## Facts

- The State (through the Attorney General) and the Commissioner of Banks sued multiple related entities and an owner/operator that offered short-term cash transactions in North Carolina.
- Defendants previously offered deferred-deposit/payday loans through storefront operations and later shifted to an “Advance Internet” model after regulatory scrutiny.
- Under the “Advance Internet” model, a customer signed an “internet services” contract for limited access to computers at defendants’ offices, during business hours, by appointment.
- At the same time, the customer received immediate cash characterized as a “rebate” and agreed to repay the cash amount plus an additional fee of at least 20% over a short term.
- Plaintiffs contended the internet access had negligible or no economic value and that the transactions’ real purpose and effect were high-cost, short-term loans.
- The trial court granted summary judgment for plaintiffs, ruling the transactions were loans subject to the Consumer Finance Act, were usurious, and constituted unfair and deceptive trade practices.
- Defendants appealed, arguing the contracts were bona fide sales of internet services with promotional rebates, not loans.

## Issues

1. Whether the “Advance Internet” transactions were, in substance, loans subject to the North Carolina Consumer Finance Act and usury limits rather than sales of internet services.
2. Whether structuring the transactions as internet-service contracts plus “rebates” and fees constituted an unfair or deceptive trade practice under N.C. Gen. Stat. § 75-1.1.
3. Whether the State had to prove a transaction-by-transaction “corrupt intent” to make a usurious loan.

## Decision

- The North Carolina Court of Appeals affirmed summary judgment for the State and the Commissioner of Banks.
- The court held the “Advance Internet” contracts functioned as loans and violated the Consumer Finance Act and North Carolina usury law.
- The court held the same conduct constituted unfair and deceptive trade practices under § 75-1.1.
- The court rejected any requirement that plaintiffs prove specific corrupt intent in each individual transaction.

## Legal Principles

- Usury and consumer-finance analysis turns on the substance and economic reality of a transaction, not its labels or drafted form.
- When a purported product or service has negligible value and the customer’s rational purpose is to obtain immediate cash, the transaction may be treated as a loan for regulatory and usury purposes.
- Charges and fees tied to a short-term cash advance may be treated as interest when determining whether the effective rate exceeds statutory limits.
- A standardized business model designed to produce usurious returns can establish usury without proving individualized, transaction-by-transaction corrupt intent.
- Disguising a high-cost loan as a consumer purchase to avoid lending regulation can constitute an unfair or deceptive act in or affecting commerce under N.C. Gen. Stat. § 75-1.1.

## Conclusion

The court affirmed summary judgment that defendants’ “Advance Internet” program was a disguised payday-loan scheme: the transactions were loans with usurious effective interest, made in violation of the Consumer Finance Act, and the mischaracterization of the loans as internet-service contracts was unfair and deceptive under § 75-1.1.


State ex rel. Cooper v. NCCS Loans, Inc., 624 S.E.2d 371 (N.C. Ct. App. 2005)