The same year that the Great War ended, the voters of California approved an initiative measure governing allowable interest rates. This initiative remains uncodified but West Publisher designates these statutes as Civil Code Sections 1916-1 to 1916-5. Among other things, the 1918 initiative prohibits compounding of interest "unless an agreement to that effect is clearly expressed in writing and signed by the party to be charged therewith". In 1934, the voters amended the California Constitution to address interest rates and for first time exempt certain lenders from usury restrictions. This amendment, Art. XX, § 22, was later amended and reenacted as Article XV, § 1.
Specified lenders are now exempt from interest rate limitations under Article XV. For example, the legislature has exempted "incorporated admitted insurers". Cal. Ins. Code § 1001.1. Did this mean that exempt lenders were also exempt from the 1918 initiative's requirement regarding compound interest?
Yesterday, the California Supreme Court in an opinion by Justice Carol A. Corrigan held:
"[T]he 1934 amendment impliedly repealed the compound interest limitation as to exempt lenders".
Wishnev. v. The Northwestern Mutual Life Ins. Co., Supreme Ct. Case No. S2465641 (Nov. 14, 2019).The Court cautioned, however, that its conclusion "does not mean exempt lenders may charge compound interest without a contractual or legal basis to do so" (footnote omitted).