California Usury and Lending Laws exam
2026 questions and rationales answers
1. What is the primary source of California’s usury law?
A. California Business and Professions Code
B. California Civil Code
C. California Constitution, Article XV, Section 1
D. California Revenue and Taxation Code
Rationale: California’s constitutional usury provision is contained in Article XV, Section 1.
2. What is the general constitutional interest rate when no different rate is lawfully contracted
for?
A. 5%
B. 7% per annum
C. 8%
D. 10%
Rationale: Article XV establishes 7% per annum as the basic rate.
3. For a loan primarily for personal, family, or household purposes, what is the constitutional
maximum rate that may generally be contracted for?
A. 7%
B. 8%
C. 10% per annum
D. 12%
Rationale: The California Constitution permits a written contract for up to 10% per annum for
qualifying personal, family, or household loans.
4. A loan used primarily to purchase real property is treated under the usury provision as:
A. A personal loan
B. A household loan
C. Not a personal, family, or household-purpose loan
D. An automatically exempt loan
Rationale: The Constitution specifically states that loans primarily used to purchase, construct,
or improve real property are not treated as personal, family, or household-purpose loans.
,5. For a non-consumer-purpose loan, the constitutional ceiling is generally the higher of 10%
or:
A. 3% plus the Federal Reserve rate
B. 4% plus the Federal Reserve rate
C. 5% plus the applicable Federal Reserve rate
D. 7% plus the Federal Reserve rate
Rationale: For non-personal-purpose loans, the Constitution uses the higher of 10% or 5% plus
the specified Federal Reserve rate.
6. Which Federal Reserve rate is referenced in California’s constitutional formula?
A. Federal funds target rate
B. Prime rate
C. Rate on advances to member banks established by the Federal Reserve Bank of San
Francisco
D. Discount rate of the Federal Reserve Bank of New York
Rationale: Article XV refers to the rate established by the Federal Reserve Bank of San Francisco
on advances to member banks.
7. Under the constitutional formula, the relevant Federal Reserve rate is measured on what
date?
A. The first day of the year
B. The closing date of the loan
C. The 25th day of the preceding month
D. The 30th day after loan approval
Rationale: The Constitution identifies the rate prevailing on the 25th day of the month preceding
the specified loan-contract or funding date.
8. Which of the following may be considered when determining whether a lender has
exceeded the constitutional interest limit?
A. Only the stated interest rate
B. Only late fees
C. Fees, bonuses, commissions, discounts, or other compensation
D. Property taxes only
Rationale: The Constitution prohibits obtaining compensation through fees or similar charges
that effectively exceed the authorized interest.
9. Which institution is generally exempt from California’s constitutional usury restrictions?
A. An unlicensed private individual
, B. A bank operating under applicable banking law
C. An unlicensed loan broker
D. A private seller
Rationale: Banks operating under state or federal banking laws are among the classes
specifically exempted from the constitutional usury restrictions.
10. Which of the following is specifically listed as an exempt lender?
A. Unlicensed real estate salesperson
B. Credit union
C. Private homeowner
D. Unlicensed investor
Rationale: Credit unions are expressly included among the exempt classes.
11. Which is another class specifically identified as exempt from the constitutional usury
restrictions?
A. Unlicensed mortgage broker
B. Licensed pawnbroker
C. Unlicensed property manager
D. Residential tenant
Rationale: Licensed pawnbrokers are among the constitutionally exempt classes.
12. A California real estate broker makes or arranges a loan secured in whole or in part by a
lien on real property. The loan may be:
A. Automatically subject to the 10% constitutional ceiling
B. Exempt from the constitutional usury restrictions
C. Invalid unless made by a bank
D. Prohibited under California law
Rationale: The Constitution specifically exempts loans made or arranged by California-licensed
real estate brokers when secured in whole or in part by liens on real property.
13. What type of real estate security commonly secures a loan subject to the real estate
broker usury exemption?
A. Lease agreement
B. Personal guarantee
C. Deed of trust or mortgage lien on real property
D. Automobile title
Rationale: California DRE materials explain that deeds of trust and mortgages are common
forms of real-property liens securing these loans.
2026 questions and rationales answers
1. What is the primary source of California’s usury law?
A. California Business and Professions Code
B. California Civil Code
C. California Constitution, Article XV, Section 1
D. California Revenue and Taxation Code
Rationale: California’s constitutional usury provision is contained in Article XV, Section 1.
2. What is the general constitutional interest rate when no different rate is lawfully contracted
for?
A. 5%
B. 7% per annum
C. 8%
D. 10%
Rationale: Article XV establishes 7% per annum as the basic rate.
3. For a loan primarily for personal, family, or household purposes, what is the constitutional
maximum rate that may generally be contracted for?
A. 7%
B. 8%
C. 10% per annum
D. 12%
Rationale: The California Constitution permits a written contract for up to 10% per annum for
qualifying personal, family, or household loans.
4. A loan used primarily to purchase real property is treated under the usury provision as:
A. A personal loan
B. A household loan
C. Not a personal, family, or household-purpose loan
D. An automatically exempt loan
Rationale: The Constitution specifically states that loans primarily used to purchase, construct,
or improve real property are not treated as personal, family, or household-purpose loans.
,5. For a non-consumer-purpose loan, the constitutional ceiling is generally the higher of 10%
or:
A. 3% plus the Federal Reserve rate
B. 4% plus the Federal Reserve rate
C. 5% plus the applicable Federal Reserve rate
D. 7% plus the Federal Reserve rate
Rationale: For non-personal-purpose loans, the Constitution uses the higher of 10% or 5% plus
the specified Federal Reserve rate.
6. Which Federal Reserve rate is referenced in California’s constitutional formula?
A. Federal funds target rate
B. Prime rate
C. Rate on advances to member banks established by the Federal Reserve Bank of San
Francisco
D. Discount rate of the Federal Reserve Bank of New York
Rationale: Article XV refers to the rate established by the Federal Reserve Bank of San Francisco
on advances to member banks.
7. Under the constitutional formula, the relevant Federal Reserve rate is measured on what
date?
A. The first day of the year
B. The closing date of the loan
C. The 25th day of the preceding month
D. The 30th day after loan approval
Rationale: The Constitution identifies the rate prevailing on the 25th day of the month preceding
the specified loan-contract or funding date.
8. Which of the following may be considered when determining whether a lender has
exceeded the constitutional interest limit?
A. Only the stated interest rate
B. Only late fees
C. Fees, bonuses, commissions, discounts, or other compensation
D. Property taxes only
Rationale: The Constitution prohibits obtaining compensation through fees or similar charges
that effectively exceed the authorized interest.
9. Which institution is generally exempt from California’s constitutional usury restrictions?
A. An unlicensed private individual
, B. A bank operating under applicable banking law
C. An unlicensed loan broker
D. A private seller
Rationale: Banks operating under state or federal banking laws are among the classes
specifically exempted from the constitutional usury restrictions.
10. Which of the following is specifically listed as an exempt lender?
A. Unlicensed real estate salesperson
B. Credit union
C. Private homeowner
D. Unlicensed investor
Rationale: Credit unions are expressly included among the exempt classes.
11. Which is another class specifically identified as exempt from the constitutional usury
restrictions?
A. Unlicensed mortgage broker
B. Licensed pawnbroker
C. Unlicensed property manager
D. Residential tenant
Rationale: Licensed pawnbrokers are among the constitutionally exempt classes.
12. A California real estate broker makes or arranges a loan secured in whole or in part by a
lien on real property. The loan may be:
A. Automatically subject to the 10% constitutional ceiling
B. Exempt from the constitutional usury restrictions
C. Invalid unless made by a bank
D. Prohibited under California law
Rationale: The Constitution specifically exempts loans made or arranged by California-licensed
real estate brokers when secured in whole or in part by liens on real property.
13. What type of real estate security commonly secures a loan subject to the real estate
broker usury exemption?
A. Lease agreement
B. Personal guarantee
C. Deed of trust or mortgage lien on real property
D. Automobile title
Rationale: California DRE materials explain that deeds of trust and mortgages are common
forms of real-property liens securing these loans.
