brown at all pertinent times; and that the respondents "represented to individuals . . . in Florida, that respondents could, in exchange for payment of money, obtain an extension of credit for a buyer"; that respondents "in expectation of consideration, arrange or attempt to arrange or offer to arrange a credit card or a line of credit for a buyer"; that respondents "assist or advise customers in obtaining, or attempting to obtain a credit card or line of credit"; "(s)pecifically, the Respondents offer customers a "Gold Card" with a $10,000.00 line of credit at 12 percent annual interest rate for a $29.95 annual fee . .
. [and the] customer is required to pay the $29.95 fee prior to full and complete performance of Respondents' services"; that respondents "deceptively represent in their sales brochure that the customer was receiving a "Gold Card" which from the sales brochure appears to be a widely accepted, standard credit card . .. [without] inform[ing] the customers of the material fact that the customer was receiving a catalogue card . . . that . . . could be used only to purchase merchandise from a specific catalogue"; that respondents "offer to sell or furnish the goods listed in the catalogue" which "could be paid for by installments" that respondent "through this credit card, would grant credit to a buyer to purchase the merchandise"; all in violation of Sections 520.32(1), 520.333(1)(a) and 687.141, Florida Statutes.
At hearing, petitioner abandoned certain additional allegations in the administrative complaint, viz., those set out in paragraphs 17, 18, 19, 20, 22,
25, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 and 38, together with any claim that respondents had violated Chapters 516 or 817, Florida Statutes.
Respondents contend that they and the activities alleged in the administrative complaint lie outside Florida's regulatory authority. But respondents' counsel conceded at hearing that, to "the extent that the Department [of Banking and Finance] has jurisdiction over Credi[]corp and Mr. Brown, it has jurisdiction over Mr. Rheinfrank." (T.14)
FINDINGS OF FACT
Credicorp, Incorporated (Credicorp) is a Texas corporation whose principal place of business is located in Dallas, Texas. Credicorp is not licensed pursuant to Chapter 520, Florida Statutes, and never has been. Originally incorporated in 1990 under the name FAFCO, Credicorp began mailing solicitations to Florida in November of 1990.
John Rheinfrank was president of Credicorp from November of 1990 until October of 1992. T. at 15. Since then, Stevan Brown, who has been corporate secretary at all pertinent times, has served as president. Credicorp has no employees or agents in Florida, and owns no property in Florida. Credicorp has not registered to do business in Florida and does not collect Florida sales or use taxes.
Credicorp mails solicitations, also called invitations, to Florida residents and others. Before the corporate name change, invitations sent to prospects read as follows:
TELEGRAM
APPROVAL NO: [account number specified] APPROVAL EXPIRATION DATE: [date specified] [Name and address of targeted individual] YOU HAVE BEEN PRE-APPROVED FOR A GOLD CARD WITH A $10,000.00 LINE OF CREDIT.
*MAIL YOUR $29.95 ANNUAL FEE BY CHECK OR
MONEY ORDER BY (specified date) ALONG WITH THIS SIGNED NOTICE TO ACTIVATE YOUR CREDIT IMMEDIATELY.
FAILURE TO DO SO WILL RESULT IN OUR REEVALUATION OF YOUR ELIGIBILITY.
PLEASE RETURN THIS TELEGRAM WITH PAYMENT BY
(date specified).
MAKE CHECK OR MONEY ORDER PAYABLE TO FAFCO GOLD CARD.
SINCERELY,
ROBERT J. ARMSTRONG, NEW ACCOUNTS MANAGER RESPOND TODAY!
Petitioner's Exhibit No. 19. Robert J. Armstrong, the putative accounts manager, does not exist. T. at 121. Recently invitations have included a 60- day money-back guarantee and a disclaimer in small type disclosing Credicorp's lack of affiliation with a financial institution. Petitioner's Exhibit No. 19.
The solicitation arrives in an envelope stamped "DATED MATERIAL: YOUR IMMEDIATE REPLY REQUESTED," and the return address is shown as "CREDIT APPROVAL DEPT." Petitioner's Exhibits Nos. 8 and 21; Admission No. 13.
Ordinarily the solicitation contains all the information an individual receives before paying money to Credicorp to secure its services. Respondents offer potential customers residing in Florida a "Gold Card" with "a $10,000 line of credit" at a 12 percent annual interest rate, in exchange for a $29.95 fee. Petitioner's Exhibits Nos. 19 and 20; Admission 46.
The services Credicorp in fact provides to members are offers to sell merchandise, loans for purchasing the merchandise that Credicorp sells, assorted coupons, and hotel and rental car discounts. Petitioner's Exhibits Nos. 15 and 29, line 23. Not one of these services is clearly identified on the initial solicitation sent to potential members. Petitioner's Exhibit No. 19; T. at 120- 121.
After the customer submits a pre-approved application and pays the membership fee, Credicorp mails a "fulfillment package." Petitioner's Exhibit No. 15, p.77, line 22. The customer must pay a $29.95 fee before Credicorp performs any service on the customer's behalf. Petitioner's Exhibit No. 20; Admission No. 47. The fulfillment package contains a letter that states, in part:
WELCOME TO CREDICORP, YOUR LINE OF CREDIT IS
$10,000
HERE IS YOUR CREDICORP MEMBERSHIP CARD! ACCOUNT #
START USING YOUR CREDICORP MEMBERSHIP AND BONUS COUPONS IMMEDIATELY TO PURCHASE NAME BRAND PRODUCTS FROM OUR HOME VALUES AND GIFT CATALOG. ENCLOSED IS OUR GIFT TO YOU, YOUR PREFERRED MEMBER SAVINGS COUPON BOOKLET WORTH UP TO $1,000.00 IN COUPONS REDEEMABLE IN YOUR AREA. ALSO SEE INFORMATION ENCLOSED ABOUT 50 percent DISCOUNTS AT THOUSANDS OF LOCATIONS THROUGH OUT THE U.S.
Petitioner's Exhibit No. 6. This letter is the first notice Credicorp gives the "new member" that he or she has joined a catalogue shopping club.
The fulfillment package also contains a second letter addressed "Dear New Credicorp Member," a copy of the Credicorp Rules and Regulations, a collection of Home Values and Gifts Bonus Coupons, a booklet of Super Saver coupons, and the Home Values and Gifts catalogue. For the past six months or so, Petitioner's Exhibit No. 16, p.44, the package has contained an application for a "Privilege Card." Petitioner's Exhibits Nos. 1, 2 6, and 15, p. 78 1. 22.
A member can purchase merchandise listed in the Home Values and Gifts catalogue by completing order forms contained in the catalogue and mailing them, along with payment, to Credicorp. T. at 108. Credicorp extends members a line of credit of up to $10,000 to purchase this merchandise. T. at 108, 111. The member's "Gold Card" number must be included when ordering products from the catalogue. Petitioner's Exhibit No. 15, p. 83, line 9.
A member cannot use the "Gold Card" to purchase goods or services from retail sellers other than Credicorp. T. at 111-114. Members cannot use their "Gold Cards" or their membership to obtain cash from anybody. The Better Business Bureau of Texas received over 34,000 inquiries in 1992 regarding Credicorp's activities. T. at 122-123.
Credicorp receives a mark-up on the merchandise it sells members. Petitioner's Exhibit No. 16, p.60, line 5. Members who purchase merchandise on credit must initially submit a specified down payment with the order. Petitioner's Exhibits Nos. 1, 2 and 14. Two prices are available to a Credicorp member, a cash price and a "credit price," which reflects a 12 percent financing fee. Petitioner's Exhibits Nos. 1, 2, 14. Merchandise purchased on credit arrives with an installment coupon book for each item ordered. Petitioner's Exhibit No. 6, Credicorp Rules and Regulations p. 2.
The Credicorp Rules and Regulations, the order forms contained in the catalogue, and all other materials Credicorp provides members make no mention of any contingency once the member completes, signs and sends in a form order for merchandise with the amount of money required. Petitioner's Exhibits Nos. 1, 2, 6, 12, 14, 17. Many Florida residents complete and sign these order forms in Florida. Petitioner's Exhibit No. 17. Credicorp has received at least 378 form orders for merchandise from Florida residents. Id.
Approximately 1,600,000 individuals have submitted to Credicorp membership applications, each accompanied by $29.95. New members' names and addresses are entered into a computer data base and "batch edit sheets," each listing 100 names of new members, are printed. Petitioner's Exhibits Nos. 4 and 5; Petitioner's Exhibit No. 15, page 73, line 1; T. at 47.
Sample batch edit sheets obtained from Credicorp by the Department listed the names of 640 Florida residents who had sent a membership application form and $29.95 to Credicorp to obtain membership. Petitioner's Exhibit Nos. 4, 5, 18. On a single day, June 24, 1992, money and membership application forms from 243 residents of Florida reached Credicorp. Petitioner's Exhibit No. 18.
CONCLUSIONS OF LAW
Since the Department of Banking and Finance referred respondent's hearing request to the Division of Administrative Hearings, in accordance with Section 120.57(1)(b)3., Florida Statutes (1992 Supp.), "the division has jurisdiction over the formal proceeding." Section 120.57(1)(b)3., Florida Statutes (1992 Supp.).
Section 520.995, Florida Statutes (1991) authorizes the Department to impose an administrative fine against any person violating Chapter 520, in an amount "not to exceed $1,000 for each such act." Section 520.995(2)(f), Florida Statutes (1991).
While the administrative complaint pleaded Section 520.331, Florida Statutes (1991), since repealed, rather than Section 520.995, the pertinent language in Section 520.331 is identical to the language that remains in effect in Section 520.995, Florida Statutes (1991). The discrepancy in citation is, therefore, without legal significance. See Scharrer v. Department of Professional Regulation, 536 So.2d 320 (Fla. 3rd DCA 1988) (reh. den. 1989); Nelson Richard Advertising v. Department of Transportation, 513 So.2d 181 (Fla. 1st DCA 1987).
Section 687.143, Florida Statutes (1991), authorizes the Department to impose an administrative fine against any person violating Chapter 687, in an amount not to exceed $5,000 for each violation, and to order an offending loan broker and its principals to cease and desist violating Chapter 687, if it is proven that violations have occurred.
Burden on Agency
Strict procedural protections apply in disciplinary cases, and, for purposes of deciding the present case, the prosecuting agency's burden is assumed to be to prove its case clearly and convincingly. See Ferris vs. Turlington, 510 So.2d 292 (Fla. 1987) Pic N' Save Central Florida, Inc. v. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, No. 91-329 (Fla. 1st DCA; May 28, 1992), 17 FLW D1379. See Addington vs. Texas, 441 U.S. 426 (1979); Ferris vs. Austin, 487 So.2d 1163 (Fla. 5th DCA 1986);
Anheuser-Busch, Inc. vs. Department of Business Regulation, 393 So.2d 1177 (Fla. 1st DCA 1981); Walker vs. State Board of Optometry, 322 So.2d 612 (Fla. 3rd DCA 1975); Reid vs. Florida Real Estate Commission, 188 So.2d 846, 851 (Fla. 2nd DCA 1966); Department of Banking and Finance v. Santa Cruz et al., 14 FALR 4663 at 4681, DOAH Case No. 91-2462.
Retail Installment Transactions
Section 520.32(1), Florida Statutes (1991) provides that a "person may not engage in or transact the business of a retail seller engaging in retail installment transactions . . . without a license . . . ." "Retail installment transaction" is defined as a "contract to sell or furnish or the sale of or the furnishing of goods . . . pursuant to a retail installment contract," Section 520.31(10), Florida Statutes (1991), which in turn is defined as "an instrument or instruments reflecting one or more retail installment transactions entered into in this state pursuant to which goods or services may be paid for in installments." Section 520.31(9), Florida Statutes (1991).
The statute is clearly intended to reach mail order sales, "contracts negotiated and entered into by mail or telephone." Section 520.36, Florida Statutes (1991). But respondents maintain that the statute does not require Credicorp to obtain a Florida license as a retail installment seller because, it is said, the instruments reflecting its transactions with Florida residents do not evidence "retail installment contracts entered in this state." Alternatively, respondents argue that the statute cannot constitutionally be construed to require such licensure because Credicorp has no employees or other agents in Florida nor any property here.
Respondents contend that all their retail installment contracts with Florida residents are entered into not in Florida, when a buyer mails payment and an order form here, but in Texas, when Credicorp ships merchandise or otherwise accepts orders there. They cite Section 672.206, Florida Statutes (1991), entitled "Offer and acceptance in formation of contract," which provides:
Unless otherwise unambiguously indicated by the language or circumstances:
An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a
prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
No writing nor any surrounding circumstance unambiguously indicates that the catalogue, which sets out unequivocal terms by which Credicorp proposes to be bound, does not constitute an offer to make a contract, an offer inviting a member's acceptance by mailing payment and a completed order form in Florida. A
contract of sale can be formed by acceptance of an offer to sell as well as by acceptance of an offer to buy. Peters v. E. O. Painter Fertilizer Co., 73 Fla. 1001, 75 So. 749 (1917).
Indeed a "contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Section 672.204(1), Florida Statutes (1991). An order does not require acceptance under Section 672.206(1)(b), Florida Statutes (1991), when it is itself acceptance under Section 672.206(1)(a), Florida Statutes (1991). Parol evidence at hearing as to corporate intent cannot alter this fact. Order forms filled out in Florida by Florida residents are surely among the "instruments reflecting one or more retail installment transactions" to which Section 520.31(9), Florida Statutes (1991) refers. Cf. Skurnick v. Ainsworth, 591 So.2d 904 (Fla. 1991).
Giving Statute Its Intended Effect Raises No Substantial Constitutional Question
Such a construction is fully consonant with due process requirements that Credicorp have sufficient "minimum contacts" with Florida to enable Florida to require licensure. As was pointed out in Quill Corp. v. North Dakota, 493 U.S. 397, 112 S.Ct. 1904 (1992), an
out-of-state direct marketer derives numerous commercial benefits from the State in which it does business. These advantages include laws establishing sound local banking institutions . . . means of waste disposal from garbage generated by mail order solicitations; and creation and enforcement of consumer protection laws, which protect buyers and sellers alike, . . . the latter
by creating a climate of consumer confidence that inures to the benefit of reputable dealers in mail order transactions.
112 S.Ct. at 1920 (White, J., dissenting.) In dollar volume, Credicorp's dealings with Floridians in a single day exceeded those found sufficient, although occurring over the course of an entire year, to support service on an out-of-state manufacturer in Eder Instrument Co. v. Allen, 253 So.2d 902 (Fla. 3d DCA 1971). See International Shoe Co. v. Washington, 326 U.S. 310 (1945); and, e.g., Sayet v. Interstate Blood Bank, Inc., 245 So.2d 142 (Fla. 3d DCA 1971).
Florida's requirement that all retail installment sellers doing business in Florida be licensed does not unduly burden interstate commerce and does not discriminate in any way against interstate commerce. See Breard v. Alexandria, 341 U.S. 622 (1951). "The mere fact that state action may have repercussions beyond state lines is of no judicial significance so long as the action is not within that domain which the Constitution forbids." Osborn v. Ozlin, 310 U.S. 53, 62 (1940). That the licensing requirement may be said to fall directly on interstate (as well as intrastate) commerce has no constitutional significance. See Complete Auto Transit, Inc. v. Brady, 400 U.S. 274 (1977).
Nor does the interstate commerce clause create a "rigid territorial limitation on the power of the States in our federal system to safeguard the health and welfare of their citizens." Bigelow v. Virginia 95 S.Ct. 2222, 2239 (1975) (Rehnquist, J., dissenting.) "Irrespective of a State's power to regulate extraterritorial commercial transactions in which its citizens participate it retains an independent power to regulate the business of commercial solicitation and advertising within its borders." Id. One purpose Chapter 520 evinces is to protect Florida consumers from misleading solicitations.
In Head v. New Mexico Board, 374 U.S. 424 (1963), a New Mexico law forbidding certain radio advertising that would have reached not only New Mexicans but Texans, as well, was upheld against a challenge by an optometrist practicing in Texas. Cf. Skiriotes v. Florida, 313 U.S. 69, 74-5 (1941); Strassheim v. Daily, 221 U.S. 280 (1911) ("Acts done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a state in punishing the cause of the harm as if he had been present at the effect . .
.." At 285.)
In short, Section 520.32(1), Florida Statutes (1991), construed in keeping with "'common sense,'" Skurnick v. Ainsworth, supra at 906 (internal citation omitted), and the Constitution of the United States alike, renders each of the 378 sales of merchandise petitioner has proven a violation of Chapter 520 for which petitioner is authorized to levy 378 administrative fines not to exceed $1,000 each. Department of Banking and Finance v. Santa Cruz, 14 FALR 4663, 4681, DOAH Case No. 91-2462.
Unlicensed Installment Retailers Deemed Loan Brokers
Section 687.141, Florida Statutes (1991), entitled "Loan brokers; prohibited acts," provides that "[n]o loan broker shall:
Assess or collect an advance fee from a borrower to provide services as a loan broker.
Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker, notwithstanding the absence of reliance by the buyer.
Make or use any false or deceptive representation in its business dealings or to the department or conceal a material fact from the department.
Initially respondents raise the question whether they or any of them fall within the statutory definition of "loan broker," without, however, urging any impediment predicated on the interstate commerce clause or other constitutional provisions.
The statutory definition is set out in Section 687.14, Florida Statutes (1991), which provides:
Loan Broker means any person, except any bank or savings and loan association,
trust company, building and loan association, credit union, consumer finance company, retail installment sales company, securities broker-dealer, real estate broker or salesperson, attorney, federal Housing Administration or Veteran's Administration approved lender, credit card company, installment loan licensee, mortgage broker or lender, or insurance company, provided that
the person excepted is licensed by and subject to regulation or supervision of any agency of the United States or this state and is acting within the scope of the license; and also excepting subsidiaries of licensed or chartered consumer finance companies, banks, or savings and loan associations; who
For or in expectation of consideration arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit;
For or in expectation of consideration assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit, or related guarantee, enhancement, or collateral of any kind or nature;
Acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or;
Holds himself out as a loan broker.
Principal means any officer, director, partner, joint venturer, branch manager, or other person with similar managerial or supervisory responsibilities for a loan broker.
(Emphasis supplied.) Credicorp is a loan broker within the meaning of the statute, if for no other reason, because Credicorp holds itself out as offering a line of credit.
The solicitations Credicorp sent to potential members offered a "Gold Card" with a "$10,000 line of credit." Petitioner's Exhibits Nos. 19 and 20. The "Members Only Finance Guide" states, "All credit card purchases carry a finance charge on the amount financed at the Annual Percentage Rate (APR) of just 12 percent." Petitioner's Exhibit No. 20, number 86, page 56. The order forms Credicorp sent to members state, "Please enter the following items to be charged to my Gold Credit Card." Petitioner's Exhibit No. 17.
While Chapter 687 does not define "credit card," and respondents showed that the member's number, not the card itself, was used to process installment sales, petitioner proved that Credicorp held itself out as a "loan broker." Section 687.14(4), Florida Statutes (1991). Credicorp also meets the
definition of a loan broker because it offers to make loans to members who make "credit purchases" of merchandise listed in the catalogue; and does in fact make loans in financing "credit purchases."
Credicorp has operated as a retail installment sales company, but without benefit of Florida or federal licensure. There was no suggestion that it was "licensed by and subject to regulation or supervision of any agency of the United States," Section 687.14(4), Florida Statutes (1991), and it affirmatively appeared that Credicorp has no Florida license as a retail installment sales company. Without one or the other, Credicorp falls within the statutory definition of a loan broker.
Because Credicorp is a loan broker, under Section 687.14(5), Florida Statutes (1991), Stevan Brown is and John Rheinfrank was a principal of a loan broker, by virtue of being and having been officers of Credicorp.
As a loan broker, Credicorp is statutorily forbidden to "[a]ssess or collect an advance fee from a borrower to provide services as a loan broker." Section 687.141(1), Florida Statutes (1991). An "advance fee" is defined in Section 687.14(1), Florida Statutes (1991) to mean "any consideration which is assessed or collected, prior to the closing of a loan, by a loan broker." Credicorp collected advance fees of $29.95 from each buyer as a condition of extending credit. "Services as a loan broker" include an unlicensed retailer's extending credit.
Material Omissions
Credicorp violated Section 687.141(2), Florida Statutes (1991) by systematically mailing large numbers of misleading solicitations which operated, in some instances, and would have operated in others as fraud or deception upon Florida residents. Credicorp's initial solicitations offer "the services of a loan broker," within the meaning of the statute, and are calculated to mislead. They appear to offer a commonly accepted, widely useful credit card.
The solicitations completely omit any mention of the quaint group of services the unwitting consumer is in fact destined to receive. There is no hint of coupons or catalogues, which might alert the solicitee that Credicorp was not really offering what is usually meant by a "Gold Card" with a "$10,000 line of credit." The solicitations say nothing of the drastic restriction limiting use of the line of credit actually available. This deceptive omission of a material fact runs afoul of Section 687.141(2), Florida Statutes (1991).
Credicorp's violations are not merely technical ones. The company should be fined $5,000 for each of the 640 deceptive solicitations which elicited payments from Florida residents, for a total of $3,200,000, on account of violations of Chapter 687, Florida Statutes. In addition, the Department should enter an order requiring that Credicorp cease and desist from all activity in violation of Chapter 687, Florida Statutes.
Each principal of a loan broker may be sanctioned for the actions of the loan broker. The Department should also order John Rheinfrank and Stevan Brown to cease and desist from all activities in violation of Chapter 687, Florida Statutes, and levy an administrative fine against each in the amount of
$250,000 for causing or allowing Credicorp to operate in violation of Chapter 687, Florida Statutes.
It is, accordingly, RECOMMENDED:
That petitioner order respondents Credicorp, John Rheinfrank and Stevan Brown to cease and desist violating Chapter 687, Florida Statutes.
That petitioner levy an administrative fine against Credicorp in the amount of three million five hundred seventy-eight thousand dollars ($3,578,000) to be paid within thirty (30) days of entry of the final order.
That petitioner levy an administrative fine against respondent John Rheinfrank in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30) days of entry of the final order.
That petitioner levy an administrative fine against respondent Stevan Brown in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30 days of entry of the final order.
DONE AND ENTERED this 4th day of October, 1993, in Tallahassee, Florida.
ROBERT T. BENTON, II
Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1993.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-911
Petitioner's proposed findings of fact Nos. 1-22, 24-38, 40, 41, 42, and 43 have been adopted, in substance, insofar as material.
With respect to petitioner's proposed findings of fact Nos. 23 and 39, extrapolation is problematic.
Respondent's proposed findings of fact Nos. 1, 2, 3, 5, 7, 8, 9, 11, 16,
24, 25, 26, and 27 have been adopted, in substance, insofar as material.
Respondent's proposed findings of fact Nos. 4 and 21 pertain to matters that are not material to petitioner's allegations.
Respondent's proposed findings of fact Nos. 6, 22 and 23 pertain to subordinate matters.
With respect to respondent's proposed finding of fact No. 10, it is clear from all the circumstances that it was Credicorp's intent to mislead recipients into believing that there was no such restriction.
With respect to respondent's proposed finding of fact No. 12, Credicorp lends money to finance merchandise it sells on credit.
With respect to respondent's proposed findings of fact Nos. 13 and 14, it is clear from all the circumstances that Credicorp used the term "Gold Card" to mislead recipients of its solicitations into believing they were being offered a credit card.
With respect to respondent's proposed finding of fact No. 15, the evidence did not show that the "Credicorp Gold Card is useful to members as a reminder of their membership."
With respect to respondent's proposed finding of fact No. 17, the word card does appear.
With respect to respondent's proposed findings of fact Nos. 18 and 19, Credicorp so held itself out.
With respect to respondent's proposed finding of fact No. 20, the sales contract comes into existence when the member mails the order and payment.
COPIES FURNISHED:
Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
Bridget L. Ryan, Esquire Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399
William E. Williams, Esquire Rex Ware, Esquire
106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
DIVISION OF FINANCE
DEPARTMENT OF BANKING AND FINANCE,
Petitioner,
vs. Administrative Proceeding
No. 2675-F-12/92 CREDICORP, INCORPORATED, a Texas DOAH No. 93-0911
Corporation, JOHN RHEINFRANK, individually and as President of Credicorp, Inc., STEVAN W. BROWN, individually and as
Vice President of Credicorp, Inc.,
Respondents.
/
FINAL ORDER AND NOTICE OF RIGHTS
This matter has come before the undersigned as Head of the Department of Banking and Finance, Division of Finance ("Department"), for the entry of a Final Order in the above referenced proceeding. On October 4, 1993, a Hearing Officer from the Division of Administrative Hearings submitted his Recommended Order in this proceeding, a copy of which is attached hereto as Exhibit "A". On or about October 19, 1993, the Respondents, Credicorp, Incorporated ("Credicorp"), John Rheinfrank and Stevan W. Brown (collectively referred to as "Respondents"), filed their Exceptions to the Recommended Order, a copy of which is attached hereto as Exhibit "B".
This matter arose when the Department filed an Administrative Complaint charging the Respondents with violations Chapters 516, 520, 687 and 817, Florida Statutes or the rules duly promulgated thereunder.
The Department timely received the Respondents' petitions for hearing. The matter was referred to the Division of Administrative Hearings for the assignment of a hearing officer to conduct a formal hearing. By Notice, a Final Hearing was held on July 23, 1993, in Tallahassee, Florida, before Hearing Officer Robert T. Benton, II. The Hearing Officer's October 4, 1993, Recommended Order recommends that the Department issue a final order finding the Respondents guilty as charged in the Administrative Complaint, directing the Respondents to cease and desist from all unlawful activities pursuant to Chapters 520 and, 687, Florida Statutes and imposing an administrative fine in the amount of Three Million Five Hundred Seventy-Eight Thousand Dollars ($3,578,000.00) against Credicorp, Inc., Two Hundred Fifty Thousand Dollars
($250,000.00) against John Rheinfrank and Two Hundred Fifty Thousand Dollars ($250,000.00) against Stevan W. Brown. On October 19, 1993, Respondents timely filed their exceptions to the Recommended Order.
RULINGS ON EXCEPTIONS FILED BY RESPONDENTS
First Exception: The Respondents take exception to the Finding of Fact Number 3 wherein the Hearing Officer describes the solicitation made by Credicorp. Respondents contend that this Finding is incomplete and fails to relate the alleged violations found by the Hearing Officer to the evidence in the record. It appears that the omission Respondents are referring to is that the Hearing Officer fails to find which, if any, of the 640 Florida members received this solicitation. In paragraph 38 of the Conclusions of Law, the Hearing Officer does implicitly find that 640 Florida residents received the deceptive solicitation from Credicorp. Having reviewed the transcript of the hearing, the exhibits and pleadings in this matter, it cannot be determined that there is no competent, substantial evidence to support the Hearing Officer's finding. It is the Hearing Officer's, not the Agency's or the Respondents' function, to evaluate the evidence in reaching ultimate findings of fact. In Heifetz v. Dept. of Business Regulations, 475 So.2d 1277, 1281 (Fla. 1st DCA 1985), the District Court of Appeal explained the respective roles of hearing officers and state agencies in deciding factual issues as follows:
The factual issues susceptible of ordinary methods of proof that are not infused with policy considerations are the prerogative of the hearing officer as the finder of fact.
McDonald v. Dept. Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977). It is the hearing officer's function to consider all the evidence presented, resolve conflicts, judge credibility of witnesses, draw permis- sible inferences from the evidence, and reach ultimate findings of fact based on competent, substantial evidence. State Beverage Department v. Ernal, Inc., 115 So.2d 566 (Fla. 3rd DCA 1959). If, as is often the case, the evidence presented supports two inconsistent findings, it is the hearing officer's role to decide the issue one way
or the other. The agency may not reject the hearing officer's finding unless there is no competent, substantial evidence from the finding could be reasonably inferred. The agency is not authorized to weigh the evidence presented, judge credibility of witnesses, or otherwise interpret the evidence to fit its desired ultimate conclusion.
Since there is competent, substantial evidence in the record with which the Hearing Officer reached his Finding of Fact, the Department concurs with it and the Respondents' First Exception is rejected.
Second Exception: The Respondents take exception to Finding of Fact Number
6 regarding the services provided to members by Credicorp. Under the Heifetz decision, it cannot be determined that there is no competent, substantial
evidence in the record to support the Hearing Officer's finding and therefore the Second Exception is rejected. Also see Son v. Department of Professional Regulation, 608, So.2d 75 (Fla. 3rd DCA 1992).
Third Exception: The Respondents take exception to the Hearing Officer's Finding of Fact Number 9 as being incomplete. Respondents assert that the Hearing Officer fails to distinguish between the statutory definition of "line of credit" contained in Section 687.0303, Florida Statutes, and "a more generic commercial meaning." However, there is no basis for the Respondents' conclusion that the Hearing Officer considered any definition of "line of credit" other than that contained in Section 687.0303, Florida Statutes. Therefore, the Respondents' Third Exception is without merit and therefore rejected.
Fourth Exception: The Respondents take exception to the Hearing Officer's rejection of their proposed Finding of Fact Number 10. Respondents suggest that it was their intent to offer members the opportunity to purchase up to Ten Thousand Dollars ($10,000.00) worth of goods from Credicorp's catalogue on a retail installment basis. The Hearing Officer, however, concluded that it was Credicorp's intent to mislead recipients into believing that no such restrictions applied to this line of credit. As previously stated, it is the Hearing Officer's and not the Agency's or Respondents' function to evaluate the evidence in reaching ultimate findings of fact. See Heifetz, supra. Since there is competent, substantial evidence in the record upon which the Hearing Officer reached this Finding of Fact, the Respondents' Fourth Exception is rejected.
Fifth Exception: The Respondents' take exception to the Hearing Officer's rejection of their proposed Findings of Fact Numbers 13 and 14. Respondents' proposed Finding of Fact Number 13 maintains that Credicorp used the term "Gold Card" in its invitations to connote a preferred or elevated level of service.
In proposed Finding of Fact Number 14 Credicorp contends that in some instances, other retailers have used the term "Gold Card" without suggesting an affiliation with Visa, MasterCard or American Express credit cards. The Hearing Officer, after evaluation of the evidence before him, found that Credicorp used the term "Gold Card" to mislead recipients of its solicitation into believing that they were being offered a credit card. The Department may not over rule a hearing officer's finding of fact when supported by competent, substantial evidence.
Having reviewed the transcript of the hearing, the exhibits and pleadings in this matter, it cannot be determined that there is no competent, substantial evidence to support the Hearing Officer's Findings and rejection of Respondents proposed Findings Numbers 13 and 14. Son, supra. Accordingly, Respondents' Fifth Exception is rejected.
Sixth Exception: The Respondents take exception to the Hearing Officer's rejection of their proposed Findings of Fact Numbers 18 and 19, which, in summary, state that Credicorp did not advise customers in obtaining or in attempting to obtain credit cards nor did it arrange or attempt to arrange for its customers a line of credit in accordance with Chapter 687, Florida Statutes. Respondents assert that the Hearing Officer's rejection of these proposed Findings is without merit because nothing in the Findings of Fact support a contrary conclusion. However, in the Findings of Fact Numbers 6 and 9 of the Recommended Order, the Hearing Officer makes his finding that Credicorp does engage in such activity. Since it is the function of the Hearing Officer to evaluate the evidence in reaching the ultimate findings of fact, the Department concurs with the Hearing officer's rejection of Respondents' proposed Findings of Fact numbers 18 and 19. See Heifetz. Therefore, Respondents' Sixth Exception is rejected.
Seventh Exception: The Respondents' take exception to the Hearing Officer's rejection of their proposed Finding of Fact Number 20. This proposed Finding details the procedure for placement and acceptance of a catalogue order with Credicorp. This proposed Finding would be used to later conclude that the catalogue orders were accepted in Texas and not in Florida. Although portions of Respondents' proposed Findings of Fact Number 20 are supported by the record, it cannot be determined that there is no competent, substantial evidence to support the Hearing Officer's rejection of this proposed Finding and ultimate Finding that the sales contract comes into existence when the member mails the order and payment. Accordingly, under Son and Heifetz, Respondents' Seventh Exception is rejected.
Eighth Exception: The Respondents take exception to the Conclusion of Law in paragraphs 22 of the Recommended Order. This paragraph concludes that the retail installment contracts between Credicorp and Florida members were entered into in Florida. Respondents take the position that this conclusion is contrary to Florida law and that the contracts were entered into in Texas. As stated previously, the Hearing Officer weighed the evidence and reach the conclusion based upon competent, substantial evidence. See Heifetz, supra. For this reason, the Department concurs with the Hearing Officer's conclusion and rejects the Respondents' Eighth Exception.
Ninth Exception: The Respondents take exception to the Conclusion of Law in paragraph 23 of the Recommended Order which continues from the conclusion in paragraph 22 regarding where the contract is formed. For the reasons articulated in the ruling on Exception 8, the Department concurs with the Hearing Officer's conclusion and rejects the Respondents' Ninth Exception.
Tenth Exception: The Respondents take exception to the Conclusions of Law in paragraphs 25, 26 and 27 of the Recommended Order which paragraphs conclude that the licensing requirements of Chapter 520, Florida Statutes, do not "unduly burden" nor "discriminate in any way against interstate commerce."
Respondents initially claim that the Hearing Officer miscited and misinterpreted cases which form the basis for his conclusion that Credicorp is subject to the registration requirements of Chapter 520 as a retail installment seller in this state, notwithstanding its lack of physical presence in this state. The Hearing Officer appropriately concluded that the actions of Respondents in this state affect the health and welfare of the citizens of this state, giving this state the power, without running afoul of the Commerce Clause, to regulate Respondents' activities with regard to retail installment contracts entered into with citizens of this state. The Breard v. City Of Alexandria 1/ and Bellas Hess 2/ decisions concur with this conclusion.
Bellas Hess proscribes "unjustifiable" local intrusion in interstate commerce. However, as proposed by Chapter 520, Florida Statutes, and concluded by the Hearing Officer, the acts of Credicorp with regard to retail installment sales form the "substantial nexus" required by the Commerce Clause in order to require Credicorp's compliance with the requirements of Chapter 520. Quill Corp. v.
North Dakota, 493 U.S. 397, 112 S. St. 1904 (1992).
Respondents then maintain that Credicorp's activities cannot be in violation of Chapter 520 because Credicorp is exempt from registration with Florida's Secretary of State's Office pursuant to Section 607.1501, Florida Statutes. Even if Credicorp is not required to register pursuant to Section 607.1501, Florida Statutes, Chapter 607 contemplated the occasion wherein certain businesses would be held to a different standard. For this reason, the
Legislature included Section 607.0301, which provides that statutes regulating certain types of businesses and corporations shall control when in conflict with Chapter 607. For all of the above reasons, the Department concurs with the conclusions in paragraphs 25, 26 and 27 of the Recommended Order and Respondents' Tenth Exception is rejected.
Eleventh Exception: The Respondents take exception to the Conclusion of Law found in paragraph 28 of the Recommended Order which imposes a fine against Credicorp for each of the 378 retail installment sales made with Florida members in violations of Section 520.32(1), Florida Statutes. In accordance with Department of Banking and Finance v. Santa Cruz, 14 FALR 4663, DOAH Case No. 91- 2462, Respondents argument is without merit. Respondents' Eleventh Exception is therefore rejected.
Twelfth Exception: The Respondents take exception to the Conclusion of Law in paragraph 30 of the Recommended Order upon the grounds that Credicorp does not offer a "line of credit" as defined by Section 687.0303, Florida Statutes.
For the reasons set forth under the Third Exception hereinabove and Heifetz, supra, their Twelfth Exception is rejected.
Thirteenth Exception: The Respondents take exception to the Hearing Officer's conclusions in paragraph 32 and 33 of the Recommended Order. Their reasons are twofold. First, they contend that the documentary evidence which expressly states that Credicorp offers a "credit card" predates the "loan broker" provisions of Chapter 687, Florida Statutes. Since Credicorp no longer uses these words in its solicitation, its financing of retail purchases does not constitute a loan under Chapter 687. Surely, if Credicorp did not receive timely payments from its Florida retail installment customers, it would come to a different conclusion.
Second, Respondents contend that the Hearing Officer was forced to "stretch" the law in order to conclude that Credicorp was a loan broker under Chapter 687. They state that "the Legislature could not have intended such an absurd result." However, from the plain language of Section 687.14(4), Florida Statutes, one cannot reasonably conclude otherwise.
After considering Respondents' form over substance arguments, the Hearing Officer correctly and astutely concludes that the actions of Credicorp constitute loan brokering under Section 687.14, Florida Statutes. Competent, substantial evidence supports this conclusion. See Son, supra. Therefore, Respondents' Thirteenth Exception is rejected.
Fourteenth Exception: The Respondents take exception to the conclusion in paragraph 35 of the Recommended Order. Respondents challenge the Hearing Officer's conclusion that Credicorp, as a loan broker, charges an "advance fee". The Department concurs with the Hearing Officer's conclusion and therefore Respondents' Fourteenth Exception is rejected.
Fifteenth Exception: Respondents take exception to the conclusion in paragraphs 36 and 37 of the Recommended Order. Their objection is rejected in part and accepted in part. The Department cannot say that the Hearing Officer's conclusion that the "misleading solicitation... would have operated..as a fraud or deception upon Florida residents" or that the solicitation was "calculated to mislead" is not based upon competent, substantial evidence. Heifetz, supra.
Additionally, with regard to the Hearing Officer's conclusion that Credicorp appears to be offering "a commonly accepted, widely useful credit card", it is
the Hearing Officer's function, not that of the Department, to evaluate the evidence in reaching ultimate findings. Heifetz, supra. Therefore, Respondents' Exception to these conclusions is rejected.
To the extent that the Hearing Officer finds that the misleading solicitations operated as a fraud or deception upon some Florida residents, this conclusion is not based upon competent, substantial evidence. Son, supra. This portion of Respondents' Exception is therefore accepted. After reviewing the transcript of the hearing, the exhibits and the pleadings in this matter, the Department cannot find any evidence to support this conclusion. Clark v.
Department of Professional Regulation, 463 So.2d 328 (Fla. 5th DCA 1985). However, the rejection of this portion of the Conclusion does not affect the ultimate conclusion that Credicorp violated Section 687.141(2), Florida Statutes since buyer reliance is not required. For the reasons stated herein, Respondents' Fifteenth Exception is accepted in part and rejected in part.
Sixteenth Exception: The Respondents take exception to paragraphs 38 and
39 of the Recommended Order upon the grounds that no proof was offered to support the conclusion that 640 Florida residents received any solicitation from Credicorp. Having reviewed the transcript of the hearing, the exhibits and pleadings in this matter, it cannot be determined that there is no competent, substantial evidence to support the Hearing Officer's conclusions. See Son, supra. It is the Hearing Officer's, not the Agency's or Respondents' function to evaluate the evidence. Heifetz. The Respondents' Sixteenth Exception is therefore rejected.
Seventeenth Exception: Respondents' excepts the Hearing Officer's entire recommended penalty. To begin, Respondents state that the Hearing Officer improperly applied the law in order to find violations of Chapter 520, Florida Statutes, by Credicorp. As stated in the ruling on the Eleventh Exception to the Recommended Order, this argument is without merit.
Respondents than assert that the proposed penalty is "grossly excessive".
This argument was also addressed in the ruling on Respondents' Eleventh Exception to the Recommended Order. For those same reasons, it is rejected here.
Next, Respondents state that the fine imposed for violations of Chapter 687, Florida Statutes, is not justified because the Department failed to prove that any of the 640 Florida members were "mislead, dissatisfied or otherwise not pleased with the services they had received from Credicorp." This portion of Exception Seventeen is addressed in the ruling on Respondents' Sixteenth Exception to the Recommended Order and, for those reasons, is rejected.
Finally, Respondents include a "catch all" objection to the penalties imposed by the Hearing Officer which states that he "abused his discretion." The Department cannot reject the penalties recommended by the Hearing Officer without changing the Findings of Fact or Conclusions of Law. Department of Professional Regulation v. Bernal, 531 So.2d 967 (Fla. 1988). For all of the above reasons, Respondents Seventeenth Exception is rejected.
Final Order
Having ruled on all the Exceptions filed by the Respondents to the Recommended Order, it is hereby ORDERED:
Except as modified herein, the Hearing Officer's Preliminary Statement, Findings of Fact and Conclusions of Law in the Recommended Order attached hereto as Exhibit "A" are hereby adopted and incorporated by reference herein as the Preliminary Statement, Findings of Fact and Conclusions of Law of this Final Order.
The Respondents Credicorp, Inc., John Rheinfrank and Stevan W. Brown shall forthwith CEASE AND DESIST from all unlawful violations of Chapters 520 and 687, Florida Statutes, and the rules duly promulgated thereunder.
The Respondents shall pay administrative fines as follows:
Respondent Credicorp, Inc. shall pay an administrative fine in the amount of Three Million Five Hundred Seventy-Eight Thousand Dollars ($3,578,000);
Respondent John Rheinfrank shall pay an administrative fine in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00); and
Respondent Stevan W. Brown shall pay an administrative fine in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00).
Each of these administrative fines shall be paid by cashier's check or money order made payable to: Regulatory Trust Fund, Department of Banking and Finance, Division of Finance. Payment shall be mailed to:
Department of Banking and Finance Division of Finance
The Capitol
Tallahassee, Florida 32399-0350
and shall be received within thirty (30) days of the date of this Final Order.
DONE and ORDERED this 14th day of January 1994, in Tallahassee, Leon County, Florida.
GERALD LEWIS as Comptroller of the State of Florida and Head of the Department of Banking and Finance
ENDNOTES 1/ 341 U.S. 622, 71 S. Ct. 920 (1951).
2/ 386 U.S. 753, 87 S. Ct. 1389 (1967).
Copies furnished to:
Robert T. Benton, II Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
Linda G. Dilworth, Director Division of Finance
202 Blount Street
Tallahassee, Florida 32399-350
Barry Gladden, Director Financial Investigations The Capitol, Suite 2103
Tallahassee, Florida 32399-0350
Bridget Ryan
Assistant General Counsel Office of Comptroller
The Capitol, Suite 1302 Tallahassee, Florida 32399-0350
NOTICE OF RIGHT TO JUDICIAL REVIEW
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW WITH THE FIRST DISTRICT COURT OF APPEAL. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing Final Order and Notice of Rights has been furnished by regular U.S. mail to William E. Williams, Esquire, and to Rex D. Ware, Esquire, Huey, Guilday and Tucker, P.A., Attorneys for Respondents, 106 East College Avenue, P.O. Box 1794, Tallahassee, Florida 32301 this 14th day of January 1994.
=================================================================
DISTRICT COURT OPINION
=================================================================
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
CREDICORP, INCORPORATED, a NOT FINAL UNTIL TIME EXPIRES TO
Texas corporation, JOHN FILE MOTION FOR REHEARING AND RHEINFRANK, individually and DISPOSITION THEREOF IF FILED
as President of Credicorp,
Inc., and STEVEN W. BROWN, CASE NO. 94-440
individually and as Vice DOAH CASE NO. 93-911 President of Credicorp, Inc.,
Appellants,
vs.
STATE OF FLORIDA, DEPARTMENT OF BANKING AND FINANCE,
Appellee.
/ Opinion filed July 17, 1995.
An appeal from an Order of the Department of Banking and Finance.
William E. Williams, Rex D. Ware, and Vikki R. Shirley of Huey, Guilday & Tucker, P.A., Tallahassee, for appellants.
Bridget L. Ryan, Assistant General Counsel, Department of Banking & Finance, Tallahassee, for appellee.
KAHN, J.
This is an appeal from a final order entered by appellee, the Department of Banking and Finance (Department), on January 14, 1994, ordering Credicorp, Inc. (Credicorp) to cease and desist certain activities under chapters 520 and 687, Florida Statutes, and imposing administrative fines totalling $4,078,000 against appellants Credicorp, John Rheinfrank, 1/ who served as its president until his departure from the company in the fall of 1992, and Steven Brown, who served as its vice-president, treasurer and secretary prior to becoming the company's president after Rheinfrank's departure. Appellants were specifically charged with violating the licensing provisions for retail installment contractors found in section 520.32, 2/ Florida Statutes, and the loan broker provisions in section 687.141, 3/ Florida Statutes. Appellants contend that (1) the licensing provisions for retail installment sellers in sections 520.30-.42 violate the Commerce Clause in the Constitution of the United States; (2) even if the licensing provisions do not violate the Commerce Clause, they do not apply to Credicorp because they do not cover retail installment contracts not
entered into in Florida; (3) because Credicorp is not a loan broker as defined in section 687.14(4), 4/ it did not violate the provisions of section 687.141 by collecting an advance fee from borrowers in exchange for its services as a loan broker; and (4) the penalty 5/ imposed is unduly harsh. We affirm in part and reverse in part the Department's final order.
Credicorp, originally incorporated under the name FAFCO in 1990, is a Texas corporation not authorized to do business in Florida. Credicorp operates a nationwide mail-order catalog business, and its only place of business is in Dallas, Texas. Credicorp has been operating in Florida since 1990, but none of its offices, employees, or independent contractors are located in Florida. Its services include providing discount coupons for retail establishments and privilege card benefits for discounts at hotels and car rental agencies. It advertises in Florida by sending solicitations to Florida residents. Certain solicitation forms placed in the record read:
TELEGRAM
Approval No.:
[account number specified]
Approval Expiration Date: [date specified] [Name and address of targeted individual]
Congratulations [targeted individual],
You have been pre-approved for a Gold Card with a $10,000 line of credit.
Mail your $29.95 annual fee by check or money order by (specified date) along with this signed notice to activate your credit immediately.
Failure to do so will result in our reevaluation of your eligibility. Make check or money order payable to Credicorp Gold Card.
Sincerely,
Robert J. Armstrong New Accounts Manager Respond Today!
Recently the solicitations have included a 60-day money back guarantee and a disclaimer in small type indicating Credicorp's lack of affiliation with a financial institution. For the relevant time period, the above solicitation constituted the only document provided to a Florida consumer before the consumer responded by sending money to Credicorp. The solicitation does not list any services that Credicorp provides and does not indicate that the "Gold Card" is actually a catalog card that can only be used to purchase merchandise from Credicorp's catalogs.
As of June 1993, approximately 1,600,000 individuals nationwide had submitted membership applications and paid the $29.95 annual fee to Credicorp. On a single day, June 24, 1992, Florida residents sent Credicorp 243 applications, each accompanied by $29.95. A small sampling of Credicorp's membership records established that Credicorp solicited advance fees from at least 640 Florida residents. From a quick review of order forms in the record, it appears that Credicorp has received over one thousand merchandise orders from Florida residents.
After the customer submits a preapproved application and pays the membership fee, Credicorp mails a "fulfillment package" to the customer. This package was the first notice to the consumer that he or she has joined a catalog shopping club. The fulfillment package includes a "Home Values and Gifts" catalog to facilitate purchases from Credicorp. The customer may then purchase merchandise by submitting a completed and signed order form, contained in the catalog, to Credicorp. According to the price list and terms of Credicorp's catalog shopping program, two prices were available to a Credicorp customer- - a cash price plus shipping and handling or a credit price with a 12 percent financing fee. A credit order requires a cash down payment. Any merchandise purchased on credit arrives with an installment coupon book for each item ordered. Upon receipt of an order form, Credicorp verifies the customer's current membership, the status of the member's account, and the availability of items ordered. After approval, Credicorp fills the order and ships the merchandise from Texas to the out-of-state customer via interstate carrier.
In July 1992, the Department advised Credicorp that it might be acting as a loan broker in violation of chapter 687, Florida Statutes. Subsequently, the Department advised Credicorp that it might also be an unlicensed retail installment seller in violation of chapter 520, Florida Statutes. Credicorp sent a letter in response, indicating its position that it does not do business in Florida and, even if it did, it does not fall within the definition of "loan broker" because it arranges credit only between its customers and itself.
On January 13, 1993, the Department filed an administrative complaint charging Credicorp with violating various provisions of chapters 516, 520, 687 and 817, Florida Statutes. Before the final hearing, the Department withdrew its allegations that Credicorp violated chapters 516 and 817. The Department alleged Credicorp was a "loan broker" under chapter 687 and was violating section 687.141 by collecting an advance fee from borrowers in exchange for its services as a loan broker and making misleading representations or omissions in connection with the offer or sale of its services. The Department also alleged that Credicorp was an unlicensed retail installment seller in violation of section 520.32(1). Credicorp timely filed a response to the administrative complaint and requested a formal hearing.
On July 23, 1993, a DOAH hearing officer convened an administrative hearing. The Department called its lead investigator as its only witness and placed in the record numerous examples of solicitations, membership fulfillment packages, and order forms. On October 4, 1993, the hearing officer issued findings of fact and conclusions of law recommending that the Department order Credicorp to cease and desist all activities in violation of chapter 687, levy an administrative fine against Credicorp in the amount of $3,578,000 and assess additional fines of $250,000 against Rheinfrank and Brown in their capacity as officers of Credicorp under chapter 687. The Department's final order essentially adopted the hearing officer's preliminary statement, findings of fact and conclusions of law except that it rejected the hearing officer's finding that Credicorp's solicitations operated as a fraud or deception upon Florida residents. Although the hearing officer did not include a specific recommendation that Credicorp cease and desist any activities in violation of chapter 520, the Department so ordered. Credicorp timely appealed.
II
Application of Licensing Provisions to Interstate Commerce
The Department adopted the hearing officer's conclusion that "Florida's requirement that all retail installment sellers 6/ doing business in Florida be licensed does not unduly burden interstate commerce and does not discriminate in any way against interstate commerce." As the reviewing court, however, we must reach our own determination concerning the constitutional validity of the licensing requirement as applied to a corporation with no physical presence in Florida.
The Commerce Clause of the United States Constitution prohibits a state from imposing a use tax upon a nonresident business which solicits orders from the state's residents, but maintains no contact with the state except by mail or interstate carrier. Ouill Corp. v. North Dakota, U.S. , 112 S. Ct. 1904, 119 L. Ed. 2d 91 (1992); National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 754, 758, 87 S. Ct. 1389, 18 L. Ed. 2d 505 (1967)("[this] Court has
never held that a State may impose the duty of use tax collection and payment upon a seller whose only connection with the customers in the State is by common carrier or the United States mail"). Florida courts have also applied this prohibition to the imposition of a license tax. Olan Mills v. City of Tallahassee, 100 So.2d 164 (Fla. 1958), cert. denied, 359 U.S. 924, 79 S. Ct.
604, 3 L. Ed. 2d 627 (1959)(where corporation was engaged in interstate commerce exclusively in taking photographs beyond the borders of the state, the city ordinance imposing license taxes on all photographers within the city was invalid as to corporation as attempt to place a direct tax on privilege of engaging in interstate commerce); Armstrong v. City of Tampa, 118 So.2d 195 (Fla. 1960)(flat-sum license or privilege tax applied to Avon impeded flow of interstate commerce and therefore violated Commerce Clause because it was imposed on solicitors as a condition precedent to engaging in interstate commerce and was subject to being duplicated by every community into which Avon might enter); City of Tampa v. Carolina Freight Carriers Corp., 529 So.2d 324 (Fla. 2d DCA 1988)(occupational license tax, as applied to Carolina Freight's facility, violates Commerce Clause). We are constrained by these cases and find the licensing provisions in chapter 520 may not be constitutionally applied to Credicorp because they constitute a flat- sum licensing tax which, according to the above cases, violates the Commerce Clause. If we were writing on a clean slate, we would hold otherwise. Although the licensing provision in section 520.32(2) requires each retail installment seller to pay a "non-refundable application fee not exceeding $200" and section 520.32(3) further requires payment of a "renewal fee not exceeding $200," the licensing provision is, in our view, not merely a tax. It is first and foremost state regulation of a matter of local concern through the police power.
The instant case is similar to California v. Fairfax Family Fund, Inc., 347 Cal. Rptr. 812 (Cal. Dist. Ct. App. 1964), aDeal dismissed, 382 U.S. 1, 86 S. Ct. 34, 15 L. Ed. 2d 6 (1965). In that case the court held that a Kentucky corporation engaged in the business of making small loans by mail to residents of California and 31 other states, which had loans of $3,500,000 outstanding to California residents and was increasing the amount of loans to them at a rate of about $90,000 per week, was doing business in California and, as a result, California had the power to license and regulate this business the same as local concerns. The defendant solicited its business by mailing printed material from Kentucky to persons in California. The borrower returned by mail a loan application and promissory note, and the defendant secured a California independent contractor to conduct a local credit investigation. After approval,
the defendant mailed a check to the borrower, who made all payments by mail to the defendant's offices in Kentucky. The defendant maintained no offices in California, nor did any of its corporate officers reside in that state. Despite the amount of loans made to California residents, the defendant never secured a small loan license as required by California Financial Code section 24200 which provided: "No person shall engage in the business of making or negotiating, for himself, or another, loans of money, credit, goods, or things in action, in the amount or of the value of three hundred dollars ($300) or less, without first obtaining a license from the commissioner."
The California appeals court held that the Commerce Clause has not withdrawn from the state the power to regulate or control matters of local concern so long as Congress has not acted in the area, 7/ the regulation is nondiscriminatory, and the regulation does not impose a burden on interstate commerce. 47 Cal. Rptr. at 813. Our review of the case law suggests the correctness of that proposition. See California v. Thomson, 313 U.S. 109, 61 S. Ct. 930, 85 L. Ed. 1219 (1941)(Court held that statute requiring every transportation agent to procure license from State Railroad Commission pay license fee, and file bond does not violate Commerce Clause in absence of pertinent regulation by Congress and where regulation does not unnecessarily obstruct interstate commerce, affects matters of local concern which are in other respects within state regulatory power, and where regulation does not infringe on national interest in maintaining free flow of commerce and preserving uniformity in regulation of commerce); Robertson v. California, 328
U.S. 440, 447, 66 S. Ct. 1160, 90 L. Ed. 1366 (19A6)("We are far beyond the time when, if ever, the word 'license' per se was a condemnation of state regulation of interstate business done within the state's borders . . . . For the commerce clause is not a guarantee of the right to import into the state whatever one may please, absent a prohibition by Congress, regardless of the effect of the importation upon the local community."). In areas affecting the health, life and safety of their citizens, the courts have allowed reasonable and nondiscriminatory regulation. Maine v. Taylor, 477 U.S. 131, 106 S. Ct. 2440,
91 L. Ed. 2d 110 (1986)(ban on imported baitfish did not violate Commerce Clause in that it served legitimate local purpose, i.e., protecting native fisheries from parasitic infection and adulteration by non-native species, that could not be served as well by available nondiscriminatory means); Huron Portland Cement Co. v. City of Detroit, 362 U.S. 440, 80 S. Ct. 930, 85 L. Ed. 1219 (1960); Operation Badlaw. Inc. v. Licking County Gen. Health Dist. Bd. of Health, 866 F. Supp. 1059 (S.D. Ohio 1992), aff'd, 991 F.2d 796 (6th Cir. 1993); Mercer v. Hemminas, 170 So.2d 33 (Fla. 1964)(statute requiring out-of-state CPAs to obtain certificate to practice in Florida did not violate Commerce Clause because of state's legitimate interest in maintaining standards of that profession).
Specifically, in Taylor, the Court held:
The Commerce Clause significantly limits the ability of States and localities to regulate or otherwise burden the flow of interstate commerce, but it does not elevate free trade above all other values. As long as a State does not needlessly obstruct interstate trade or attempt to "place itself in a position of economic isolation," it retains broad regulatory authority to protect the health and safety of its citizens and the integrity of its natural resources.
477 U.S. at 151 (citation omitted)
The Supreme Court has recognized:
[T]here are matters of local concern, the regulation of which unavoidably involves some regulation of interstate commerce, but which because of their local character and their number and diversity may never be adequately dealt with by Congress. Because of their local character, also, there is wide scope for local regulation without impairing the uniformity of control of the national commerce in matters of national concern and without materially obstructing the free flow of commerce which were the principal objects sought to be secured by the Commerce Clause. Notwithstanding the Commerce Clause, such regulation in the absence of Congressional action has, for the most part, been left to the states by the decisions of this Court.
Thompson, 313 U.S. at 113. The Court in Thompson went on to note:
[F]raudulent or unconscionable conduct of those so engaged which is injurious to their patrons, is peculiarly a subject of local concern and the appropriate subject of local regulation. In every practical sense regulation of such conduct is beyond the effective reach of Congressional action. Unless some measure of local control is permissible, it must go largely unregulated.
313 U.S. at 114. Justice Scalia, concurring in the judgment in Ouill Corp., wrote, "Even before Bellas Hess, we had held, correctly, I think, that state regulatory jurisdiction could be asserted on the basis of contacts with the State through the United States mail. See Travelers Health Assn. v. Virginia ex rel. State Corp. Comm'n, 339 U.S. 643, 646-650, 70 S. Ct. 927, 928-931, 94 L. Ed. 2d 1154 (1950)(Blue Sky laws)." 112 S. Ct. at 1904.
In Fairfax Family Fund, the California appeals court noted that the small loan law, which serves primarily to protect citizens of California from fraudulent and unconscionable conduct of those in the lending business, constitutes a matter of local concern for the purpose of determining whether it violates the Commerce Clause insofar as a lender engaged in interstate commerce is concerned. 47 Cal. Rptr. at 813. The Commerce Clause does not preclude a state from giving needful protection to its citizens in the course of their contacts with businesses conducted by outsiders when the legislation is general in its scope, is not aimed at interstate or foreign commerce, and merely involves burdens incident to effective administration. 47 Cal. Rptr. at 815.
The court noted that no question of discrimination existed because the statute applied to both interstate and intrastate lending agencies. The court explained that the degree of regulation is not disproportionate to the evils that exist if the lenders are left to their own devices without regulation by the state. Id. The licensing procedure imposes charges or expenses no larger in amount than are reasonably necessary to defray the administrative costs involved and could not, in any event, qualify as discriminatory or imposing undue restrictions on interstate commerce. Id. To deny the state the power to license and regulate this business as it does for local concerns engaging in the same business would, in effect, grant an immunity to which it is not entitled under the circumstances. Id. The court noted that "[a]s a practical matter, it would be next to impossible for the state to regulate the activities of this business without the license requirement." Id. Finally, the court observed that when the
burdens imposed by local legislation become too great, Congress may legislate to secure uniformity or to protect the national interest as this is a legislative, not a judicial, function. Id.
The instant case is analogous to the above regulatory cases. The licensing provision in section 520.32 involves a local concern that the state has the power to regulate, that has not been regulated by Congress, and that does not discriminate against, or in any respect unnecessarily obstruct, interstate commerce. Moreover, the provision is designed to safeguard the people of Florida from deceitful practices and conduct such as that undertaken by Credicorp.
In our view, the Florida Legislature envisioned the licensing of retail installment sellers such as Credicorp. Section 520.36, entitled "Mail order and telephone sales," indicates the legislative intent to include within the licensing provisions retail installment contracts negotiated and entered into by mail or telephone. 8/ We are nonetheless constrained to find that the licensing provision, with its flat tax rate, falls within controlling precedent and is therefore unconstitutional. Penalties assessed for a violation of chapter 520 must be set aside as must the finding of violation itself. In addition, we certify the following as a question of great public importance:
MAY FLORIDA IMPOSE A LICENSING REQUIREMENT AND ANNUAL FEE UPON A RETAIL INSTALLMENT SELLER THAT ACTIVELY SOLICITS AND SELLS TO FLORIDA RESIDENTS, BUT REACHES THIS STATE ONLY BY UNITED STATES MAIL AND COMMON CARRIER?
III
Retail Installment Seller
Because we have elected to certify this issue as a question of great public importance, we reach Credicorp's additional contention that it may not be regulated under chapter 520 because it does not enter retail installment contracts in Florida.
The licensing requirement of section 520.32(1) is applied to "a retail seller engaging in retail installment transactions." A retail installment transaction means "a contract to sell or furnish or the sale of or the furnishing of goods or services by a retail seller to a retail buyer pursuant to a retail installment contract . ." s 520.31(11), Fla. Stat. A "'retail installment contract' or 'contract' means an instrument or instruments reflecting one or more retail installment transactions entered into in this state pursuant to which goods or services may be paid for in installments." s 520.31(10), Fla. Stat. Credicorp argues that under section 520.31(10), a contract must be entered into in Florida before the state can require a license. In Credicorp's view, orders by Florida consumers are offers that Credicorp must accept, in Texas, before a contract is formed. Credicorp thus denies that any of its contracts are entered into in Florida. The Department obviously takes a contrary view, arguing that a contract of sale developed when the Florida consumer accepted Credicorp's offer to sell, as described in the terms, conditions, and prices in the Credicorp catalog, by submitting the completed and signed order form.
The hearing officer considered these arguments and found "[a] contract of sale can be formed by acceptance of an offer to sell as well as by acceptance of an offer to buy. Peters v. E.O. Painter Fertilizer Co., 73 Fla. 1001, 75 So.
749 (1917)." Recommended Order, at 12. Significantly, however, he also found that "[o]rder forms filled out in Florida by Florida residents are surely among the 'instruments reflecting one or more retail installment transactions' to which Section 520.31(9), [sic] Florida Statutes (1991) refers." Id. The latter observation is astute and correct. The statutory scheme in question does not merely assume a meaning for "contract" or "retail installment contract." Rather, section 520.31(10) provides a specific definition. That definition of contract as "an instrument or instruments reflecting one or more retail installment transactions entered into in this state" may not strictly accord with commercial usage of the term. Nonetheless, "[w]here the legislature has used particular words to define a term, the courts do not have the authority to redefine it." Baker v. State, 636 So.2d 1342, 1343-1344 (Fla. 1994); see also Deehl v. Knox,
414 So.2d 1089 (Fla. 3d DCA 1982)(statutes should be construed to reflect the common law, unless the legislature clearly indicates otherwise). Therefore, the Department, as the agency responsible for compliance with the statute, did not abuse its discretion in finding that Credicorp entered into "retail installment contracts" in this state.
III
The Loan Broker Act A
We affirm the Department's ruling that appellants violated provisions of sections 687.141(1) and (3). Although appellants contend that Credicorp is not a loan broker as defined in section 687.14(4), 9/ our review of the record and the statute leads to a contrary conclusion. Primarily, appellants contend that Credicorp fits the exception in the loan broker act for any "retail installment sales company . . . licensed by and subject to regulation or supervision of any agency of the United States or this state and... acting within the scope of the license." s 687.14(4), Fla. Stat. They urge that because the federal government does not license retail installment companies and because Florida cannot require Credicorp to be licensed in Florida without offending the Commerce Clause, Credicorp falls within the exception for retail installment companies. We disagree. Even if the state cannot require Credicorp to be licensed in Florida, Credicorp may not shelter itself under the definition in section 687.14(4), which excepts only retail installment sales companies licensed by any agency of the United States or Florida. Interstate concerns such as Credicorp that decide to pursue business in Florida have the choice of either voluntarily submitting to licensure, and thereby falling within the statutory exception, or complying with Florida's regulation that prohibits certain loan brokering acts. Credicorp chose not to voluntarily submit to licensure; therefore, it was required to play by the rules found in chapter 687. The loan broker provisions, sections 687.14- 687.148, viewed in light of the cases discussed in section II, supra, constitute a permissible exercise of Florida's police power.
We do not view Florida's regulatory scheme as the type of overtly protectionist legislation that has been rightly condemned under the Commerce Clause. An example of such may be found in Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 100 S. Ct. 2009, 64 L. Ed. 2d 702 (1980). That case presents a classic example of what the Court concluded to be "parochial legislation" in the sense that it "overtly prevents foreign enterprises from competing in local markets." 100 S. Ct. at 2009. The statute in question in Lewis, section 659.141(1), Florida Statutes, prohibited an out-of-state bank holding company from owning or controlling a Florida business that sells investment advisory services to any customer. This statute was apparently passed at the prompting
of the Florida Bankers Association and certain individual banks, once they became aware of the prospect of Bankers Trust (BTIM) opening an investment advisory service in Palm Beach County. Under the terms of the statute, Bankers Trust, which principally conducted its business outside Florida, could not acquire, own, or control, directly or indirectly, any Florida bank or trust company where the business of banking or trust business or functions are conducted, or from which such business furnishes investment advisory services. According to the complaint filed in Lewis, that particular statute, when read in conjunction with section 660.10, Florida Statutes, prohibiting any corporation, other than a state chartered bank and trust company or a national banking association located in Florida from performing certain trust or fiduciary functions, prohibited Bankers Trust from establishing a subsidiary trust company having a national bank charter or a Florida state charter that would engage exclusively in one or more of the functions regulated by section 660.10, Florida Statutes. Thus, the subsidiary, BT Investment Managers, and its prospective parent, Bankers Trust, were completely locked out of the market in Florida. The record in the case also showed that, but for the offending Florida statute, the Federal Reserve Board would have permitted Bankers Trust to engage in the proposed business.
In the present case, retail installment companies that submit to Florida licensure are not subject to the loan broker provisions. Nonetheless, it would require a great stretch to conclude that the statute acts as a barrier specifically to out-of-state firms, or that in-state retail installment sellers have a significant competitive advantage that may not be overcome by interstate businesses. In Lewis, the court rightfully concluded that the Florida scheme resulted in "outright prohibition of entry, rather than some intermediate form of regulation (as) the only effective method of protecting against the presumed evils . . . ." 100 S. Ct. at 2019. The statute presently under review regulates, rather than prohibits, loan brokering, and Credicorp raises no argument that it is unable to meet one of the exceptions of section 687.14, only that it may not constitutionally be required to meet one of the exceptions.
Our research has located, and we now distinguish, other cases in which the state legislation at issue had a clear protectionist motivation. E.g., National Meat Association v. Deukmejian, 743 F. 2d 656, 657 (9th Cir. 1984)("the purpose of the law was to promote the California beef industry"); Miller v. Publicker Industries, Inc., 457 So.2d 1374 (Fla. 1984)(tax preference afforded to domestic gasohol had the practical effect of putting an importer of gasohol out of business as far as the Florida market was concerned); Delta Airlines Inc. v.
Department of Revenue, 455 So.2d 317 (Fla. 1984)(tax credit for Florida based airlines discriminates against interstate commerce because the corporate tax credit provides a direct commercial advantage to Florida based common carriers over non-Florida based carriers).
We are not persuaded that a different result is required by Hughes v.
Oklahoma, 441 U.S. 322, 99 S. Ct. 1727, 60 L. Ed. 2d 250 (1979), a case relied upon heavily by the dissenting, opinion, but not cited at all by Credicorp in any of its briefs. In Hughes, a commercial minnow dealer challenged an Oklahoma statute that prohibited transporting or shipping outside the state of Oklahoma for sale minnows seined or procured from waters within Oklahoma. Hughes adopted the view that had been previously put forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174 (1970):
Where the statute regulates even handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits . . If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities."
441 U.S. at 331. The statute involved in Hughes went far beyond mere discrimination against interstate commerce; rather, it "overtly block[ed] the flow of interstate commerce at [the] State's borders." 441 U.S. at 337, quoting, Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S. Ct. 2531, 57 L. Ed. 2d 475 (1978). In an effort to protect its natural resources, Oklahoma chose the method that most overtly discriminated against interstate commerce. Condemning this "most discriminatory means," the Supreme Court noted the existence of "nondiscriminatory alternatives" adequate to fulfill Oklahoma's legitimate local purpose. 441 U.S. at 338. By using the plural term "alternatives," it appears the Supreme Court will allow a state some discretion to fulfill a legitimate local purpose where it is demonstrated that the state has not elected to utilize the most discriminatory means, which is overt blockage of the flow of interstate commerce.
Under our holding in this case, interstate firms may either voluntarily comply with the Florida state licensing provisions or may comply with the substantive regulatory provisions. This case is, thus, different from those cases in which the out-of-state company found itself, as the result of protectionist legislation, unable, by any means, to obtain the same treatment afforded to domestic companies.
B
Credicorp next argues that it does not fall within the definition of a "loan broker" contained in section 687.14(4). A "loan broker" is:
fly person, . . . who: (a) . . . arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit; (b) . . . assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit, or related guarantee, enhancement, or collateral of any kind or
nature; (c) acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or (d) holds himself out as a loan broker.
s 687.14(4), Fla. Stat. The Department did not show that Credicorp arranges loans of money. We must thus determine whether Credicorp qualifies as a loan broker under any of the remaining sections of the statutory definition. In particular, a loan broker also includes any person who arranges or attempts to arrange a line of credit or a credit card, or who holds himself out as a loan broker.
Credicorp denies any involvement in lines of credit, as that term is defined in section 687.0303. 10/ Appellants contend that the statutory definition of line of credit does not include the commercial definition of the phrase, which actually describes what Credicorp does: the extension of credit by a retailer for use by the consumer in purchasing that retailer's goods. We
do not read the definition so narrowly, nor do we believe such a construction fits the loan broker provisions when read in pari materia. As previously noted, the statute excepts from its provisions licensed retail installment sales companies which, like Credicorp, extend only credit for sale of their own merchandise. If such sellers were not otherwise under the regulatory ambit, no need would exist for an exception. In our estimation, Credicorp's installment sales practices are the functional equivalent of advancing money to a debtor.
Moreover, we are convinced the Department did not abuse its discretion by finding that Credicorp held itself out as a loan broker by offering a line of credit and a credit card.
The solicitation sent to Florida consumers proclaimed, "You have been pre- approved for a Gold Card with a $10,000 line of credit." The term "credit card" is not defined in chapter 687. Black's Law Dictionarv, however, defines "credit card" as:
Any card, plate or other like credit device existing for the purpose of obtaining money, property, labor or services on credit. The term does not include a note, check, draft, money order or other like negotiable instrument.
Black's Law Dictionary 367 (6th ed. 1990). Credicorp's Gold Card falls within that definition because it exists for the purpose of obtaining property, i.e., merchandise from Credicorp's catalog on credit. Credicorp itself refers to the Gold Card as a credit card in its Members Only Finance Guide: "All credit card purchases carry a finance charge on the amount financed at the Annual Percentage rate of just 12 percent." In addition, the order forms Credicorp sends to members includes the following language: "Please enter the following items to be charged to my Gold Credit Card." The Credicorp Rules and Regulations pamphlet also makes repeated reference to use of the Gold Card to purchase merchandise.
The initial solicitation portrays Credicorp as a loan broker by stating without qualification that the targeted consumer has been pre-approved for a "Gold Card with a $10,000 line of credit." Nothing in this mailing informs the consumer that this line of credit has any restrictions or is not really a line of credit as defined in section 687.0303, Florida Statutes. Similarly, in its solicitations, Credicorp fails to mention that the Gold Card is actually a catalog card and cannot be used to purchase services or merchandise from other retailers. We reject Credicorp's argument that it is protected because the line of credit and credit card offers were in truth neither.
IV
Finally, the award of penalties was within the permissible range as found in section 687.143 and is supported by competent substantial evidence. The Department therefore acted within its discretion and this court may not overturn the penalty. See Florida Real Estate Comm'n v. Webb, 367 So.2d 201 (Fla. 1978); Arpayoglou v. Department of Prof. Reg., 603 So.2d 8 (Fla. 1st DCA 1992).
AFFIRMED in part; REVERSED in part; question certified.
BARFIELD, J., CONCURS; ALLEN, J., CONCURS IN PART & DISSENTS IN PART W/WRITTEN OPINION.
ALLEN, J., concurring in part and dissenting in part.
Because there is no substantial nexus for Commerce Clause purposes under the circumstances presented here, I agree with the majority that the finding and penalty with respect to the section 520.32(1), Florida Statutes, license tax must be set aside. I respectfully disagree, however, with the majority's conclusion that the loan broker statutes may be applied to Credicorp without offending the Commerce Clause.
The Commerce Clause grants the congress power "[t]o regulate Commerce . . . among the several States." Although the provision speaks in terms of a power granted to the congress, it has been recognized that it also limits the power of the states to erect barriers to interstate trade. See,e.g., Lewis v. BT Inv.
Managers Inc., 447 U.S. 27, 35, 100 S. Ct. 2009, 64 L. Ed. 2d 702 (1980); Hughes
v. Oklahoma, 441 U.S. 322, 326, 99 S. Ct. 1727, 60 L. Ed. 2d 250 (1979);
Philadelphia v. New Jersey, 437 U.S. 617, 623, 98 S. Ct. 2531, 57 L. Ed. 2d 475 (1978). This limitation, however, is not absolute. In the absence of conflicting federal legislation, the states may exercise their general police powers to regulate matters of "legitimate local concern," even though interstate commerce may be affected. See, e.g., Lewis, 447 U.S. at 36; Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 440, 98 S. Ct. 787, 54 L. Ed. 2d 664
(1978). Yet, notwithstanding the importance of the state interest involved, "it may not be accomplished by discriminating against articles of commerce coming from outside the State unless there is some reason, apart from their origin, to treat them differently." Lewis, 447 U.S. at 36, quoting Philadelphia v. New Jersey, 437 U.S. at 626-627; see also Hughes, 441 U.S. at 336; in v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 353, 97 S. Ct. 2434, 53 L. Ed. 2d
383; Pike v. Bruce Church, Inc. 397 U.S. 137, 142, 90 S. Ct. 844, 25 L. Ed. 2d
174 (1970). Accordingly, a virtually her rule of invalidity has been applied where outright protectionism is involved. See, e.g., Lewis, 447 U.S. at 36; Philadelphia v. New Jersey, 437 U.S. at 624. But the prohibition against discrimination is not limited to obviously protectionist legislation. Indeed, discrimination against interstate commerce is impermissible even though the discrimination is not apparent from a mere reading of the legislation, and even though the legislation may not have been enacted for purposes of economic protection. See Hunt, 432 U.S. at 352-353. It is enough that the legislation merely discriminates against interstate commerce "in practical effect." Hughes, 441 U.S. at 336.
A three-part test has been applied to determine whether a state legislative enactment impermissibly discriminates against interstate commerce. Under that test, we must inquire: (1) whether the challenged statute discriminates against interstate commerce, either on its face or in practical effect; (2) whether the statute serves a legitimate state purpose; and, if so, (3) whether alternative means could promote this purpose as well without discriminating against interstate commerce. See Hughes, 441 U.S. at 336; Pike 397 U.S. at 142. Even assuming that there is a legitimate state purpose for including retail installment sellers within the coverage of Florida's loan broker statutes, an analysis under the first and third parts of the foregoing test reveals that the statutes may not be applied to out-of-state retail installment sellers such as Credicorp to the exclusion of licensed in-state retail installment sellers.
As construed by the majority, the loan broker statutes treat out-of-state retail installment sellers not subject to the section 520.32(1) license tax differently from local retail installment sellers who are subject to the 520.32(1) tax. Out-of-state retail installment sellers such as Credicorp are subject to the statutes, but in-state licensed retail installment sellers are exempt. See s 687.14(4), Fla. Stat. This unequal application results in harmful discrimination against out-of-state businesses such as Credicorp because it forces them to make a choice: they must either pay the unconstitutional 520.32(1) license tax, or, pursuant to the prohibition of section 687.141(1), Florida Statutes, they must refrain from a practice which is permitted for local, licensed retail installment sellers, the charging of an advance fee for the extension of credit. See s 687.141(1), Fla. Stat.
In light of the discriminatory effect of the loan broker statutes, a further inquiry must be made under the test set forth above: whether alternative means could promote the state regulatory purpose as well without discriminating against interstate commerce. The answer seems fairly obvious. The discriminatory effect could easily be removed by making the loan broker statutes applicable to all retail installment sellers. Indeed, if the legislature has determined that a legitimate state purpose is served by making the loan broker statutes applicable to some retail installment sellers, I see no valid reason for failing to make them applicable to all retail installment sellers, and none has been suggested by the appellee.
Because the loan broker statutes, as construed by the majority, discriminate against interstate commerce, and because this discrimination could easily be eliminated, the statutes violate the Commerce Clause to the extent that they are applied to unlicensed out-of-state retail installment sellers such as Credicorp. Accordingly, I would hold that the loan broker statutes may not be applied to such businesses.
The majority does not suggest that the loan broker statutes are being applied equally to all retail installment sellers, and the majority acknowledges that out-of-state businesses such as Credicorp must make the choice described above. But the majority suggests that such treatment of out-of-state businesses is acceptable for three reasons.
First, the majority says that the loan broker statutes do not violate the Commerce Clause because they do not amount to "overtly protectionist legislation." I agree that the loan broker statutes are not overtly protectionist legislation such as the legislation at issue in the cases cited in the majority opinion. But, under the test enunciated in cases such as Hughes v. Oklahoma and Pike v. Bruce Church, that is not the end of the inquiry. As
explained above, even legislation that is not overtly protectionist violates the Commerce Clause if it has the effect of unnecessarily discriminating against interstate commerce.
Second, the majority says that the loan broker statutes are permissible because they regulate, rather than prohibit, loan brokering. But I know of no exclusion from Commerce Clause scrutiny which must or should be accorded to legislation simply because it fails to absolutely prohibit an economic activity. Indeed, there are numerous examples of state statutes held to be violative of the Commerce Clause even though they did not have the effect of prohibiting economic activity. See,e.g., Hunt, 437 U.S. at 333; Pike, 397 U.S. at 137.
Finally, the majority says that the loan broker statutes meet constitutional scrutiny because Credicorp could pay the section 520.32(1) license tax and be excepted from the loan broker statutes, thereby overcoming any significant competitive advantage that in- state retail installment sellers might have as a result of the loan broker statutes. I know of no other authority for the proposition that states may discriminate against interstate commerce through regulatory legislation so long as the burden of that discrimination may be overcome through payments by affected out-of-state businesses into the state's treasury. I doubt that such authority existed before today. And the majority's holding in this regard seems particularly enigmatic in light of the fact that the suggested payment into the state treasury would be for a license tax which, according to the same majority, may not lawfully be assessed against Credicorp because of the prohibition of - - the Commerce Clause.
I would reverse the order in its entirety.
ENDNOTES
1/ Mr. Rheinfrank died on October 25, 1993.
2/ Section 520.32, Florida Statutes, provides in material part:
(1) A person may not engage in or transact the business of a retail seller engaging in retail installment transactions as defined in this part or operate a branch of such business without a license, except that a license is not required for a retail seller whose retail installment transactions are limited to the honoring of credit cards issued by dealers in oil and petroleum products licensed to do business in this state.
3/ Section 687.141 provides: No loan broker shall:
Assess or collect an advance fee from a borrower to provide services as a loan broker.
Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker, notwithstanding the absence of reliance by the buyer.
Make or use any false or deceptive representation in its business dealings or to the department or conceal a material fact from the department.
4/ Section 687.14(4) defines "loan broker" as:
ny person, except any bank or savings and loan association, trust company, building and loan association, credit union, consumer finance company, retail installment sales company, securities broker- dealer, real estate broker or salesperson, attorney, federal Housing Administration approved lender, credit card company, installment loan licensee, mortgage broker or lender, or insurance company, provided that the person excepted is licensed by and subject to regulation or supervision of any agency of the United States or this state and is acting within the scope of the license; ... who:
For or in expectation of consideration arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit;
For or in expectation of consideration assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit or related guarantee, enhancement, or collateral of any kind or nature.
Acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or
Holds himself out as a loan broker.
5/ Penalties were imposed pursuant to section 687.143(3), Florida Statutes (1991), which provides:
The department may impose and collect an administrative fine against any person found to have violated any provision of this act, any rule or order promulgated by the department, or any written agreement entered into with the department in any amount not to exceed $5,000 for each violation. All fines collected hereunder shall be deposited in the Division of Finance Regulatory Trust Fund.
6/ Credicorp agrees that it is a retail installment seller.
7/ The parties in the present case have advised the court that Congress has not acted to regulate or license retail installment sellers.
8/ Section 520.36 provides:
Retail installment contracts negotiated and entered into by mail or telephone without personal solicitation by salesmen or other representatives of the seller, when a catalog of the seller or other printed solicitation of business which is distributed and made available generally to the public clearly sets forth the cash price and other terms of sales to be made through such medium, may be made as provided in this section.
9/ Supra, note 4.
10/ Section 687.0303 provides:
The term "line of credit," whenever used in this chapter, means an arrangement under which one or more loans or advances of money may be made available to a debtor in one transaction or a series of related transactions.
The Legislature hereby declares that, as a matter of law, "line of credit," as such term is defined in this section, is deemed to have been included in and governed by the provisions of this chapter as it existed prior to, on and subsequent to July 1, 1979.
=================================================================
DISTRICT COURT OPINION
=================================================================
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
CREDICORP, INCORPORATED, a CASE NO. 94-440
Texas corporation, JOHN DOAH CASE NO. 93-911 RHEINFRANK, individually and
as President of Credicorp, Inc., and STEVEN W. BROWN,
individually and as Vice President of Credicorp, Inc.,
Appellants,
v.
STATE OF FLORIDA, DEPARTMENT OF BANKING AND FINANCE,
Appellee.
/ Opinion filed September 13, 1995.
An appeal from an Order of the Department of Banking and Finance.
William E. Williams, Rex D. Ware, and Vikki R. Shirley of Huey, Guilday & Tucker, P.A., Tallahassee, for appellants.
Bridget L. Ryan, Assistant General Counsel, Department of Banking & Finance, Tallahassee, for appellee.
ON MOTION FOR CERTIFICATION
KAHN, J.
We grant in part appellant's motion for certification and certify the following as a second question of great public importance passed upon by this decision:
MAY FLORIDA CONSTITUTIONALLY APPLY THE LOAN BROKER ACT, SECTION 687.14- 687.148, FLORIDA STATUTES, TO AN OUT-OF-STATE RETAIL INSTALLMENT SELLER WHICH, UNDER THE COMMERCE CLAUSE, MAY NOT BE COMPELLED TO BE LICENSED IN FLORIDA AS A RETAIL INSTALLMENT SALES COMPANY UNDER SECTION 520.32, FLORIDA STATUTES?
BARFIELD and ALLEN, JJ., CONCUR.
| Issue Date | Proceedings |
|---|---|
| Sep. 14, 1995 | Opinion filed. |
| Jul. 18, 1995 | First DCA Opinion filed. |
| Jan. 14, 1994 | Final Order and Notice of Rights filed. |
| Oct. 04, 1993 | Recommended Order sent out. CASE CLOSED. Hearing held July 23, 1993. |
| Aug. 16, 1993 | Respondents' Proposed Recommended Order filed. |
| Aug. 16, 1993 | (Petitioner's) Proposed Recommended Order filed. |
| Aug. 04, 1993 | Transcript filed. |
| Jul. 29, 1993 | (Petitioner) Response to Respondent`s Motion for Official Recognition filed. |
| Jul. 23, 1993 | CASE STATUS: Hearing Held. |
| Jul. 23, 1993 | (Petitioner) Notice of Appearance filed. |
| Jul. 22, 1993 | Respondents Motion for Official Recognition; Copy of House of Representatives, Committee on Commerce final Bill Analysis - CS/HB837 91-87 Laws of Florida filed. |
| Jul. 21, 1993 | (Respondent) Notice of Filing Supplemental Affidavit; Affidavit of Richard P. Glashan filed. |
| Jul. 20, 1993 | (Petitioner) Notice of Telephonic Deposition; Motion to Take Deposition by Telephone filed. |
| Jul. 16, 1993 | Order sent out. (Response to motions) |
| Jul. 15, 1993 | (Respondents) Response to Motion to Compel and Second Motion for Attorney`s Fees, Costs and Sanctions; Affidavit of Steven W. Brown; Affidavit of Robert L. Callaway; Notice of Appearance on Behalf of John Rheinfrank filed. |
| Jul. 14, 1993 | Notice of Hearing filed. (From Bridget L. Ryan) |
| Jul. 12, 1993 | (Petitioner) Second Motion for Attorney's Fees, Costs and Sanctions filed. |
| Jul. 12, 1993 | (Respondents) Response to Second Request for Admissions filed. |
| Jun. 29, 1993 | Order sent out. (Rulings on motions) |
| Jun. 29, 1993 | (Respondents) Notice of Taking Deposition filed. |
| Jun. 24, 1993 | (Petitioner) Motion to Correct Style of Case; Motion to Compel Answers to Interrogatories w/Exhibit-A filed. |
| Jun. 22, 1993 | (2) Notice of Taking Deposition filed. (From Bridget L. Ryan) |
| Jun. 21, 1993 | Steven W. Brown's Notice of Serving Answers to Department's Interrogatories; Credicorp, Inc.'s Notice of Serving Answers to Department's Interrogatories filed. |
| Jun. 18, 1993 | (Respondents) Amended Response to Request for Production filed. |
| Jun. 17, 1993 | (Petitioner) Motion for Attorney's Fees, Costs and Sanctions w/Exhibits filed. |
| Jun. 14, 1993 | Response to Motion to Strike Amended Notice of Appearance; Request for Clarification or in the Alternative Motion for Protective Order filed. |
| Jun. 09, 1993 | Motion to Strike Amended Notice of Appearance filed. |
| Jun. 01, 1993 | Order sent out. ( |
| May 26, 1993 | (Petitioner) Motion to Compel and for Attorney's Fees and Costs filed. |
| May 21, 1993 | (Petitioner) Notice of Serving Interrogatories filed. |
| May 19, 1993 | (Petitioner) Notice of Serving A Response to Respondents' First Request for Production of Documents; Notice of Serving Answers to Respondents' First Set of Interrogatories filed. |
| Apr. 20, 1993 | Respondents` First Request for Production of Documents; Respondents` Request for Admissions; Notice of Serving Interrogatories filed. |
| Apr. 14, 1993 | (Respondents) Amended Notice of Appearance filed. |
| Apr. 13, 1993 | (Respondents) Response to Request for Production filed. |
| Apr. 06, 1993 | Notice of Hearing sent out. (hearing set for 7-23-93; 10:00am; Talla) |
| Mar. 22, 1993 | (Respondents) Response to Request for Admissions filed. |
| Mar. 12, 1993 | (Petitioner) Request for Production filed. |
| Mar. 08, 1993 | Joint Response to the Initial Order filed. |
| Feb. 24, 1993 | Initial Order issued. |
| Feb. 19, 1993 | Agency referral letter; Administrative Complaint; Request for Admissions; Supportive Documents filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 17, 1995 | Opinion | |
| Jan. 14, 1994 | Agency Final Order | |
| Oct. 04, 1993 | Recommended Order | Offering line of credit to Fla residents requires license, even though done from Texas by mail. Misleading ads net company and principals heavy fines. |
DEPARTMENT OF BANKING AND FINANCE vs INLET MORTGAGE COMPANY, LTD., AND JOHN DAVIS, 93-000911 (1993)
DIVISION OF FINANCE vs RON COOK AND TERESA JELICH, 93-000911 (1993)
RICHARD L. MURPHY AND JACQUELYN W. MURPHY vs. DEPARTMENT OF BANKING AND FINANCE, 93-000911 (1993)
DIVISION OF FINANCE vs. EDWARD J. LENAHAN, JR., 93-000911 (1993)
