Master Charge v. Daugherty

SHINN, P. J.

Appeal from a judgment denying a petition for a writ of mandate to require the Commissioner of Corporations to grant a permit for the issuance of capital stock by Master Charge. The application to the commissioner was denied upon the ground that Master Charge had not procured a license as a lender under the Small Loan Law, sections 24200-24261, Financial Code.

Appellant proposes to engage in business under the following plan: For a charge of $5.00 per year it will issue cards to persons deemed to be good credit risks which will entitle them to purchase, on credit, merchandise or service at stores, hotels and restaurants listed in its booklet; the card holder will sign an invoice, appellant will purchase, without recourse, at a discount of from 6 to 10 per cent such of the invoices as the creditor chooses to sell and assign to it; appellant will bill the card holder for the face amount of the invoices and the card holder will pay the same. If the card holder has personal credit with the tradesman and the purchases are charged to him directly, appellant does not acquire the account and the credit card does not enter into the transaction.

The question is whether appellant will be engaged in the business of loaning credit to its card holders. Although the briefs evidence diligent search for authority on the subject, little has been discovered in the way of precedent as to what constitutes a loan of credit.

Pertinent sections of the Financial Code are the following: “ ‘Lender’ includes all persons who are engaged in the business of lending their own money, credit, goods, or things in action.” (§24007.) “No person shall engage in the business of making or negotiating, for himself, or another, loans of money, credit, goods, or things in action, in the amount or of the value of three hundred dollars ($300) or less, without first obtaining a license from the commissioner.” (§ 24200.) The commissioner denied the application for a permit to issue stock pursuant to an opinion of the attorney general that appellant’s plan of business was one for the loan of credit for which a license was required. We do not doubt that the contemplated plan involves the loan of credit.

[702]

Appellant says that “A loan of money is a contract by which one delivers a sum of money to another, and the latter agrees to return at a future time a sum equivalent to that which he borrowed” (Civ. Code, §1912); and it asserts that there is not in its plan of business “the slightest semblance to a loan transaction.”