Application to File Brief and Brief of Amici Curiae, Center for Responsible Lending, National Association of Consumer Advocates, Public Citizen, Inc., and Public Good Law Center in Support of Appellants

Amicus Brief submitted to the California Supreme Court in De La Torre v CashCall Inc., 5 Cal.5th 966 (Cal. 2018): The Ninth Circuit has asked this Court whether the interest rate on consumer loans of $2,500 or more can render the loans unconscionable under section 22302 of the California Financial Code. The answer – with the proviso that any unconscionability determination must be made in the context of the terms and circumstances of the loans in question – is yes. . . .

When the legislature removed the interest rate cap on loans above $2,500, it did not impliedly repeal the historic principle that courts may intervene where a contract or provision is unduly oppressive or unconscionable. Rather, the legislature recognized that the statute’s unconscionability provision would remain a safeguard against the excesses of an unfettered free market. The doctrine of unconscionability, a “principle of equity applicable to all contracts generally,” applies to all provisions of all contracts. (See Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 820.) A loan’s interest rate, whether governed by a statutory rate cap or not, is no exception. The incorporation of Civil Code section 1670.5 into Financial Code section 22302 evinces a clear legislative intent that courts should police the consumer credit market for unduly oppressive contract terms. The legislative mandate of Finance Code section 22302 is clear: where the market for consumer loans fails to produce socially tolerable terms, the courts may step in.

The attributes of the loans at issue in this case – their relatively large size, the length of the repayment period and, notably, their high interest rates – provide ample foundation for a finding that the loans are in fact unconscionable. For the current proceeding, however, it is enough to say this: The interest rate on consumer loans of $2,500 or more can – in the context of the other terms and circumstances of the loans – render the loans unconscionable under section 22302 of the California Financial Code.