A California covered loan is originated with a willful and knowing violation of the covered-loan rules. Which borrower remedy is available under California Financial Code section 4978?
Correct Answer
D) Actual damages or $15,000, whichever is greater, plus attorney fees and costs
For a willful and knowing covered-loan violation, California Financial Code section 4978 allows the borrower to recover actual damages or $15,000, whichever is greater, plus attorney fees and costs. The prior legacy wording incorrectly treated the issue as a mandatory-counseling rescission rule.
Why This Is the Correct Answer
For a willful and knowing covered-loan violation, California Financial Code section 4978 allows the borrower to recover actual damages or $15,000, whichever is greater, plus attorney fees and costs. The prior legacy wording incorrectly treated the issue as a mandatory-counseling rescission rule.
Why the Other Options Are Wrong
Option A: Only a complaint to DFPI, with no private recovery
Filing a DFPI complaint is an option but not the borrower's only remedy. Rescission provides direct financial relief.
Option B: Automatic cancellation of the principal balance
The loan being closed does not eliminate the borrower's remedies for counseling violations.
Option C: Only refund of recording fees paid at closing
The borrower's remedies go beyond actual damages and include rescission, statutory damages, and attorney's fees.
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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