Usury Law Not Applicable to Judgment Creditor’s Forebearance Agreement

  In consolidated appeals, and in a lengthy opinion in Bisno v. Kahn, the First Appellate District concludes that California’s usury law does not apply to a judgment creditor’s agreement to forbear collecting on a judgment. Held: “Because the usury law does not expressly prohibit a party from entering into an agreement to forbear collecting on a judgment, usury liability does not extend to judgment creditors who receive remuneration beyond the statutory 10 percent interest rate in exchange for a delay in enforcing a judgment.”

  However, “any forbearance fee does not become part of the judgment and is not an amount that must be paid to satisfy the judgment under the Enforcement of Judgments Law [citation omitted]. Rather, a forbearance agreement is a contract between the judgment creditor and the judgment debtor that is separate from the judgment to which it applies. Consequently, a forbearance agreement must be enforced in a separate contract action and is subject to standard contractual defenses such as duress and unconscionability.”


   Mr. Daymude consults with clients and accepts cases involving California’s usury law and cases to enforcement judgment. For other types of cases accepted, please scroll this page and visit My Practice page. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.

Loans Arranged by Real Estate Brokers Are Exempt From Prohibition on Usury

  A loan secured by a lien on real property is exempt from the constitutional prohibition on usury if the loan is made or arranged by a licensed real estate broker. Civil Code section 1916.1 explains that a loan is arranged by a person licensed as a real estate broker when the broker acts for compensation or with the expectation of compensation for soliciting, negotiating, or arranging the loan for another.

  In Brock v. California Capital Loans the court held that even when the lender on such a loan is a corporation that is wholly owned by the arranging broker, the broker can still be found to have arranged the loan “for another” for purposes of section 1916.1. In such a situation, the broker may also be found to have arranged the loan “in expectation of compensation” even if the only compensation the broker will receive is the profit his wholly owned corporation reaps from the interest on the loan.


iStock_000016600371XSmall  I consult with clients and accept cases involving the prosecution and defense of usury claims. For other types of cases I accept, please consult the My Practice page. If you are seeking a consult or representation, please give me a call at 818.971.9409. – Michael Daymude