Exemptions - Consumer Loans - Financial - CA

Section § 22250

This law states that certain financial regulations do not apply to loans made for amounts of $10,000 or more or $5,000 or more, provided these amounts are genuine and not used to dodge regulations. Specific sections of the financial code are listed as not applicable under these loan conditions.

For loans over $10,000, many regulatory sections are waived, while for loans over $5,000, a different set of sections is waived. The exemption is only valid if the laws aren't being exploited to avoid the usual legal rules.

(a) The following sections do not apply to any loan of a bona fide principal amount of ten thousand dollars ($10,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22154, 22155, 22201, 22202, 22307, 22313, 22314, 22315, 22322, 22323, 22325, 22334, and 22752, and the sections enumerated in subdivision (b).

(b) The following sections do not apply to any loan of a bona fide principal amount of five thousand dollars ($5,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22300, 22305, and 22306, subdivision (a) of Section 22307, and Sections 22309, 22320.5, 22326, 22327, 22400, and 22751.

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Section § 22251

This law is about ensuring loans meet genuine minimum requirements to avoid unfair practices. It states that if a borrower requests less than a regulatory ceiling amount but then receives more without a good reason, and this loan is quickly paid down to below that threshold through an agreement, it’s considered an attempt to dodge legal boundaries unless it meets other aspects of the law.

Even if a loan appears as a sale or lease, if it genuinely meets the minimum required amount, it's valid. Charges, fees, or insurance costs are not to be included in the principal amount when determining if a loan exceeds a regulatory amount, unless they’re part of refinancing an existing loan, ensuring this isn't used to evade rules.

Any section that refers to this section does not apply to any loan of the bona fide principal amount specified in the regulatory ceiling provision of that section or more if that provision is not used for the purpose of evading this division. In determining under Section 22250, 22303, 22304, or 22304.5 or any section that refers to this section whether a loan is a loan of a bona fide principal amount of the amount specified in that section or more and whether the regulatory ceiling provision of that section is used for the purpose of evading this division, the following principles apply:

(a) If a borrower applies for a loan in a bona fide principal amount of less than the specified amount and a loan to that borrower of a bona fide principal amount of the specified amount or more is made by a licensed finance lender, no adequate economic reason for the increase in the size of the loan exists, and by prearrangement or understanding between the borrower and the licensee a substantial payment is to be made upon the loan with the effect of reducing the bona fide principal amount of the loan to less than the specified amount within a short time after the making of the loan other than by reason of a requirement that the loan be paid in substantially equal periodical installments, then the loan shall not be deemed to be a loan of the bona fide principal amount of the specified amount or more and the regulatory ceiling provisions shall be deemed to be used for the purpose of evading this division unless the loan complies with the other provisions of the section that includes the regulatory ceiling provisions.

(b) If a loan made by a licensed finance lender is in a bona fide principal amount of the specified amount or more, the fact that the transaction is in the form of a sale of accounts, chattel paper, goods, or instruments or a lease of goods, or in the form of an advance on the purchase price of any of the foregoing, shall not be deemed to affect the loan or the bona fides of the amount thereof or to indicate that the regulatory ceiling provisions are used for the purpose of evading this division.

(c) For the purposes of determining whether the loan amount exceeds a regulatory ceiling, the “bona fide principal amount” shall not be comprised of any charges or any other fees or recompense specified in Sections 22200, 22201, 22202, 22305, 22316, 22317, 22318, 22319, 22320, 22320.5, and 22336, or any amounts paid for insurance of the types specified in Sections 22313 and 22314, or any fees paid to a licensee for the privilege of participating in an open-end credit program. Nothing in this subdivision shall be construed to prevent those specified charges, fees, and recompense that have been earned and remain unpaid in an existing loan from being considered as part of the bona fide principal amount of a new loan to refinance that existing loan, provided the new loan is not made for the purpose of circumventing a regulatory ceiling provision. This subdivision is intended to define the meaning of “bona fide principal amount” as used in this division solely for the purposes of determining whether the loan amount exceeds a regulatory ceiling, and is not intended to affect the meaning of “principal” for any other purpose.

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