California Finance Lender (CFL) Can Sell Loans to Non-Institutional Investors

In Montgomery v. GCFS, Inc., (June 12, 2015), the Court of Appeal of the State of California, First Appellate District, Division 5, upheld the trial court’s sustaining demurrers from a borrower who tried to evade repayment of a loan because the CFL licensee had sold the loan to a third-party who was not an ‘institutional investor.’  In its decision, the Court of Appeal made clear that Financial Code Section 22340 allows a CFL to sell loans to ‘institutional investors’ but does not prohibit a CFL from selling loans to non-institutional investors.

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