A non-exempt lender makes a $12,000 loan for a family holiday at 11% simple interest. Is this personal-purpose loan’s 11% rate within the California constitutional limit?
Correct Answer
A) Usurious: a loan for personal use is capped at 10% a year in California
For a loan primarily for personal, family or household purposes the constitutional ceiling is 10 percent a year. Other choices: 12 percent is not a California ceiling; usury reaches unsecured lending too, and the real property connection matters for the broker exemption rather than for coverage; and 7 percent is the rate that applies where no other is specified, not the consumer loan ceiling. Source: Cal. Const. art. XV, § 1
Why This Is the Correct Answer
For a loan primarily for personal, family or household purposes the constitutional ceiling is 10 percent a year. Other choices: 12 percent is not a California ceiling; usury reaches unsecured lending too, and the real property connection matters for the broker exemption rather than for coverage; and 7 percent is the rate that applies where no other is specified, not the consumer loan ceiling. Source: Cal. Const. art. XV, § 1
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