A CFL licensee wants to secure a $3,800 consumer loan with a deed of trust on the borrower's home. May this loan be secured by the borrower’s home under the CFL small-loan restriction?
Correct Answer
B) Not permitted: a CFL loan under $5,000 may not be secured by real property
A CFL loan may not be secured by real property unless the bona fide principal amount is more than $5,000, which keeps small consumer loans off people's homes. Other choices: collateral is not simply a matter of agreement here; covered-loan disclosures are a different statute; and the threshold is $5,000 rather than $10,000. Source: Cal. Fin. Code § 22251; DFPI guidance
Why This Is the Correct Answer
A CFL loan may not be secured by real property unless the bona fide principal amount is more than $5,000, which keeps small consumer loans off people's homes. Other choices: collateral is not simply a matter of agreement here; covered-loan disclosures are a different statute; and the threshold is $5,000 rather than $10,000. Source: Cal. Fin. Code § 22251; DFPI guidance
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