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Does the California usury cap apply to a loan made between two private individuals?

Los Angeles, CA |

Trying to find an answer through Google, not having much luck - so confusing!

The situation: there was a private loan made between two acquaintances. The loan was $30,000 principal, with $12,000 in agreed-upon total interest. The loan was to be outstanding for 8 months before repayment started. Depending on how you measure the interest percent, it's 40% (on 8 months) or 60% (across the year). Those percentages might be calculated the wrong way, but it's definitely way above the 10% cap I saw online from the CA constitution.

My question: does that 10% usury cap from the CA constitution apply to this kind of private loan? If so, are there any remedies to get out of the outrageous interest, or any penalties on the person who lent the money?

Any insight or links would be much appreciated.

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Attorney answers 3

Best Answer

I just finished trying a usury case. The penalty for the lender is they get no interest at all on the loan. The reward for the borrower is they can get up to three times the amount of the interest paid as an offset to the principal.

The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.


Yes, this cap applies, unless one of the many exceptions applies also. The exceptions include apply to loans made by CA licensed financial lenders, pawnbrokers, time payment contracts where the seller finances the purchase of goods by extending the payment over a period of time, etc... The usury laws also don't apply to loans made by a CA licensed real estate broker when the loan is secured (in whole or in part) by real estate.

Consult a lawyer to disclose exactly what kind of loan this is to see if you can challenge the interest. There are penalties involved, so you should find out if this loan's interest is enforceable before you make any repayments.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.


I agree with Ms. Koslyn's excellent answer. Speak to a lawyer about this matter immediately and see what can be discovered. Spend the money on the lawyer and you'll usually get better results on this type of thing.

Good luck.

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