The California Finance Lenders Law prohibits any "person" from engaging in the business of a "finance lender" without a license, unless otherwise exempt. Cal. Fin. Code § 22100(a). The CFL defines a "finance lender" as follows:

"Finance lender" includes any person who is engaged in the business of making consumer loans or making commercial loans. The business of making consumer loans or commercial loans may include lending money and taking, in the name of the lender, or in any other name, in whole or in part, as security for a loan, any contract or obligation involving the forfeiture of rights in or to personal property, the use and possession of which property is retained by other than the mortgagee or lender, or any lien on, assignment of, or power of attorney relative to wages, salary, earnings, income, or commission.

Cal. Fin. Code § 22009.

This definition is problematical for several different reasons. First, the use of "includes" is ambiguous, leaving the public to guess whether it was intended to be a term of limitation or enlargement. See Why The Word “Includes” Conflates The Separation Of Powers. Second, the use of "may" is indefinite, leaving the public to guess what else might or might not constitute the business of making loans. Third, "loan" is not defined, leaving the public to guess at whether a particular financial arrangement involves making a "loan". See When A Purchase And Sale May Be A Loan.

Common sense should require that the CFL apply only to persons who actually make loans. However, in Belyea v. Greensky, Inc., 2023 WL 8701311, the defendant, Greenksy, argued that it was not subject to the CFL because it "simply supplies the technology that allows merchants to present their customers with bank financing, and then, if the loan closes, a GreenSky affiliate services the loan." Judge Jacqueline Scott Corley rejected this argument, stating:

 As quoted above, § 22009 specifies “the business of making consumer loans or commercial loans may include lending money” and “taking . . . security for a loan.” Cal. Fin. Code § 22009 (emphasis added). Nowhere does § 22009 indicate “the business of making consumer loans” only includes those two activities. Rather, those two activities are examples of what “the business of making consumer loans... may include.” Id. (emphasis added). Plaintiffs sufficiently plead “the business of making consumer loans” may also include GreenSky's conduct. So, Plaintiffs plausibly allege GreenSky is a “finance lender” for purposes of the California Financing Law.

Although Judge Corley's decision is at odds with a common understanding of the meaning of "making loans", it is consistent with at least one prior enforcement decision that I wrote about several years ago. Commissioner Finds Funding Is Not A Sine Qua Non For Lender Status.

I am surprised that Section 22009 has not been challenged as being void for vagueness because it is beyond all peradventure that persons of common intelligence can only guess as to its meaning and will differ as to its application. As Justice Brennan once observed:

The requirement that government articulate its aims with a reasonable degree of clarity ensures that state power will be exercised only on behalf of policies reflecting an authoritative choice among competing social values, reduces the danger of caprice and discrimination in the administration of the laws, enables individuals to conform their conduct to the requirements of law, and permits meaningful judicial review.

Roberts v. United States Jaycees (1984) 468 U.S. 609, 629, 104 S.Ct. 3244, 82 L.Ed.2d 462.