Which of the following loans would be subject to California's constitutional usury limits?
Correct Answer
D) A personal loan between two private individuals with no broker involvement
A personal loan between private individuals with no broker involvement is subject to the constitutional usury limit. Banks, credit unions, and CFL-licensed finance companies are all exempt from usury limits under Article XV and related statutes.
Why This Is the Correct Answer
A personal loan between private individuals with no broker involvement is subject to the constitutional usury limit. Banks, credit unions, and CFL-licensed finance companies are all exempt from usury limits under Article XV and related statutes.
Why the Other Options Are Wrong
Option A: A mortgage loan made by a federally chartered bank
Federally chartered banks are exempt from state usury limits under federal preemption and Article XV exemptions.
Option B: A home loan originated by a credit union
Credit unions are exempt lenders under both federal and state law, not subject to the constitutional usury ceiling.
Option C: A commercial loan from a California-licensed finance company under the CFL
CFL-licensed finance companies are specifically exempt from usury limits as regulated financial institutions under California law.
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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