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But this California law is requiring a lot more detail than just a

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 simple just a simple disclosure form.

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well

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here's a

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here's a good thing to talk about first because we've talked

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 about disclosure laws on here. I feel like a ton if

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 there's a law being proposed if one passes if

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 one goes into effect.

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And whenever the topic is brought up, I usually

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 have I usually

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 have people tell me that.

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That they're in favor of the disclosure law and

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 I'm like, you know, oh, okay. Tell me about that and say

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 well we're one of the good guys and we're in favor of disclosing. Why

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 wouldn't we want to you know, provide accurate and

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 transparent information to our customers I said,

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Well, yeah that makes sense. You know, that would make

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 you a good person or you know, one of the good guys if you want to make sure that the

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 the other party has all the information to make an informed

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 decision, but when these laws are drafted they're not

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 always.

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They're not always coming in with that being in the

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 end goal. Yeah, it's not just about there being

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 a form or an APR that makes

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 the customer more informed because all these other things

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 that come with that. Yeah that

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 are going to make it more expensive and more difficult

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 for you to operate your business. And and

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 this is this is what this is what's happened? Yeah with

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 with California for Virginia. Yeah there,

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 you know, there was some legal leg work that company has

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 had to jump through. I've heard from several funding comedy

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 that said they are confident that they're able

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 to continue funding like they were before they've got the form like

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 we've got the form the form the form everyone keeps

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 they can't talk about the form enough. We have the form we put

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 the form we're good. We're doing the form we our form

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 is good and then it's like okay on to California. What's my

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 California form? And it's like hold on. This one's

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 not just about a form. There's a lot more going on here in California,

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 and I think it's interesting because when we talk

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 about,

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And you we actually there's a there's a video

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 that we do we actually went through the form with everyone like this is

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 what this could mean, you know talk with your lawyer don't we're not

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 giving legal advice but and it was a form we sat here

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 we went through the form we went through the form but in California, it's actually a lot

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 different, you know, it's gonna require specific disclosures on

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 these contracts on the commercial Finance contracts,

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 you know anywhere from

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 you know, the actual APR, you know

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 from normal things like that to when it

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 comes to the operation process when it

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 comes to you know, what exactly the my new

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 details and something we spoke about earlier was when we

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 were off camera was this specific this

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 school this specific law is requiring so

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 much more detailed and just kind of

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 a generic overview of you know, hey, this

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 is a product. Here's the epr sign and we're done. This is

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 this actually has more, you know,

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Conversations that can happen that can trigger, you

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 know into talk about,

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 you know business about talk at

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 having conversations that you know will need to

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 be logged going to be timed. So Sean, let

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 me ask you this. What do you think overall is

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 the one the main thing that people should be aware of if they're

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 thinking about doing business in California? All right.

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 So I think this there's two things one one is with Virginia

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 and don't quote me on this because this

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 is my takeaway if I'm talking with someone who

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 is more knowledgeable about it than I but with in

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 Virginia the form the infamous form

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 that we've talked about is that that form is required with

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 the contract, right? So you're funding the

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 merchant you're doing the deal. Here's the disclosure form.

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Easy in California. My understanding is

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 that it's a little bit different.

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If you need to disclose potentially earlier on

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 in the conversation, it may not

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 just be here. It is with the contract. I believe

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 it has more to do with when you're making proposals to

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 the merchant when you're like, you know you

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 qualify I think for you know, 10,000 or you

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 know, fifteen thousand dollars easily approximate terms

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 we're talking about that conversation now is a

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 little bit more dangerous than it used to be because you have

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 to worry about whether or not it's entered into the territory as to

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 whether or not you need to now offer the state required

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 disclosures. So the whole process you

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 just mention the word like term operational process.

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 Yeah.

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The operational process could be affected

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 because everyone is used to pitching the merchant terms

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 right at some point, right? It could

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 be a pre-approval. It could be Ballpark and then you get

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 to the point where like these are the final terms sign the contract.

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 However, you may need to make disclosures prior

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 to the final terms. It could be early in the conversation when

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 you're like texting the merchant we might be able to

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 get you 10,000 out of six month deal right that and

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 don't quote me. You need to talk to a lawyer but

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 that could potentially be a scenario in which

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 you are now required to give some sort of estimated

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 APR based upon a state required calculation. Yeah,

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 and that you have to log this particular conversation

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 and report it back to the funding

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 company that it happened along with the disclosure that you provided and

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 something that the Articles say is that like all this

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 data that you have from the first conversations you

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 have, you know that has all the details of you

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 know, the time the dates that all needs to be stored. You can't

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 just

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The way because part of the compliance is that

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 you have proof of the data showing that you know, this is all you

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 know for this specific transaction. This is

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 all that has gone into it. So it's not just contract form

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 you're done. There's a lot more that goes into the California

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 law. When did you talk to the merchant? What did what

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 exactly did you say Oh you talked about this. Did you

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 send over the necessary disclosures? Did you use

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 the estimated APR that is required by the state. Did you

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 log in the conversation? Did you did you put down the put it

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 down in a journal and time stamped that this happened? Did you report

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 it back to the funder when it happened? Guess what? My understanding isn't

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 don't call me on everything I say but my understanding that

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 the fonder is responsible for whatever the

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 broker is doing if you're like, well, you know,

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 I might just kind of keep Blind Eye to some of it. You know,

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 we'll we'll comply where we can and if the broker

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 goes off and the deep end and starts making proposals that are outside

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 of my purview. You know, that's not on me. My understanding

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 is that it may be on you if you're the

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Company if the broker is negotiating deals with

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 the merchant they may be required to give approvals or

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 pre-approvals or terms that are approved by the funder and

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 abide by all the necessary disclosures every single

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 time. They make those offers to the merchant. These are things you

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 need to think about. Do not quote Sean Murray. Do not

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 say that Sean Murray told you to do this.

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This is just my understanding, please hire qualified

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 Council, but the other thing

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 is that you know, how did this compare to California? That's just

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 one thing this whole trigger of disclosure.

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The other side of it is that it's it's

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 a it's not just a matter of filling out

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 a form you now need to calculate an APR. First of

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 all, if you're doing a loan, that's easy.

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 Yeah, but if you're doing say a purchase the

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 future sale, if you're doing an MCA transaction, there's no such

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 thing as an APR now because it's so

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 short that it wouldn't be appropriate some people think they're

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 like, oh you don't want to give an APR because your argument is

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 that it's so short-term that it's not appropriate not about appropriate. It's

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 just mathematically not possible to calculate because you

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 have no element of time and APR requires a

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 precise element of time in the calculation and

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 there is none in an MCA. Guess what this date

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 of California it came to terms with that

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 because it is true. So they said guess

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 what you are going to estimate one. You

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 can use two methods to decide what it

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 is Oracle method or the underwear. Yeah Historical Method or

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 the underwriting method not gonna get into the two different methods, but it's my

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 understanding.

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That New York is going to try to do the same thing, but they're like you choose

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 the method that you want and it's you

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 know, it's an estimate but we're gonna hold you to it if you're estimate is

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 wrong, even though you're just estimating right? So you

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 have to work with legal counsel to make sure that whatever

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 estimate you use whatever methodology you use

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 is up to Snuff with what they want. But then

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 it goes one step further. I already had no idea about this

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 at all until I had this conversation last week it then

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 so all right. So I a fundamental

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 piece of a MCA agreement.

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Is that there is a true-up or reconciliation provision,

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 which means that if

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 a Merchants sales go up or down

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 the merchant has the ability to reconcile the

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 payments based upon

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 whether or not funds are over collected or undercollected. So if

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 the sales tank like hey, you were technically debiting out too

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 much. You need to reimburse me for the overage Bill the

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 other way too. Hey your sales doubled by technically should be

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 giving you more you should have been collecting more than you did at the

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 reconciliation and that's the true up.

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California says okay. We understand.

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That too, but now there's another here's another

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 thing.

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Do you predict any of these circumstances, you

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 know these scenarios happening where you're going to need to

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 do one of these reconciliations? I don't know if anyone predicts

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 them. Yeah, you know, that's the whole point of doing the troop because you can't

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 really predict it you make a prediction the prediction was wrong. So you

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 got to do the true up or the reconciliation because it's hard to

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 predict the state is saying however my understanding summary

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 understanding not legal advice. I'm

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 not a lawyer but my understanding that the state is saying you now

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 have to come up with your own predictions for

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 I guess one off

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 events that could trigger reconciliation or chew up

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 and

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And come up with the date that you think these things will happen and the

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 amount.

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That will happen when you do these two ups.

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I've never heard of anything like this before in my entire life.

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 I don't know if any funding company has ever even performed

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 this retent potential calculation. And so, of course,

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 you know, I had a conversation with it about a

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 conversation about it with someone else and said, do you

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 know any of us means like how would you how would you even know? How would

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 you calculate? Yeah a day and time of an

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 unpredictable event that said. Well, maybe it means let's say it's like a

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 ski resort.

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And you're like, well the ski resorts sales numbers are going to be lower in

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 the summertime.

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like

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but she built into the original. Yeah calculation. Let's

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 say let's say that it's not

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Maybe you know that you know ski season ends on

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 May 1st. You can say on you know,

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 June 1st. We anticipate there being a

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 Reconciliation and potentially the reconciliation amount

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 will be this.

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Maybe that's what it means. You don't know so Mary not a lawyer

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 not a lawyer, but you have to come up with scenarios of

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 where you think you could reasonably anticipate a

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 Reconciliation taking place the amount

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 and the date and

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If you do this wrong, too, I guess you could be held to

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 account by this. These are things I've never even heard of. Yeah,

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 I mean and this is definitely a unique situation because every state

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 is different but something that the individual

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 the professional Miss Fisher that we were talking about and

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 she helped us out with this article something that she

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 mentioned was getting ready for December. If

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 you wait till December you're too late,

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 you know to kind of get anything ready. So how in regards

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 to preparation. How does one prepare for this

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 new compliance line, California?

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You know if it were if it were me I

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 would.

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Be working with an attorney.

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To figure this all out.

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I can't imagine that any funding company will be

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 able to comply. Well if they

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 do not work with an attorney to guide them

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 through all this. Yeah, you're a Concepts

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 in this law like the one I just talked about where you have to kind of guess future

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 troop scenarios. I've never once

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 contemplated in my 16 years in the industry. You never

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 heard of this, right? Yeah. Sure. We all think about there could

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 be a Black Swan event and there could be a tornado that wipes out

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 the business but is that a reasonably anticipated event?

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 Like it's giving what's reasonably anticipated and

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 I think Underwriters are already trying to make a prediction as to what's gonna

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 happen and we're looking back at the history. Yeah and everything that

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 probably gonna be similar in the future. Yeah, and then the

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 state is saying but but what if something else

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 happens when you think that will happen? Yeah, I

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 think that will be

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Yeah, that sounds like that sounds like data science.

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 It sounds like you know, it's just copy. It's

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 a complicated situation, you know you there's certain things

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 you don't predict for and if you

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 get it wrong, you know.

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You get in trouble if you

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 don't put it all you get in trouble. So it's it's really it's really

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 really weird. And I only I don't mean to scare anyone necessarily but

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 these are the components of

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 the California law that go into effect on December 9th.

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 So we are looking at something that's quite different from

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 Virginia and which it does at the end of the day,

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 Virginia does boil down to a form. Yeah, so you are forgiven if

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 you thought

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It's probably gonna be something similar in California, you know,

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 maybe as I wanted to things a little bit different but we're one of

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 the good guys. Of course, we'll comply. Well, I

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 think it might be a little bit more than some of

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 you have asked for or thought it would be maybe some of you are

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 excited. Anyway, I don't know but it does sound like it would be costly to

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you know to comply with this and then you don't know if

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 this data is going to apply some type of gotcha.

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You know map to all of this where you you've

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 done everything that you could and you felt like

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 you were following the rules and you said gosh that cost

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 us to million dollars. Yeah, but we are a compliance in California. And California's

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 regulator is just lying and wait to find

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 out the one thing you screwed up and they're gonna come in and say

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 gotcha. Yeah, you know what I mean? So yeah, and I think it's it's

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safe to say that

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if you are working in this industry and you are

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 working in different states to not assume that what one

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 state has is going to be the same as another state or it's

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 going to be a copycat version where there could be similarities. But also

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 there are a lot of differences as we're seeing now

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 between California and Virginia, Virginia, like you

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 said blows down to one form where you just fill it out you put presented into

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 the contract then you keep it moving California. That's a whole

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 different. It's a whole different ball game because there's

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 so much my new details that go into it that you have to

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 know, you know, and like you said the best piece of advice

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 is to reach out to an attorney and get counsel and

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 make sure you know, there's a proper understanding of

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 how to do business in California. Once

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 December comes around, you know,

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 there was an old saying that's a low barriers to answer to this

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 business. And that's if that were still true today. It's very

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 quickly quickly going away because the advantage is going to

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 go to the funding companies and the lending

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 companies that have access to expens.

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And qualified Council. Yeah, right and it's

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 the expensive because you I don't know that you could rely on the lawyer

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 down the street who helped you draft your you know, you're right

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 so agreement to walk you through, you know complicated

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 State compliance in California. I think

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 a lot of smaller funding companies know a guy,

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 you know or no no woman who who can

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 help them with some legal stuff. Yeah, when it

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 comes up everything up an LLC, you know, I think something we

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 talked about was and I'm pretty sure it was here that you

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 know, you may know a guy but you

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 know a lawyer that practices criminal, you

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 know, family court or family law

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 entertainment law and then you know, it's not

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 the same as someone that practices, you know within the

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 MCA within the alternative Finance industry and

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 that specializes in this area. So that's something else

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 to take into consideration because you may

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 know a guy that can help you set up an LLC and S Corp,

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 whatever but then when you're like Hey, how do

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 I do the

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Oracle method of APR on my California contract

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You know, even if they give you an answer.

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Can are you are you confident in the answer that you

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 get so you probably will need qualified

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 counsel to give you all the precise answers. Yeah

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 that you need for this particular law. Do not

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 quote or use any of the stuff. I said at

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 100% face value because I'm not a lawyer

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 and I'm going off of my understanding of what other people

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 told me and what I read, right? So do

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 your own due diligence and talk to the right people the

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 right qualified people to guide you through the state

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 of, California.