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A Comprehensive Guide to Usury Law in California: Unveiling Exemptions and Article 15 | Rokita Law, P.C.

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Understanding California’s Usury Laws: Key Regulations for Business Owners and Lenders

As a business owner or lender in California, it’s important to understand California’s usury laws to ensure compliance and avoid legal trouble. Usury is the practice of charging excessive interest rates on loans. Article 15 of the California state Constitution sets the maximum rate of interest that California usury law can charge. It states that no person may charge a higher rate of interest than 10% per year on any loan or forbearance of money, goods, or things in action. However, there are some exemptions to this rule. Some loans and lenders are not subject to California’s usury laws.

Who is Exempt from California Usury Laws? | california constitution

Under California law, there are several exemptions to the usury law. These include:

1. National banks – National banks are exempt from California’s usury laws due to federal preemption. They can charge interest rates that are legal in the state where they are based.

2. Federal credit unions – Federal credit unions are also exempt from California usury laws due to federal preemption. They can charge interest rates that are legal in the state where they are based.

3. Licensed lenders – The state of California licenses some lenders, enabling them to charge higher interest rates. These include banks, credit unions, finance lenders, and payday lenders. However, the Department of Business Oversight must license and regulate these lenders.

4. Small loans – Small loans of $2,500 or less may be subject to different usury laws. The amount of interest these loans can charge depends on the size of the loan.

What is Article 15 of the California Constitution? | california constitution

Article 15 of the California Constitution addresses California’s usury law. It sets a maximum interest rate of 10% per year that lenders can charge on loans. This law applies to all loans and forbearances of money, goods, or things in action.

California’s usury laws aim to protect consumers from predatory lending practices. However, it’s important for businesses to understand the law to ensure compliance. Violations of the usury law can result in penalties or even criminal charges.

In conclusion, if you are a lender or business owner in California, it’s essential to be informed about the state’s usury laws. Understanding who is exempt from these laws and what Article 15 entails can help you avoid legal issues and maintain compliance. For more information on California usury law or assistance with legal matters, contact Rokita Law, P.C. – a Los Angeles-based law firm with experience in financial services 


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