Alert July 29, 2008

California Appellate Court Refuses to Enforce Lender’s Choice of Law Provision

A California appellate court recently held that a Nevada choice of law provision contained in California consumer loan agreements was unenforceable because it conflicted with state public policy. The Nevada-based lender made consumer loans in Southern California and its loan agreements contained Nevada choice of law provisions. Plaintiff filed a class action alleging that the lender violated California’s Finance Lenders Law. The court refused to honor the choice of law provision, holding that the “application of Nevada law would deprive a substantial segment of the borrowing public in this state of the substantive and regulatory protection California affords to all of its other customers” and “would impair California’s regulatory interests to a far greater extent than application of California law would impair Nevada’s interests.” Click here for Brack v. Omni Loan Company, Ltd., et al., No. D048198 (Cal. Ct. App. – 4th Dist. July 16, 2008).