California Expands De Minimis Exemption Under California Finance Lenders Law

As of January 1, 2014, businesses or individuals who make five or fewer commercial loans in a 12 month period are exempt from the registration requirement under the California Finance Lenders Law if the loans are incidental to the business of the lender. This expansion is good news for business that make isolated loans from time to time. Before the change, making more than one loan in a 12 month without a license or other exemption risked violating the California Finance Lenders Law, which could subject a lender to civil and criminal penalties.

Business that make more than five commercial loans over 12 months or that are in the lending business should be wary of the California Finance Lenders Law. They should confirm they are exempt from the law on another basis – the most common exemptions cover banks, trust companies, credit unions and certain other financial companies – or consider registering as a licensed finance lender. Lenders operating in violation of the California Finance Lenders Law risk civil and criminal penalties whereas licensed lenders enjoy an exemption from California’s usury laws.

Contact John Oehmke for more information regarding exemption and registration under the California Finance Lenders Law.