Under California's predatory lending statute (CFL §4970), a 'covered loan' is triggered when the APR exceeds the comparable Treasury rate by more than:
Correct Answer
B) 8 percentage points for first liens
A covered loan under CFL §4970 is triggered when the APR exceeds the comparable Treasury security yield by more than 8 percentage points for first-lien loans.
Why This Is the Correct Answer
8 percentage points for first liens is correct. A covered loan under CFL §4970 is triggered when the APR exceeds the comparable Treasury security yield by more than 8 percentage points for first-lien loans. A covered loan under CFL §4970 is triggered when the APR exceeds the comparable Treasury security yield by more than 8 percentage points for first-lien loans.
Why the Other Options Are Wrong
Option A: 6 percentage points for first liens
6 percentage points is the total points and fees cap, not the APR trigger threshold.
Option C: 10 percentage points for first liens
10 percentage points exceeds the actual threshold and would miss many predatory loans.
Option D: 12 percentage points for first liens
12 percentage points is far too high and would fail to protect consumers from high-cost lending.
Memory Technique
CA -> ca-covered-loans-high-cost-consumer-protections
Exam Tip
Covered-loan questions often test the 8-point APR trigger, 6 percent points-and-fees trigger, principal-dwelling scope, Consumer Caution notice timing, ATR, prepayment penalty limits, prohibited loan terms, and remedies.
Common Mistakes to Avoid
- -Using a national baseline answer when California has agency-specific DFPI or DRE requirements
- -Confusing CFL, CRMLA, covered-loan, usury, servicing, and DRE endorsement rules
- -Relying on legacy California state-exam or education assumptions instead of current NMLS source pages
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