A private nonexempt California lender makes a personal-purpose loan that is not arranged by a licensed real estate broker and no regulated-lender exemption applies. What Article XV usury ceiling generally applies?
Correct Answer
B) 10% per year
For loans used primarily for personal, family, or household purposes, California Article XV generally sets a 10% annual ceiling unless an exemption applies. The legacy item incorrectly mixed CFL and constitutional usury concepts.
Why This Is the Correct Answer
For loans used primarily for personal, family, or household purposes, California Article XV generally sets a 10% annual ceiling unless an exemption applies. The legacy item incorrectly mixed CFL and constitutional usury concepts.
Why the Other Options Are Wrong
Option A: 5% per year
This incorrectly references the federal discount rate without the '5% above' margin and uses 'plus' instead of the correct 'higher of' comparison structure required by CFLL.
Option C: 15% per year
15% per annum significantly exceeds the CFLL limits for loans under $300,000 secured by real property and confuses this category with higher-amount loan thresholds that have different rate caps.
Option D: Any rate agreed to in writing
12% per annum would exceed the typical maximum under CFLL since the Federal Reserve discount rate would need to be 7% or higher for this to be permissible, which is uncommon in recent economic conditions.
Memory Technique
CA -> ca-usury-real-estate-broker-exemptions-interest-penalties
Exam Tip
Usury questions require separating personal-purpose loans, other-use loans, regulated-lender exemptions, real estate broker arranged real-property loans, and nonexempt private-lender scenarios.
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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