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Medford v. Wholesale Electric Supply Co.
Citations: 286 Ark. 327; 691 S.W.2d 857; 1985 Ark. LEXIS 2067Docket: 85-48
Court: Supreme Court of Arkansas; June 24, 1985; Arkansas; State Supreme Court
Wholesale Electric Supply Co. Inc. filed a lawsuit against Sonny Medford, operating as Medford Electric, for an outstanding amount on an open account related to electrical materials purchased between April 1981 and December 1982. Medford countered by claiming that the interest charges were usurious. The trial court determined that the interest was valid under the Monetary Control Act of 1980, specifically 12 U.S.C. 86a, and the appellate court affirmed this decision. The interest charged by Wholesale Electric was 5/6 of 1% per month (10% annually) before December 2, 1982, after which it increased to 1.25% per month (15% annually). This rate exceeded the Federal Reserve discount rate for 90-day commercial paper. On December 2, 1982, the full balance of over $10,000 was due, and both parties acknowledged that the provisions of Amendment 60 were not relevant to the case. Medford argued that Wholesale Electric did not demonstrate a “loan in the amount of $1,000.00 or more,” which would invoke the federal usury provisions. Prior to the Monetary Control Act and Amendment 60, Arkansas had a fixed maximum interest rate, making it easier to determine usurious contracts. However, with the current variable interest rate framework, the burden of proof for usury now rests with the borrower. The court concluded that the account constituted a loan as defined by the Monetary Control Act, encompassing credit sales and extensions of credit for business purposes. Medford's claim that the amount was less than $1,000.00 was dismissed, as the balance exceeded $10,000 at the time the interest rate increased. The court affirmed the trial court's ruling that the interest charges were valid under the applicable laws.