On June 26, Florida Governor Ron DeSantis signed the Florida Commercial Financing Disclosure Law (FCFDL). As discussed here, the FCFDL mandates that covered commercial financing companies provide consumer-like disclosures for certain commercial financing transactions. The law also defines and prohibits specific acts by brokers of those transactions, including the collection of advance fees.
The FCFDL applies to multiple types of commercial financing, including commercial loans, lines of credit, and accounts receivable purchase transactions, subject to certain exceptions. For any covered transaction, the FCFDL requires disclosure of:
- The total amount of commercial financing, and if different from the financing amount, the disbursement amount after any deductions or withholdings, which must be itemized;
- The total amount owed to the financing company;
- The total cost of the financing;
- The manner, frequency and amount of each payment, or if there are variable payments an estimated initial payment and the methodology used to calculate variable payments and when payments may vary; and
- Certain information related to prepayment rights and penalties.
The FCFDL has exemptions for certain transactions and entities including:
- Federally insured Florida and federal “depository institutions,” as well as their holding companies, affiliates and subsidiaries;
- Commercial mortgages;
- Individual transactions of more than $500,000;
- Transactions with providers who sell or lease products manufactured, licensed, or distributed by that provider or certain related companies (e.g., certain commercial credit sales);
- Certain purchase money obligations;
- Leases;
- Providers who originate no more than five covered transactions in a 12-month period;
- Licensed money transmitters; and
- Certain floor plan financing transactions with motor vehicle dealers or rental companies.
The exception for Florida and federal depository institutions and related parties raises serious issues under the Commerce Clause of the U.S. Constitution. See Lewis v. BT Investment Managers, Inc., 447 U.S. 27 (1980) (holding invalid certain “parochial” legislation favoring Florida bank holding companies over out-of-state bank holding companies).
The FCFDL disclosures are much more limited than related statutes in California and New York. The Attorney General is given exclusive authority to enforce the FCFDL thorough voluntary compliance, administrative or judicial proceedings to enforce compliance, and fines limited to $20,000 in the aggregate ($50,000 for violations after written notice of prior violations). There is no private right of action under the FCFDL.
Although the FCFDL has an effective date of July 1, 2023, it only applies to transactions consummated on or after January 1, 2024.