On March 20, Alston & Bird Partner Stephen Ornstein issued a Client Alert to inform clients regarding a somewhat obscure California court case that contains very significant consequences for the financial services industry in connection with California consumer loans exempt from the state’s usury law. In a 2018 California Supreme Court case, the Client Alert explains how consumer loans that are exempt from usury may be deemed “unconscionable” under California law.
The Client Alert highlights the California Supreme Court’s decision on August 13, 2018 in Eduardo De La Torre et al. v. CashCall, Inc. (S. Cal. 5th 966 (2018)) in a usury case that the interest rate on consumer loans of $2,500 or more may render the loan “unconscionable” under the California Financial Code, even though such a loan would not be deemed usurious under California law. The Client Alert advises clients in the financial services industry to carefully review their contracts to eliminate potentially unduly harsh provisions that could render the loan product as unconscionable.
The Client Alert can be found here on our website.