Under California law, which of the following statements about the relationship between usury and the California Financing Law (CFL) is CORRECT?
Correct Answer
D) CFL licensees are exempt from constitutional usury limits but must comply with rate limitations set by the CFL and DFPI regulations
CFL licensees are exempt from the constitutional usury ceiling under Article XV, but they are not free to charge unlimited rates. They must comply with rate limitations and other requirements established under the CFL and enforced by the DFPI.
Why This Is the Correct Answer
CFL licensees are exempt from the constitutional usury ceiling under Article XV, but they are not free to charge unlimited rates. They must comply with rate limitations and other requirements established under the CFL and enforced by the DFPI.
Why the Other Options Are Wrong
Option A: CFL licensees are subject to both the constitutional usury limit and CFL rate caps simultaneously
CFL licensees are NOT subject to both; the constitutional usury limit does not apply to them. They only follow CFL-specific rate rules.
Option B: The CFL usury exemption only applies to loans under $50,000
There is no $50,000 threshold for the CFL usury exemption; the exemption applies based on the licensee's status, not the loan amount.
Option C: CFL licensees have no rate limitations of any kind
CFL licensees do have rate limitations under the CFL regulatory framework; exemption from constitutional usury does not mean complete freedom on rates.
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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