On June 28, Connecticut Governor Ned Lamont signed into law Senate Bill 1032 entitled An Act Requiring Certain Financing Disclosures, which requires certain providers of commercial financing to make various disclosures and requires providers and brokers to register. Connecticut now joins states like Utah, California, Georgia, New York, Florida, and Virginia (discussed here, here, here, here, here, and here) in requiring such disclosures.
Similar to Virginia’s law, the Connecticut Act limits “commercial financing” to sales-based financing in an amount not exceeding $250,000. For sales-based financing transactions, the Connecticut Act requires providers to make the following disclosures:
- The total amount of the financing;
- The disbursement amount, which is the amount paid to the recipient, excluding any finance charges that are deducted;
- The finance charge;
- The total repayment amount (disbursement amount plus the finance charge);
- The estimated repayment period;
- The manner, frequency, and amount of each payment, or a payment schedule and the amount of the average projected monthly payments if the payments vary;
- All other potential fees not included in the finance charge, including, but not limited to, draw fees, late payment fees and returned payment fees;
- Any fees or charges associated with prepayment;
- A description of any collateral requirements or security interests;
- Any amounts provided to the business under the agreement that will be paid by the provider to a broker; and
- Additional information regarding transactions that refinance a commercial financing transaction with the same provider.
Unlike California and New York’s commercial disclosure laws, the Connecticut Act does not require disclosure of the annual percentage rate. Notably, if the Banking Commissioner determines that the commercial financing disclosure laws of another state meet or exceed the Connecticut Act’s requirements, a provider may use that state’s form instead.
The Connecticut Act also requires a “provider” to register annually with the Banking Commission and pay a fee, unless an exemption applies. A “provider” is defined as “a person who extends a specific offer of commercial financing to a recipient and includes, unless otherwise exempt under this section, a commercial financing broker.”
The exemptions under the Connecticut Act include:
- Banks, bank holding companies, credit unions, or any subsidiary or affiliate of the same;
- Technology service providers for any exempt entity, so long as the person has no arrangement to acquire an interest in the transactions;
- Commercial mortgages;
- True leases;
- Purchase money obligations;
- Providers who extend no more than five commercial financing transactions in Connecticut in a twelve-month period;
- Certain transactions of $50,000 or more to motor vehicle dealers or rental companies; and
- Commercial financing transactions offered in connection with the sale of a product that the person manufactures, licenses, or distributes.
The Connecticut Act goes into effect on July 1, 2024.