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IN THESUPREME COURT OF IOWA
No. 18 / 04-1653 Filed March 5, 2007 MIDWEST CHECK CASHING, INC., d/b/a EZ MONEY CHECK CASHING, Appellee, vs. ERIN E. RICHEY, Appellant. ________________________________________________________________________ Appeal from the Iowa District Court for Polk County, Robert J. Blink, Judge.

Defendant seeks discretionary review of a decision by the district court that affirmed a judgment entered by a magistrate in an action to collect a "payday" loan. AFFIRMED.

Carlton G. Salmons and Tom W. George of Gaudineer, Comito & George, West Des Moines, for appellant.

Hugh J. Cain of Hopkins and Huebner, P.C., Des Moines, for appellee.

2 CADY, Justice. In this discretionary review from a decision by the district court that affirmed a judgment entered by a magistrate in an action by a delayed deposit services business to collect a "payday" loan, we must determine if the applicable statutory requirements were followed in the case and whether the "payday" loan statute is constitutional. review, we affirm the judgment of the district court. I. Background Facts and Proceedings. On our

Erin E. Richey (Richey) obtained a $400 loan from Midwest Check Cashing, Inc. (Midwest) in March of 2002. Midwest is a business

engaged in delayed deposit services, which provides customers with what is commonly known as "payday" loans. Midwest is licensed to operate the business by the State superintendent of banking. Richey had

obtained similar loans in the past from Midwest when she resided at 1228 East 13th Street in Des Moines. At the time of this transaction in March 2002, however, Richey resided at 712 13th Street in West Des Moines. As a previous customer, Richey was familiar with the "payday" loan process. Under this process, the customer gives a postdated personal check made payable to the business engaged in delayed deposit services in return for the receipt of cash. The amount of the check is greater than the amount of cash the customer immediately receives from the company. The difference in the two amounts represents the

transactional fee charged by the company for giving the customer the cash in advance of negotiating the check. In this case, Richey made a check payable to Midwest for $450, postdated it two weeks into the future, and immediately received $400 from Midwest. Midwest, of

3 course, agreed to wait two weeks before cashing the check. At this time, Richey would presumably have enough money in her account to honor the check. The "payday" loan allows a customer with a checking account to obtain money by writing a check without adequate funds in the checking account at the time the check is written. The check given to Midwest by Richey accurately reflected the address of her current West Des Moines residence. However, Richey also signed a disclosure agreement as a part of the transaction. The

agreement disclosed Midwest loaned Richey $400 and imposed a $50 fee for the transaction. It also disclosed this $50 fee represented the

equivalent of a 325.89% annual percentage rate (APR) on the $400 loan over two weeks. Finally, the agreement erroneously indicated Richey's current address as her former Des Moines residence, but included an acknowledgement that "all statements made in this agreement are true, complete, and correct." Nevertheless, Richey signed the agreement. Midwest negotiated Richey's check two weeks after the transaction by depositing it in its bank account. The check was not paid because of insufficient funds in Richey's checking account. As a result, Midwest

sent Richey a letter of notice to cure default. The letter was sent to her previous Des Moines address shown on the disclosure agreement. Midwest brought a small claims action to collect the debt after Richey failed to respond to the notice to cure. Richey eventually filed an answer and counterclaim in the action. The counterclaim sought

damages and attorney fees based in part on Richey's claim that she did not receive the notice to cure mailed by Midwest. At the small claims hearing, a representative from Midwest explained the procedure followed by the company in a "payday" loan

4 transaction. In particular, she testified if a check given by a customer shows an address of the customer different from the address in its computer records, then the customer is asked if the address in its records is correct. If the address is not correct, the computer records are then changed to reflect the correct address. In this way, the office

records are relied upon by the business to reflect the customer's correct information. Midwest called Richey as a witness. She testified on direct

examination that Midwest never asked her to verify her current address during the transaction. Richey then contradicted herself on cross-

examination when she recalled that Midwest did indeed ask her if the address on the check was correct. Yet, on redirect examination, Richey again testified that Midwest never asked about her current address. Richey further testified she never received the notice to cure, and had no other contact with Midwest regarding the transaction. Richey

testified she believed the check she gave to Midwest had been paid. 1 The small claims court ruled in favor of Midwest and against Richey on her counterclaim. It found Richey failed to provide her correct address to Midwest. Richey appealed to the district court. She claimed the transaction was governed by the Iowa Consumer Credit Code (ICCC), not the Delayed Deposit Services Licensing Act (DDSLA). Richey

challenged the constitutionality of the DDSLA, and further challenged the validity of the notice to cure given by Midwest.

writing the $450 check to Midwest, Richey's checks were stolen. The thief wrote over $8000 in fraudulent checks, and as a result, Richey opened a new checking account. Because of the theft, she had considerable confusion regarding her finances and the consequences of the check she wrote to Midwest. She assumed it had cleared because she had not heard from Midwest.

1After

5 The district court affirmed the judgment. It found the ICCC did not override the more specific provisions of the DDSLA, and as a result the DDSLA governed Richey's transaction. It further found Richey's

constitutional challenges to the DDSLA were without merit because Richey could not prove the requisite state action in order to succeed. In addition, the district court noted Richey could not show dissimilar treatment of similarly situated individuals, and even if these

prerequisites could be met, the DDSLA was rationally related to the government's interest. Finally, the district court found Richey provided Midwest with an incorrect address by signing the disclosure statement. Subsequently, Richey applied for discretionary review to the Iowa Supreme Court pursuant to Iowa Code section 631.16 (2005). See Iowa R. App. P. 6.201 (stating the requirements for an application for discretionary review). We granted her application. II. Issues. First, the ICCC

On appeal, Richey makes two basic arguments.

governs her transaction and the transaction failed to satisfy the ICCC's requirements. Second, if the DDSLA governed her transaction, section 533D.9 of the DDSLA is unconstitutional. III. Standard of Review.

"On discretionary review of a small claims action, our standard of review depends on the nature of the case. If the action is a law case, we review the district judge's ruling on error." Hyde v. Anania, 578 N.W.2d 647, 648 (Iowa 1998) (citation omitted). The parties agree Richey's

statutory arguments must be reviewed on assigned errors. See City of Ames v. Regency Builders, Inc., 653 N.W.2d 553, 555 (Iowa 2002) (reviewing at law and noting the parties agree). The parties also agree

6 Richey's constitutional arguments must be reviewed de novo. See

Simonson v. Iowa State Univ., 603 N.W.2d 557, 561 (Iowa 1999) ("Our review of a district court's judicial review ruling is ordinarily for correction of errors at law. When constitutional issues are raised,

however, we must make an independent evaluation of the totality of the evidence and our review in such cases is de novo." (Citation omitted.)). IV. Application of the ICCC to "Payday" Loans.

Richey claims the "payday" loan transaction is governed by the ICCC, and the transaction violated the ICCC in three ways. First, she argues Midwest failed to comply with the notice to cure provisions under the ICCC. Next, Richey argues the disclosure agreement inaccurately

stated the interest rate, or at least was deceptive and misleading in stating the interest rate, under the provisions of the ICCC. Last, Richey argues the interest charged is unconscionable and violates the limitations imposed by the ICCC. Thus, we must first decide if the ICCC applies to "payday" loan transactions. "Payday" loans are specifically governed by the "Delayed Deposit Services Licensing Act." The Iowa legislature enacted the statute in

1995. 1995 Iowa Acts ch. 139,

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