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Question: What is our monetary risk for failing to comply with California’s restrictions on the collection of per diem interest?

Answer:

Based on recent California Consent Orders, the risk is substantial.

California Civil Code section 2948.5 and California Financial Code section 50204(o) govern the collection of per diem interest by mortgage lenders in California. The California Department of Financial Protection and Innovation (DFPI) has been issuing strict penalties for repeat offenders who overcharge borrowers per diem interest in regards to the disbursement of loan proceeds at funding. Below are a few recent examples:

• In November 2025, the DFPI issued a Consent Order against a licensee for, among other things, overcharging per dieminterest on 10 mortgage loans.  The DFPI discovered the alleged overcharges during a routine examination and subsequent self-audit.  In the Consent Order, the DFPI affirmed that borrower refunds had been made, but also ordered the licensee to pay a $100,000 penalty.

• In August 2025, the DFPI entered into a $1.8 million Settlement Agreement with a former mortgage lender and servicer for alleged violations that included per dieminterest overcharges after repeatedly finding that the company charged excess per diem interest. 

• In May 2025, the DFPI issued a Consent Order against another licensee for charging per dieminterest for more than one day prior to disbursement of the loan proceeds from escrow.  This Consent Order also carried a $100,000 penalty. 

MQMR recommends that mortgage lenders doing business in California ensure adequate oversight of and routine self-audits for compliance with per diem interest collection requirements.