The state Supreme Court issued a ruling today on the law that limits the scope of Iowa’s cap on car title loans. The law went into effect on July 1, 2007 and said a company could not issue finance charges over 21% per year on the unpaid balance of the amount financed for a loan secured by car title.
Anderson Financial Services which operates the “Loan Max” company asked the Attorney General for an opinion on whether they could still charge higher rates on loan advances made for loan agreements signed before the new law took effect.
The A-G’s opinion said any advances made on car title accounts signed before the July 1, 2007 law would be subject to the new finance-charge limits. A Polk County district court judge adopted the Attorney General’s opinion and the company appealed.
The Iowa Supreme Court says the new law to limit interest charges was not created as a remedy for a wrongful act — but was prompted by the legislature’s policy decision that limits on such charges were in the public interest.
The High Court says the district court erred in that ruling, as the law does not prevent Loan Max from exercising its contractual right to collect the interest rates specified under agreements entered into prior to the new law.