Borrower Seeks To Void Notes Because Lender Was Not Licensed Under The CFL

The California Financing Law (fka Finance Lenders Law) prohibits anyone from engaging in the business of a finance lender without obtaining a license from the California Commissioner of Business Oversight (unless exempt).  Cal. Fin. Code § 22100(a).  A finance lender includes any person who is engaged in the business of making consumer loans or commercial loans.  Financial Code Section 22750(b) imposes a very draconian consequence on persons who violate the law:

"If any provision of this division is willfully violated in the making or collection of a loan, whether by a licensee or by an unlicensed person subject to this division, the contract of loan is void, and no person has any right to collect or receive any principal, charges, or recompense in connection with the transaction."

The statute, however, does not necessarily relieve every borrower who is unwilling or unable to repay a loan.  Section 22750 is located in Article 2, Chapter 4, Division 9 of the Financial Code.  Section 22001(b) provides that consumer loans are subject to, among things to Article 2 (commencing with Section 22750) of Chapter 4.  Commercial loans, in contrast, are not subject to Article 2, Chapter 4.  Cal. Fin. Code § 22001(c).  This was made clear recently in a ruling by U.S. Magistrate Judge Jacqueline Scott Corley in  t'Bear v. Forman, 2019 U.S. Dist. LEXIS 19460.  The lender in this case isn't entirely out of the woods because Judge Corley did not decide (as of yet) whether the loans in question were consumer or commercial loans.

Curious about what makes a loan a consumer loan?  See Consumer Loan, Commercial Loan or Neither?