California and New York are the two largest private-lending markets in the country and they take opposite approaches to usury. California writes the ceiling into its Constitution and exempts broker-arranged loans by statute. New York runs two ceilings — civil and criminal — and exempts by entity status and loan size. A private lender operating in both states needs the side-by-side, not just the headline numbers.

  • California ceiling: Constitution Art. XV §1; ten percent for consumer loans.
  • California exemption: Civ. Code §1916.1 — DRE-broker-arranged loans secured by real property.
  • New York civil cap: sixteen percent under Gen. Oblig. Law §5-501; voids the interest provision.
  • New York criminal cap: 25% under Penal Law §190.40; voids the entire loan.
  • New York exemptions: entity borrower at $250,000 (civil) or $2.5M (criminal).

How the ceilings are structured

California sets a single statutory ceiling at the higher of ten percent annually or five percentage points above the San Francisco Federal Reserve discount rate on the 25th day of the month preceding the contract or execution date (Cal. Const. art. XV §1; Civ. Code §1916.12). New York runs two ceilings in parallel: the civil cap at sixteen percent under Gen. Oblig. Law §5-501 and the criminal cap at 25% under Penal Law §190.40. Crossing the civil cap voids the interest. Crossing the criminal cap voids the loan entirely and creates felony exposure for officers who authorize the rate.

How the exemptions work

California exempts by the broker overlay. Civ. Code §1916.1 lifts the ceiling for any loan arranged by a California DRE-licensed real-estate broker and secured by real property. The exemption is procedural: a broker must be on the file in substance, not just in name. New York exempts by entity status and loan size. Loans of $250,000 or more to corporations sit outside the civil cap. Loans of $2.5M or more sit outside both caps. The exemption depends on the corporation being a real operating entity — see Barker v. Rokosz (E.D.N.Y. 2024) for the substance-over-form pierce.

How the servicer-licensing overlay differs

California treats servicing as a broker-regulated activity. A DRE-licensed broker who arranges a loan can service it within the broker license, subject to the Commissioner’s Regulations 2830–2835 trust-fund and reporting rules. New York treats servicing as a separate licensed activity. NY Banking Law Part 419 requires mortgage loan servicer registration with the Department of Financial Services for any person engaged in servicing residential mortgage loans in New York — and the regulatory definition does not exempt business-purpose loans on residential property.

How enforcement priorities differ

California enforces primarily through the DRE’s broker-discipline track. Audit findings — trust-fund commingling, missing three-way reconciliations, incomplete columnar records — feed license suspension and revocation actions. New York enforces primarily through the Department of Financial Services, with parallel attention from the Attorney General on consumer-protection grounds. The Department’s 2024 enforcement priorities included servicer registration compliance and consumer-credit pierces in business-purpose lending.

How private lenders structure cross-state deals

A California broker who originates a loan secured by California real property under §1916.1 holds the exemption inside California. The same broker arranging a loan secured by New York property runs two separate analyses: California usury (no exemption applies because the collateral is out of state and §1916.1 is a California exemption), and New York usury (the entity-borrower or loan-size exemption applies if the file supports it). A self-servicing California lender holding a New York note also faces NY Part 419 registration. The importance of mortgage licensing for private lenders walks through the multi-state framework.

Quick reference

  • California consumer cap: ten percent (Const. art. XV §1).
  • California non-consumer cap: higher of ten percent or five points above SF Fed discount.
  • California exemption: DRE-broker-arranged (§1916.1).
  • New York civil cap: sixteen percent (Gen. Oblig. Law §5-501).
  • New York criminal cap: 25% (Penal Law §190.40).
  • New York exemption (civil): entity borrower, $250,000+.
  • New York exemption (criminal): entity borrower, $2.5M+.
  • California servicer overlay: DRE broker authority.
  • New York servicer overlay: DFS Part 419 registration.

Reference content only. The interaction of state usury, federal Reg Z, and servicer licensing is fact-intensive — consult qualified legal counsel before applying this framework to a specific cross-state structure.

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