Usury? no it’s just the internet
A local company in the business of providing internet access has run into some trouble with the state. The state claims the company is not really and ISP, but a “payday” loan operation. As such, the state claims it had to register and get permission to operate, plus the state accused the business of usury (charging more than the permitted rate of interest). The state got an injunction, forcing the company to stop operations. This initial action was affirmed by the Court of Appeals. What interested me about the decision, was the Court’s description of operations:
Short on Cash purports to be an Internet service provider. Customers that purchase Internet service from Short on Cash receive an immediate cash rebate of one hundred dollars per Internet account opened. In exchange, the customer commits to a one-year Internet contract with Short on Cash and is obligated to make bi-weekly payments of twenty dollars for Internet service. If the customer terminates the contract prior to the expiration of the one-year period, he or she is obligated to repay the one-hundred-dollar rebate. Short on Cash does not limit the number of accounts that its customers may open. However, for each account opened, the customer receives a one hundred dollar rebate and is obligated to make bi-weekly payments of twenty dollars for the one-year contractual period.
Short on Cash customers have unlimited access to the Internet from their home computers. However, those that access the Internet from the computer located on Short on Cash’s premises are limited to one hour of access per two-week period. In January of 2001, Short on Cash had a total of 100 to 120 customers; of this number, approximately twenty-five customers accessed the Internet from their home computers.
Just in case anyone is dubious of the nature of this deal, the Court dropped a footnote to clarify:
by charging biweekly payments of twenty dollars for the contractual period, in exchange for the one hundred dollar rebate, Short on Cash receives finance charges or profits in the amount of 20% of the principal or rebate, at a minimum, and 420%, at a maximum,—i.e., $520 minus $100 equals $420 divided by 100 equals 420%—per account. These excessive finance charges are in violation of Indiana Code Section 24-4.5-7-201.
