Last week, I wrote about the oft overlooked California Finance Lenders (CFL) law. In general, that law provides that anyone engaged in the business of making consumer or commercial loans must obtain a license from the Department of Corporations (unless an exemption is available).

CFL licensees do enjoy one benefit. They constitute a class of “exempt persons” for purposes of California’s constitutional usury limitations. Cal. Fin. Code § 22002.

Usually, an exemption is a good thing. In Moore v. Hill, however, the CFL exemption proved to be a bad thing. The case involved a claim that the CFL licensee had borrowed at usurious interest rates. Thus, the issue was not whether the loans made by the licensee were exempt, but whether the licensee’s obligations were exempt.

Article XV, § 1 of the California Constitution provides in relevant part...