California Court of Appeal Invalidates Default Interest Provision on Nonconsumer Loan

The California Court of Appeal recently held that default interest and late fee charges are unlawful when they are assessed against the full outstanding principal balance on a partially matured note, regardless of whether the loan is a consumer or nonconsumer loan. At present, lenders operating in California should be prepared for borrowers to challenge the imposition of default interest applied against the entire unpaid principal balance in the event of a nonmaturity default.

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