On July 1st, Virginia’s “sales-based financing” disclosure law quietly went into effect. The Delegate from Virginia that introduced it in the first place, Kathy Tran, marked the occasion by retweeting a caucus announcement that it was live. Elsewhere, it was hardly mentioned. It was even absent from the Official Code of Virginia where it was supposed to be ceremoniously entered on July 1st. The State insists that its omission is just a glitch.
“There have been significant technical difficulties during the 2022 code upload process,” reads a notice on the Virginia State Law Portal. “Due to these difficulties, the portal does not currently reflect the changes to enacted law. The Division of Legislative Automated Systems and the publisher are working diligently to resolve these issues as quickly as possible. Once the data is obtained from the publisher in the correct format, the standard quality check of the entire body of law that went into effect July 1 will be conducted.”
The law focuses primarily on disclosures. Sounds simple enough, but in the preceding weeks the draft disclosure form was met with some resistance by potentially covered parties because of how little time there was to integrate it into their systems and processes. Regardless, at least one small business funding company told deBanked off the record that ambiguous language and terms in the law had led to the decision to cease doing business in the State of Virginia, at least for now. Their focus is shifting toward compliance with the upcoming California and New York disclosure laws where the population pools are larger and the soon-to-be enacted requirements are seemingly more complex. Utah too will soon implement its own version of a disclosure law.
For commercial finance brokers, the defining elements of the Virginia law are that commissions earned will have to be disclosed to customers and that they’ll have to register their businesses with the State to even continue doing business there.
The US Chamber of Commerce is not thrilled with the CFPB’s attempt to allegedly expand its power. A June 28 letter fired off by the Chamber to CFPB Director Rohit Chopra asks that the agency rescind amendments added to its Supervision and Examination Manual. Specifically, it wants the CFPB to limit its enforcement of anti-discrimination laws to the statutory boundaries established by congress. The CFPB recently announced, however, that it would start to enforce its own self-created anti-discrimination rules and policies above and beyond what is permitted by existing law.
“The Bureau’s self-expansion of its authority will impose significant burdens on banks, financial markets, and the consumers they serve,” the Chamber writes.
CFPB Director Chopra has garnered a bit of reputation for his views. He was previously a director of the FTC and rode into the top role of the CFPB through the Biden Administration. Chopra now finds himself in the crosshairs of the US Chamber of Commerce, the “world’s largest business organization.” With more than three million members, the Chamber warned that if the agency attempts to enforce its “unlawful” powers, that it is prepared to engage in litigation.
“Instead of perpetuating an improper exercise of authority, the Bureau should respect the limits of its authority and rescind these troubling amendments,” the Chamber’s Chief Counsel wrote on “Litigation Center” letterhead. “We encourage you to follow this course. The Chamber will not hesitate to take legal action to defend businesses (and the economy that they serve) against the Bureau’s unlawful actions.”
Two versions of the letter were sent. This is a link to one of them.
Remember when Virginia passed a landmark sales-based financing law? Well, it’s supposed to go into effect on July 1st.
This is a draft of what the disclosure form is supposed to look like, though with only days left to begin compliance, it hasn’t even been 100% finalized.
Notably, funders will have to begin disclosing to merchants the amount of compensation being paid to the broker in connection with a deal. Also, by November 1st, funders and brokers will have to register their business with the State if they wish to continue working with Virginia-based businesses, a process that would include a background check and registration fees.
Please consult an attorney for official guidance on compliance.
Michigan recently became the 14th state in the U.S. to mandate high schoolers to take a half-credit finance education course before graduating. This mandate was put into effect by the HB 5190 bill signed by Gov. Gretchen Whitmer just last week.
“As a mom, I want every kid who graduates in Michigan to enter the world with a diverse set of skills and knowledge, and that must include financial literacy,” said Whitmer.
Along with Michigan; Alabama, Florida, Georgia, Iowa, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Rhode Island, Tennessee, Utah and Virginia all require high school students to take personal finance courses.
According to a survey conducted by Next Gen Personal Finance, 22.7% of US high school students will have guaranteed access to a personal finance course. An additional 48.2% of students in 2022 have access to one either as an elective or as a possible option to fulfill a graduation requirement. Only 4.87% have no access to any financial education in any of their courses.
In non-guaranty states, personal finance courses were least likely to be available in city areas with only 1 in 20 receiving personal financial education. In rural areas, that figure increased to 1 in 7. The numbers also fluctuate based upon the schism in location, race, and socioeconomic status.
The importance of financial education early on can’t be overstated as the benefits of it seem to wane into adulthood, almost to zero.
According to Mariel Beasley, principal at the Center for Advanced Hindsight at Duke University and Co-Director of the Common Cents Lab (CCL), “Content-based financial education classes [for adults] only accounted for .1 percent variation in financial behavior.” She added, “We like to joke that it’s not zero but it’s very, very close.”
No More Delays? California Finalizes Commercial Financing Disclosure Rules – Sets December 9th as Effective DateJune 9, 2022
Four years after California passed a commercial financing disclosure law, the debate over what the final rules should be has finally ended. On Thursday, the Department of Financial Protection and Innovation’s rules were approved and published. The law is scheduled to take effect on December 9, 2022.
Given the length and complexity, readers are advised to consult with a knowledgeable attorney for the best immediate interpretation of the language and its implications. The rules cover merchant cash advance, factoring, leasing, and various forms of lending.
To read up on the history of this law, you can review our past coverage.
In an era where it has become almost fashionable for states to introduce commercial financing disclosure laws, the bill proposed in Connecticut this past March did not make it through. Its first draft was rough, freely using ambiguous terminology like “double dipping” which was clearly drawn from an original draft presented to the New York State legislature more than a year ago.
The bill stalled in the Senate despite a couple of favorable committee reports. The legislature adjourned for the year on May 4th, ending the bill’s prospects for advancement in 2022. This was the second time the bill had appeared so a version of it will likely return in 2023.
The fourth annual Alternative Finance Bar Association conference is BACK IN PERSON. This is the go-to event for and with the industry’s leading attorneys.
Mark your calendars for June 15th and June 16th in New York City and register by emailing Lindsey Rohan at firstname.lastname@example.org. Registration is subject to approval and space availability.
Two-day program includes the following panels:
The State of the Industry: Industry experts discuss pending legislation, case law and market hurdles. They have both a regulatory panel ready to discuss what’s new in Virginia, Utah, NY and California as well as a Courtroom panel ready to discuss the winning and losing case law that has come out in the past year.
Bankruptcy: The aftermath of Chicago v. Fulton, In re Shoot the Moon and other pivotal bankruptcy cases that shape industry practices.
Ethics: Challenges faced by internal counsel and ways to navigate those pressures.
Collections: Trends in the post-COJ, post-COVID era.
Employment/Labor Law: The rise of labor use outside the U.S. What challenges arise from having call centers outside the U.S. Tax implications, oversight and practical benefits/detriments. Post-COVID remote work implications. What you need to be aware of to avoid creating liabilities.
The Art of Arbitration: The importance of a carefully drafted Arbitration Clause and the pro/cons of this venue.
Thinking Ahead: What technologies and market conditions will shape the future of the industry. Broad discussion of Blockchain technology, CRM systems, cannabis and what we can imagine will shape the future of Alternative finance.
WEDNESDAY KEYNOTE: David Picon, Esq. – It is with great pride that David Picon of Proskauer Rose will be the Keynote speaker. For years the AFBA has admired his work from afar. Attendees now have an opportunity to learn directly from David what makes for an unstoppable litigator.
THURSDAY SPECIAL EVENT: AFBA Game Show Mash-Up with the Industry’s Legendary Attorneys. Special Guests you will not want to miss!
- Andrew Smith, Covington & Burlington LLP
- Brian Simon, Hollis Public Affairs
- Jamie Polon, Mavrides Moyal Packman & Sadkin, LLP
- Patrick Siegfried, Rapid Finance
- Natalie Pappas, Rapid Finance
- Keith Ellis, Expansion Capital Group
- Kate Fisher, Hudson Cook LLP
- Cathy Brennan, Hudson Cook LLP
- Blake Sims, Hudson Cook LLP
- Steve Denis, Small Business Finance Association
- Christopher R. Murray, Murray Legal PLLC
- Mark Stout, Padfield & Stout
- Shanna Kaminski, Kaminski Law Group
- Michael W. Davis, DTO Law
- John Viskocil, Fora Financial
- Gabriel Mendelberg, Mendelberg P.C.
- Anthony F. Giuliano, Giuliano Law P.C.
- Jeffrey S. Cianciulli, Weir Greenblatt Pierce LLP
- David Picon, Proskauer Rose
- Jonathan Nelson, Dedicated Financial GBC
- Lindsey Rohan, BasePoint Capital LLC
- Christina Grigorian, Katten; Zach Miller, Burr & Foreman
- Renata Buhkman, Delta Bridge Funding
- Vanessa Petty, Settle
- Alexis Shapiro, Forward Financing
- Jan Owens, Manatt Phelps
- Scott Pearson, Manatt Phelps
- Jesse Michael Carlson, Kapitus
- Robert Zadek, Buchalter
Day 1 – June 15
9:00am – 4:30pm: Offices of Proskauer Rose (includes light breakfast and lunch)
5:30pm – 7:30pm: Cocktails at Dear Irving
Day 2 – June 16
9:30am – 6:00pm: 15 W. 38th Street, 2nd Fl, Sinatra Room (includes light breakfast and lunch)
4:00pm: Wine & Cheese
Register soon, SPACE IS LIMITED!
deBanked is a sponsor of the event. Industry attorneys are highly encouraged to attend.
Posting Fake Reviews To Make Your Financial Services Company Look More Appealing? The CFPB Says You Will Face The ConsequencesApril 21, 2022
The CFPB has put companies that offer financial products and services on notice. If you post fake reviews about yourself online, it “may result in significant penalties.”
“Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal,” said CFPB Director Rohit Chopra. According to the agency, manipulating customer reviews is unlawful under the Consumer Financial Protection Act. “Laundering fake reviews in ways that appear completely independent from the company to improve their ratings may constitute a deceptive practice,” the agency states.
Examples were provided. One involved a company that relied on its own employees to leave reviews of the company’s products, which it said was unlawful because they had not disclosed that they were employees in the reviews themselves. Another example involved paying non-employees to post materially misleading reviews.
Also apparently illegal is only showing positive reviews about ones own products while hiding or refusing to publish the negative ones.
The CFPB cited a similar initiative undertaken by the FTC. “Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Advertisers will pay a price if they engage in these deceptive practices.”
With the CFPB’s purview being more narrow than the FTC’s, the CFPB’s closing message was that “Banks and financial companies should ensure that their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act. Violations are subject to civil penalties and other legal consequences.”