Articles by Ken Greene
DFPI Increases Equity Requirements For California Finance License
December 20, 2024Ken Greene is an attorney with the Law Office of Kenneth Charles Greene. To contact Ken, email: ken@kengreenelaw.com
The California Department of Financial Protection and Innovation (“DFPI”) recently made an announcement (rather quietly, in my opinion) that may prove disturbing to anyone applying for or maintaining a California Financing Law (CFL) lender of broker license. It has raised the equity requirement rather dramatically. Brokers must have and maintain a $50,000 net worth; Lender/Brokers must have and maintain a $250,000 net worth. This applies to every CFL applicant and licensee.
After a year in which licensees, particularly lenders (termed “providers” by the DFPI) shouldered the significant burden of the new disclosure laws, this increase will not be welcome news. One wonders just what the DFPI is thinking as lenders and brokers stop lending in California.
Maybe that will change next year with the departure of Commissioner Clothilde V. Hewlett. The Commissioner announced her retirement at the end of this year after serving in that position since 2021. Her background in consumer services and affairs, as well as victims’ compensation is certainly commendable. However, this may have translated to more oversight than the commercial finance industry needs or warrants. In this writer’s opinion, a bit more of Adam Smith’s laissez-faire economic philosophy is warranted. If the State of California truly wants to innovate and protect, the scope of those responsibilities should include not only protecting the borrowers from unscrupulous lenders, but protecting lenders from overbearing legislation which chases them out of the state. This is a disservice not only to the lenders, but to borrowers who are then deprived important channels of finance.
The Law Offices of Kenneth Charles Greene present this article. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Offices of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene is prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author..
New York Commercial Disclosure Regulations Approved
February 7, 2023With permission to be republished from Leasing News
Ken Greene is an attorney and Editor of Leasing News. To contact Ken, email: ken@kengreenelaw.com.
On February 1, 2023, the New York State Department of Financial Services (“DFS”) adopted final regulations related to its new Commercial Finance Disclosure Law (“CFDL”) found in Article 8, Sections 801-811 of the New York Financial Services Law.
As a reminder, here are the major provisions of the CFDL:
- The law only applies to transactions which are less than $2.5 million;
- Banks and similar financial institutions are exempt;
- True (operating) leases are exempt;
- Commercial transactions secured by real property are exempt;
- Anyone who makes no more than 5 transactions in New York in a 12 month period is exempt;
- Certain vehicle dealers (for transactions which exceed $50k) are exempt;
- Disclosures must be made at the time of extending a specific offer; and
- Generally, the disclosures must include the amount of financing, APR, repayment amounts, term, finance charge, and description of collateral, if any.
Pursuant to the 53 pages of regulation, the CFDL:
- Applies only to transactions where the recipient is in New York;
- Exemptions extend to all majority owned subsidiaries of banks (because they are subject to consolidated oversight);
- Does not require disclosure of broker compensation in the disclosure forms, but still requires disclosure of broker fees in writing;
- Requires that APR be calculated in accordance with either the United States Rule or Appendix J of Reg Z;
- Allows for a digital signature by the recipient on the disclosure forms;
- Has font, rows and column requirements virtually identical to California law;
- Limits the duties of brokers to transmittal of disclosures and providing financer with evidence of transmission. There does not appear to be a document retention requirement like the one in California.
The New York regulations are quite similar to the California rules.
One important difference between the two is the $2.5 million threshold for New York versus the $500k threshold in California. Another major distinction between the two is the express inclusion of bank subsidiaries in the New York law, whereas the California regulations are unclear on this issue.
The compliance date for these regulations is six months after publication of the Notice of Adoption in the State Register. That appears to have happened already, so prepare for compliance on or before August 1, 2023.
This article is presented by the Law Office of Kenneth Charles Greene. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Office of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene, is strictly prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author.
The FTC Proposes to Ban Employment Non-Compete Clauses
February 6, 2023As also published in Leasing News
To welcome in the new year in its inimitable way, the Federal Trade Commission (“FTC”) proposed new rules that would ban employers from imposing non-compete on their employees. If passed, the new rule would provide that it is an “unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with an employee, to maintain a worker with a non-compete clause, or, under certain circumstances, to represent to a worker that the worker is subject to a non-compete clause.”
Per the FTC, a non-compete clause is a “contractual term between an employer and a worker that typically blocks the worker from working for a competing employer, or starting a competing business, within a certain geographic area and period of time after the worker’s employment ends.” As such, these clauses have historically been considered appropriate subjects for scrutiny under the nation’s antitrust laws such as the Sherman Act.
The prospective change in federal law was prompted by what the FTC calls “natural experiments” by virtue of new legislation in several states that limit or ban non-competes. Non-competes are either entirely or largely unenforceable as against public policy in California, North Dakota, the District of Columbia, and Oklahoma. Maine, Maryland, New Hampshire, Rhode Island, Washington and most recently, Colorado, have severe limitations on non-competes. The “experiments” in these states apparently prompted President Biden, in July of 2021, to issue his “Promoting Competition in the American Economy Order”, a broad Executive Order that purports to encourage innovation and competition in the American workplace. The Order asks the FTC to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” Here is what the Executive Order looks like:
https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/
The FTC has sought public comments to the proposed rule. The comment period ends on March 6, 2023. Thereafter, the new law may take effect as soon as 180 days following the comment period. Instructions for sending comments are found in the Notice of Proposed Rulemaking.
https://www.ftc.gov/system/files/ftc_gov/pdf/p201000noncompetenprm.pdf
One of the upsides of a non-compete is that it helps protect trade secrets and IP, but this can be achieved through a confidentiality or non-disclosure provision. It also keeps former employees from taking your business model and creating a competitive business, which may be difficult to achieve otherwise. However, do you really want to retain an employee who wants to leave simply because he signed an agreement that says he or she cannot compete with you?
The downside of non-competes is that, to some, they violate public policy by restricting the mobility of workers. They are also limited in scope, and expensive to enforce.
What does it mean to you? The general consensus is that the new law will be challenged in court. If it is not, and it becomes law, not only will you no longer be able to legally use non-competes with your employees, but you will have to rescind existing non-competes and inform your employees that the clauses are no longer in effect.
Stay tuned for updates.
This article is presented by the Law Office of Kenneth Charles Greene. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Office of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene, is strictly prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author.
