On June 9, California’s Office of Administrative Law approved commercial financing disclosure regulations (Regulations) which require consumer-like disclosures for certain commercial financing products such as small business loans and merchant cash advances. With this final step completed, the Regulations from the Department of Financial Protection and Innovation (DFPI) will become effective on December 9, 2022, completing a process that began with the passage of SB 1235 in 2018.

Until this year, only New York had also passed a similar law requiring commercial financing disclosures, which is currently at the proposed regulations stage (see our blog post on New York’s proposed regulations here). However, already this year, Utah and Virginia have each passed statutes requiring the registration of certain commercial finance companies in addition to imposing disclosure requirements (see our blog posts on Utah’s law here and Virginia’s law here).

The Regulations require providers of commercial financing to give the recipient of the financing-specific disclosures in the precise language and format detailed by the Regulations at the time the provider extends the commercial financing offer. The format requirements detail specific rows and columns that must be used for a disclosure table and the terms that must appear in each section of the table.

Despite significant pushback from industry groups during the rulemaking process, the regulations require an APR disclosure for all product types, including sales-based financing transactions such as merchant cash advances. The Regulations provide information about how the APR disclosure must be calculated.

Additionally, although there is an exemption for depository institutions, the Regulations expressly apply to certain partners of depository institutions. As a result, despite the exemption, banks will need to determine applicability of the Regulations to appropriately assess their partners’ compliance practices.

We routinely assist clients in developing and maintaining commercial finance programs and will continue to monitor the developments of state regulation of commercial finance.

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Photo of Caleb Rosenberg Caleb Rosenberg

Caleb is an associate in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and…

Caleb is an associate in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small businesses in the credit and alternative finance products industry.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Chris also leverages insights from his litigation and enforcement experience to help clients design new products and processes, including machine learning marketing, fraud prevention and underwriting models, product structure, advertising, online application flows, underwriting, and collection and loss mitigation strategies.

Chris brings a highly practical focus to his legal advice, informed by balancing a deep understanding of the business of consumer finance and the practical priorities of federal and state regulatory agencies.

Chris speaks frequently at conferences across the country on consumer financial services law and has been featured in numerous articles in publications such as the Wall Street Journal, the New York Times, the Washington PostAmerican BankerNational Law JournalBNA Bloomberg, and Bank Safety and Soundness Advisor.

Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance…

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance counseling to help businesses with the myriad federal and state consumer protection laws and laws regulating financial services companies.

Photo of Mark Furletti Mark Furletti

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured…

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured loans, and deposit products. He counsels providers of consumer and small business financial services, including banks, on regulatory compliance, and defends them in class action litigation and government supervisory and enforcement matters. He also counsels purchasers of merchant receivables, companies that specialize in online small business lending, and companies that interact with their customers electronically or that set up recurring billing arrangements with their customers.

Mark regularly provides guidance on electronic payments and payment network rules, electronic contracting and mobile commerce, online banking, retail installment sales, preparing for examinations by the Consumer Financial Protection Bureau (CFPB), responding to CFPB supervisory requests (including so-called PARR letters), Article 9 of the Uniform Commercial Code, lease-purchase transactions and consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), Electronic Funds Transfer Act (EFTA), Electronic Signatures in Global and National Commerce Act (E-SIGN), and statutes prohibiting unfair, deceptive, and abusive acts and practices.

He is the co-chair of the American Bar Association’s (ABA’s) National Institute on Consumer Financial Services Basics. He previously served as co-chair of the Electronic Financial Services Subcommittee of the ABA’s Consumer Financial Services Committee.

Previously, Mark worked for the Federal Reserve Bank of Philadelphia for several years, during which he wrote more than 15 articles on consumer credit and payments topics and advised those crafting regulations on consumer credit and consumer payments issues. One article, “The Debate Over the National Bank Act and the Preemption of State Efforts to Regulate Credit Cards,” 77 Temple L. Rev. 425 (2004), was named best student article by the American College of Consumer Financial Services Lawyers. Other published articles include “Credit Card Pricing Developments and Their Disclosure,” 13 J. of Fin. Transformation 5 (2005).

Mark also worked as a business consultant, assisting the nation’s largest retail banks and credit card lenders with customer strategy issues, and as a manager at one of the largest credit card issuers in the United States.

Photo of Chris Capurso Chris Capurso

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and…

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and other credit programs. He provides guidance on federal consumer protection laws and regulations, including TILA, ECOA, ESIGN, and GLBA.