A lender splits a $380,000 request into a $290,000 first and a $90,000 open-end line so that neither piece reaches the 6% points and fees trigger. Does splitting the transaction for this purpose avoid the California covered-loan protections lawfully?
Correct Answer
D) Prohibited: structuring to evade covered-loan status is itself a violation
The statute reaches evasion through open-end credit, loan splitting and other devices, so dividing a transaction to keep each piece under the trigger does not work. Other choices: testing each piece separately is exactly the evasion the provision names; disclosure does not cure an evasion; and 8% is not a figure in this part of the code. Source: Cal. Fin. Code § 4973(k)
Why This Is the Correct Answer
The statute reaches evasion through open-end credit, loan splitting and other devices, so dividing a transaction to keep each piece under the trigger does not work. Other choices: testing each piece separately is exactly the evasion the provision names; disclosure does not cure an evasion; and 8% is not a figure in this part of the code. Source: Cal. Fin. Code § 4973(k)
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