Business Law

Business Law Annual Review 2017

Update on California Finance Lenders Law

Mike Slattery and Andrew Noble1

Mike Slattery is Co-Vice Chair of the Financial Institutions Committee. He is Of Counsel to Lamb & Kawakami LLP (downtown Los Angeles) where he represents financial institutions.

Andrew Noble is a financial services attorney at Severson & Werson, P.C. whose practice involves commercial and residential real estate secured lending and retail banking. Mr. Noble currently serves as Chair of the California Bar Association’s Consumer Financial Services Committee. He is admitted to practice in California and Washington state.

The California Finance Lenders Law ("CFLL"), codified at Financial Code section 22000 and following, regulates loans from non-bank lenders. The CFLL requires "finance lenders"2 and "finance brokers"3 to obtain a license from the state Department of Business Oversight ("DBO"). Licensed finance lenders are exempt from California usury law, but the CFLL limits the interest and other charges the lender may impose. The CFLL does not apply to lenders who do business under any state or federal law that regulates banks, trust companies, or savings and loan associations4 or to transactions—automobile finance and retail installment sales contracts—regulated under other California laws.5 There is also an exception for lenders who make five or fewer commercial loans in a twelve month period, provided those loans are "incidental to the lender’s business"6 and for a lender who makes no more than one commercial loan within a twelve month period (regardless of whether the loan is incidental to the lender’s business or not).7 Loans under $2,500 are the most strictly regulated while the CFLL imposes few restrictions on the terms of loans of $5,000 or more.8

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