Regulation
Top Industry Execs Attend Small Business Finance Leaders Summit in Washington DC
January 29, 2024
Fifty top C-level executives attended the Small Business Finance Leaders Summit in Washington DC last week to discuss the economy, small business finance, policy issues, regulatory impacts, and industry best practices. Co-hosted by two major trade organizations, the Small Business Finance Association (SBFA) and the Innovative Lending Platform Association (ILPA), it was invite-only and open to members of both.
Speakers included US Senator Roger Marshall, Tom Sullivan from the US Chamber of Commerce, Holly Wade from the National Federation of Independent Business, Aaron Klein from Brookings, Will Tumulty from Rapid Finance, Justin Bakes from Forward Financing, Kirk Chartier from OnDeck, and Steve Allocca from Funding Circle, among others.
“As our industry matures, it’s important to provide industry leaders with an opportunity to connect and engage with high-level thought leaders,” said Steve Denis, Executive Director of the SBFA. “We believe our C-level Summit complements the Broker Fair and other industry conferences like Money 20/20 or Nexus. We hope to expand our Summit in June to bring in some new industry voices and will continue to focus on high-end content that is meaningful and strategic for our members and other top industry leaders.”
The organizations are planning another Summit in early June to build upon the success.
Financial Service Associations Urge Legislation on IRS Income Verification
January 25, 2024
The IRS doesn’t want financial service companies to be able to verify the income of customers, at least not through official channels like the Income Verification Express Services (IVES) system. On January 2 and 3, the IRS announced it would only allow IVES transcripts to be made available “to mortgage lending firms for the sole purpose of obtaining a mortgage on residential or commercial real property (land and buildings).” Government agencies will also not be allowed to use IVES.
“The IRS is implementing the provisions of the Taxpayer First Act (P. Law 116-25) with increased privacy and security requirements for access to confidential tax information,” it announced. “If tax transcript information is required by your firm for other than securing a mortgage, we recommend requesting it directly from the taxpayer.”
But relying on getting the information directly from the taxpayer defeats the whole purpose in more ways than one, many financial service trade associations say. On Wednesday, a letter jointly signed by the American Bankers Association, America’s Credit Unions, American Fintech Council, Consumer Data Industry Association, Electronic Transactions Association, Financial Technology Association, Innovative Lending Platform Association, Independent Community Bankers Association, Mortgage Bankers Association, Responsible Business Lending Coalition, and Small Business Finance Association urged senior ranking members of Congress to pass H.R. 3335. Dubbed the IRS eIVES Modernization and Anti-Fraud Act, it would “ensure the IRS follows the original intent of Congress to modernize the system and prevent disruptions to the consumer and commercial lending industries.”
Seven States Reintroduce Commercial Financing Bills
January 20, 2024
They’re BACCKKKK. The following states legislatures all have new bills in front of them for consideration.
North Carolina – Small Business Truth in Financing Act
Kansas – The commercial financing disclosure Act
Missouri – Commercial Financing Disclosure Law
New Jersey – An Act concerning commercial financing
Illinois – Small Business Truth in Lending Act
California – Commercial Financing Bill
Second Hearing on Broker Licensing in California
January 16, 2024The Judiciary Committee of the California State Senate was the next in line to discuss the continued push for commercial finance broker licensing. Several organizations came forward in support of the bill while others said that changes were necessary to the current proposal. The licensing bill (SB 869) was also discussed the day before in the Banking Committee.
You can watch the full thing below:
California Senate Committee Finds Support for Small Business Finance Broker Licensure
January 10, 2024The hot topic in a recent California Senate committee hearing was licensure for MCA brokers. In it, legislators took interest in broker commissions and how they’re paid. This was not a one-sided discussion. Representatives for Rapid Finance, Kapitus, Forward Financing, and the RBFC were present and able to give testimony. The general consensus was that a licensure framework was favorable but that there were still issues that need to be resolved. The bill at issue is SB 869.
You can listen to a copy of the audio we’ve obtained of the hearing on Spotify or watch the hearing in full below:
California to Hold Hearings on Commercial Finance Broker Licensing
January 8, 2024Members of the California state legislature are apparently not done with the commercial finance space. This time they want to expand the scope of the California Financing Law (CFL) to include “commercial financing providers” and “commercial financing brokers” for the purpose of licensure, regulation, and enforcement. In Senate Bill 869, commercial financing is defined as an “accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, or lease financing, intended by the recipient for use primarily for a purpose other than a personal, family, or household purpose.”
While the bill was technically introduced last year, its progress stalled. Now it’s not only back but it will also be the subject of back-to-back committee hearings on January 10 and January 11. To the extent these hearings are publicly accessible, deBanked will livestream them.
Biden Vetoes Congressional Resolution to Scrap CFPB’s Small Business Lending Rules
December 19, 2023
Bipartisan or not, President Biden formally vetoed S.J.Res. 32 which would have scrapped the CFPB’s 888 pages of soon-to-be implemented small business lending rules and forced the agency to create new ones.
The CFPB is obligated by the Wall Street Reform and Consumer Protection Act to collect data from small business finance companies (MCA included) so that it will be able to assess the market and measure potential disparities. It is a limited scope law that nevertheless resulted in 888 pages of rules explaining how to collect that data and send it to the federal government. They are slated to go into effect very soon.
Despite data collection being the intended purpose, Biden suggested in his official veto statement that the rules are actually intended to “conduct oversight of abusive and predatory lenders.”
“If enacted, this resolution would harm all those that stand to benefit from expanded transparency and accountability,” Biden said. “By hampering efforts to promote transparency and accountability in small business lending, Republicans are siding with big banks and corporations over the needs of small business owners.”
Unless litigation changes the timelines, many funders and lenders must start complying by October 1, 2024. This is a federal law, not a state requirement.
Brokers: What’s Your Address and Phone Number?
December 14, 2023
Brokers, this is no joke. In eighteen days, the State of Florida will by law require that brokers disclose their actual address and phone number in advertisements that promote their services as a broker. This is because Florida’s commercial financing disclosure law added its own twist by incorporating one of DailyFunder’s original rules to its statute.
Furthermore a broker may NOT:
(1) Assess, collect, or solicit an advance fee from a business to provide services as a broker. However, this subsection does not preclude a broker from soliciting a business to pay for, or preclude a business from paying for, actual services necessary to apply for a commercial financing transaction, including, but not limited to, a credit check or an appraisal of security, if such payment is made by check or money order payable to a party independent of the broker.
(2) Make or use any false or misleading representation or omit any material fact in the offer or sale of the services of a broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a broker, notwithstanding the absence of reliance by the business.
(3) Make or use any false or deceptive representation in its business dealings.
What’s the risk of non-compliance?
The Florida Attorney General has the right to commence administrative or judicial proceedings to enforce compliance with this part.
1. A violation of this part is punishable by a fine of $500 per incident, not to exceed $20,000 for all aggregated violations, arising from the use of the transaction documentation or materials found to be in violation of this part.
2. A violation of this part after receipt of a written notice of a prior violation from the Attorney General is punishable by a fine of $1,000 per incident, not to exceed $50,000 for all aggregated violations, arising from the use of the transaction documentation or materials found to be in violation of this part.
These rules were signed into law in June of this year and they apply to all deals funded starting January 1, 2024.
