Judge plans to conduct hearing on challenge to banking law

Clark County District Judge Jessie Walsh has scheduled an April 2 hearing on whether to stop a state agency from enforcing a banking law a hard-money lender claims is unconstitutionally vague.

The constitutional challenge stems from administrative action taken in October against OneCap, a private lender that makes loans secured by real estate. OneCap is licensed as a mortgage broker to make loans with real estate as collateral. Like other private lenders, OneCap raises money for those loans from individuals.

The Nevada Mortgage Lending Division separately has issued a cease-and-desist order against OneCap, alleging violations involving several loans that had real estate collateral. The mortgage division also ordered OneCap to pay a $250,000 fine.

However, OneCap's lawsuit deals only with claims by the Financial Institutions Division that OneCap made 18 loans that weren't secured by real estate.

The division claims that One Cap lacks a required license to make those installment loans and seeks to fine OneCap $180,000 for the alleged violations.

Attorney Harold Gewerter, who represents OneCap, filed a lawsuit on March 17, claiming the law was unconstitutionally vague.

Financial Institutions Commissioner George Burns said his division would address the issues that OneCap raised at the court hearing.

OneCap is seeking a court-ordered temporary restraining order against the financial division prior to an April 8 administrative hearing on the 18 installment loans.

OneCap has 2,000 investors, and many are expected to attend the hearing at the Sawyer Building.

The legal challenge may lead to cancellation or postponement of the hearing, however.

The lawsuit focuses on a state law provision that says a license is unnecessary when installment loans are "isolated, incidental or occasional transactions." In the lawsuit, Gewerter contends that the language in the state law is too vague to be enforceable.

"We argue that the loans are occasional or incidental to the business of OneCap," Gewerter said.

The lawyer for OneCap also says the provision is too vague and thus violates the 14th Amendment right to due process.

Bank attorney Francis Grady of Rocky River, Ohio, said he has not seen the Nevada law and has not read Gewerter's lawsuit, but Grady doubted many lawyers would say 18 loans could be treated as isolated transactions.

The language that Gewerter cites is common in banking law, Grady said. Lawyers frequently have bank clients who wonder if they cannot make one or two isolated loans in another state in which they don't normally do business, Grady said.

Gewerter said he expects his client to appeal if Walsh denies the restraining order. The state also has a lot at stake, because the division relies on the statute to administratively enforce state laws dealing with banking, lending and related issues, analysts said. The law dates from 1959 and was last amended in 2001, Gewerter said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.