If you’re interested in California’s usury law, you have to look in several places: the Constitution, uncodified initiative measures, codes and case law.  When Woodrow Wilson was occupying the White House, the people of California approved a series of initiative measures with respect to interest rates.  Although technically uncodified, these provisions can be found in Section 1916-1 to -5 of the California Civil Code.  Later, the people of California added, and then amended, a constitutional provision to impose limitations on the rate of interest that may be charged by non-exempt lenders. Cal. Const. Art. XV.  Some licensed lenders are subject to statutory interest rate limitations.  See, e.g., Cal. Fin. Code § 22303 (imposing maximum interest rates on consumer loans made by Finance Lenders for loans with a bona fide principal balance of less than $2,500).

In most cases, professional lenders are exempt from California’s constitutional usury limitations.  For example, the California legislature has exempted incorporated, admitted insurers from the interest rate provisions of Article XV.  Cal. Ins. Code § 1100.1.  U.S. District Court Judge Edward M. Chen however recently ruled this exemption does not extend to the provisions of Section 1916-2 which requires a lender to obtain the signed agreement of the borrower in order to assess compound interest.  Wishnev v. Northwestern Mutual Life Ins. Co., 2016 U.S. Dist. LEXIS 16501 (Feb. 9, 2016).  Judge Chen’s ruling conflicts with Judge Susan Y. Illston’s ruling last fall in Washburn v. Prudential Ins. Co. of Am., 2015 U.S. Dist. LEXIS 159633 (Nov. 24, 2015) and Judge Chen has certified the case for interlocutory appeal.  2016 U.S. Dist. LEXIS 41605 (March 28, 2016).