On February 16, Illinois State Representative Hoan Huynh (D) introduced HB3064, the Small Business Truth in Lending Act, that would impose certain mandatory disclosure requirements for commercial financing transactions and require registration of small business finance companies and brokers. Illinois follows the lead of states such as New York, California, Utah, and Virginia which have each enacted legislation imposing additional requirements on small business financing transactions. The differences between the state requirements creates an increasingly complex multi-state regulatory environment for small business finance companies. We expect that additional states will continue to push legislation forward in this area, as legislators in Connecticut, Maryland, and Missouri have also introduced bills this year.

The Illinois bill would impose disclosure requirements on broad categories of commercial financing, including closed-end commercial financing, open-end commercial financing, sales-based commercial financing, factoring transactions, and “other forms” of commercial financing. Much like the requirements in New York and California, the Illinois bill provides for some variations in the disclosure requirements depending on the transaction type. For closed-end financing, the bill would require the following:

  • The total amount of commercial financing, and if different from the financing amount, the disbursement amount after any deductions or withholdings;
  • The finance charge;
  • The percentage rate calculated in accordance with the federal Truth in Lending Act;
  • The total repayment amount, which is the disbursement amount plus the finance charge;
  • The term of the financing;
  • The payment amounts or a description of the methods used to calculate the amounts and frequency and the amounts of the average projected payments per month;
  • A description of all other potential fees and charges not included in the finance charge, including draw fees, late payment fees, and returned payment fees;
  • Any fees that would be assessed for a prepayment in full; and
  • A description of collateral requirements or security interests, if any.

The bill does contain exceptions for certain financing providers such as banks and certain types of financing such as commercial mortgages and transactions of more than $2,500,000. However, much like California and New York, certain bank partners may not be exempt, as the exemptions appear to carve out some technology providers that have an arrangement to obtain an interest in the financing after origination, even if the transaction was originated by a bank.

Troutman Pepper routinely assists clients in assessing the applicability of and complying with commercial disclosure laws and will continue to monitor the developments in state and federal regulation of commercial finance.

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Photo of Caleb Rosenberg Caleb Rosenberg

Caleb is counsel 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…

Caleb is counsel 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 Mark Furletti Mark Furletti

Mark helps clients navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small business, particularly in connection with credit, deposit, and payments products. He is a trusted advisor, providing practical legal counsel and advice to providers of financial

Mark helps clients navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small business, particularly in connection with credit, deposit, and payments products. He is a trusted advisor, providing practical legal counsel and advice to providers of financial services across numerous industries.

Photo of Jeremy Rosenblum Jeremy Rosenblum

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products…

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products designed to serve the needs of unbanked and under-banked consumers), bank overdraft practices and disclosures, geographic expansion initiatives, and compliance with federal and state consumer protection laws, including statutes prohibiting unfair, deceptive and abusive acts and practices (UDAAP); usury laws; the Truth in Lending Act (TILA); the Electronic Funds Transfer Act; E-SIGN; the Equal Credit Opportunity Act; and the Fair Credit Reporting Act (FCRA).

Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield helps consumer-facing clients navigate compliance, litigation and regulatory risks posed by the complex web of state and federal consumer protection laws. He is a trusted advisor and tireless advocate, helping clients develop practical compliance and dispute-resolution strategies.