Consumer Credit–The Department Store Revolving Charge Account–Usury Resurrected–State v. J.C. Penney Company

The Attorney General of Wisconsin recently brought an action against the J.C. Penney retailing chain for an injunction against any further charges of 1½% per month on the declining balances of its revolving charge accounts. The state alleged that anything in excess of I% per month was a violation of the $12 per $100 per annum usury ceiling established by its legislature as the maximum chargeable for a loan or forbearance of money. Penney admitted that its monthly charge frequently exceeded the allowable rate but argued that its charge was a “time-price differential,” exempt from statutory control under the time-price doctrine. The trial court rejected this contention. In deciding that the monthly charge in fact represented interest on the forbearance of an indebtedness created by the sale, the court refused to apply the doctrine, by which all but two American jurisdictions have traditionally exempted credit sales from the strictures of the usury laws. The trial court nonetheless refused the injunction on the ground “[t]hat the right to assert the violation of section 138.05(1) is a right personal to the persons who contract with defendant under . . . [Penney’s charge account agreement ].”