Articles by deBanked Staff
Trade Group Sues CFPB Over Small Business Loan Data Collection Rules
January 4, 2024
The RBFC has filed a lawsuit against the CFPB over its data collection rules that are scheduled to go into effect this year.
As readers may recall, the federal regulator created 888 pages of rules governing how small business lenders (including MCA companies) will be required to collect and submit data for federal analysis.
At first, it appeared that the CFPB had way overstepped its bounds when Congress, on a bi-partisan basis, passed a resolution to scrap the rules. President Biden, however, then took the unprecedented step of vetoing their resolution on his belief that the rules were necessary to “conduct oversight of abusive and predatory lenders.”
One week after the veto the RBFC filed its lawsuit.
Although the CFPB is required by law to collect small business loan data pursuant to Section 1071 of the Wall Street Reform and Consumer Protection Act, the plaintiff took umbrage with the CFPB’s allegedly deliberate misinterpretation of the words “credit” and “loan” as they’re written in that statute. That’s because the CFPB unilaterally decided those terms also apply to MCAs/Sales-Based-Financing agreements. The RBFC contests that the CFPB has the legal authority to include products outside the scope of the federal statute and asks the Court to declare the rules invalid as they apply to sales-based financing.
Let’s Talk About Merchant Cash Advance Collections
January 3, 2024One of the best ways to maximize the effectiveness of merchant cash advance collections is to do a few simple things before and after the deal is funded. deBanked sat down with Leo Vargas, CEO of Triton Recovery Group, to discuss one of the most popular topics in the industry. You can watch it below or listen to it on Spotify if you don’t have time for video.
SBFA Appeals Decision in Disclosure Law Lawsuit
January 2, 2024The Small Business Finance Association will appeal the decision issued in its case against the California DFPI over the legality of its disclosure laws.
The SBFA filed its suit in December 2022, alleging that the disclosure laws in California violated the First Amendment and that they were pre-empted by a federal law (TILA) that governs APR calculations. After the Court initially allowed the case to proceed in March 2023, it reversed course and dismissed the SBFA’s lawsuit in December.
On December 29, the SBFA filed its notice of appeal to the United States Court of Appeals for the Ninth Circuit.
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.
Intuit’s SMB Loans Relatively Flat Year-over-Year
December 18, 2023
Intuit originated $279M worth of term loans to small business for the fiscal quarter ending October 31. This is down from the $314M originated over the same time period last year.
“As of October 31, 2023 and July 31, 2023, the allowances for loan losses on term loans to small businesses were not material,” the company wrote in its earnings report.
Further, Intuit said that “In August 2023, we entered into a forward flow arrangement with an institutional investor. Pursuant to this arrangement, we have a commitment to sell to the institutional investor a minimum of $250 million in participation interests in unsecured term loans purchased or made to small businesses over the next 18 months, subject to certain eligibility criteria.”
Intuit did not raise its term loan program on its earnings call nor did analysts ask about it.
Here’s how Intuit’s flat SMB loan originations stacks up against some of its direct competitors:
Square Loans – Steady
PayPal – Significant pullback
Shopify Capital – Significant increase
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.
deBanked’s Top Five Stories of 2023
December 13, 2023
deBanked’s most read stories of 2023 are in. Here’s what the industry read about most this year!
EIDL & ERC Updates
Readers tuned in to learn about EIDL loans going bad and the roller coaster surrounding the ERC program.
See:
As IRS Announces Pause of ERC Payouts, Businesses May Resume Pursuit of Upfront Alternatives
Whoa, That’s a Lot of Bad EIDL Loans
Reliant Funding
There was a lot of talk about Reliant Funding this year, which first made waves in February and then later in September.
See:
Reliant Funding Shifts Gears
The LCF Group Acquires Key Strategic Assets from Reliant Funding and Sets Course for a Record-Breaking Year
GFE
The company is called Global Funding Experts. After they raised a debt facility of $100 million, everyone wanted to know more!
See: Experts: How GFE Went Big
Bluevine Cutting off ISOs
The news just broke, but seeing a big name change their business strategy like this has got many people talking.
See: Bluevine Partner Email Circulates
Florida Commercial Financing Disclosure Rule
Guess what’s about to go into effect? A unique disclosure rule like nowhere else. Brokers, I hope you’ve read this one!
See: Pending Florida Law Draws From DailyFunder’s Rulebook
Top stories of 2022
Top stories of 2021
Top stories of 2020
Top stories of 2019
Top stories of 2018
Top stories of 2016
Missouri Resurrects its Commercial Financing Disclosure Bill
December 10, 2023For the third time, a commercial financing disclosure bill has been introduced in Missouri. Senate Bill 753, introduced this month, is nearly identical to SB 187 which failed to gain traction this year.
A staple of the bill is its broker licensing requirement, which would require an annual renewal. Brokers would not be able to broker any deals for Missouri merchants until they were registered.
