Which of the following is TRUE about California's usury law compared to other states?
Correct Answer
B) California's usury limit is set by the state Constitution, making it harder to change than statutory limits in most other states
California's usury limit is established by Article XV of the state Constitution, not by statute. This makes it significantly harder to change because constitutional amendments require either a ballot initiative or a two-thirds legislative vote plus voter approval, unlike simple statutory changes in most states.
Why This Is the Correct Answer
California's usury limit is established by Article XV of the state Constitution, not by statute. This makes it significantly harder to change because constitutional amendments require either a ballot initiative or a two-thirds legislative vote plus voter approval, unlike simple statutory changes in most states.
Why the Other Options Are Wrong
Option A: California's usury limit is set by statute and can be changed by simple legislative majority
California's usury limit is constitutional, not statutory, and cannot be changed by simple legislative majority.
Option C: California has no usury law, relying entirely on federal regulations
California does have its own usury law in Article XV; it does not rely solely on federal regulations.
Option D: California's usury limit is set by the DFPI Commissioner annually
The DFPI Commissioner does not set the usury rate; it is established by the constitutional formula in Article XV.
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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