Regulation
Florida Disclosure and Broker Law Signed by Governor, But Will The Effective Date Be Revised?
June 26, 2023Florida’s governor signed H1353 into law on Friday, a set of disclosure rules that will impact both brokers and funders. One key element of it was drawn from the DailyFunder forum, for example.
As written, the law says it is supposed to go into effect on July 1, 2023. One wonders given the timeline if that will be extended to give the industry an opportunity to even understand what the requirements are.
Florida has now been updated on the deBanked regulatory map.
Federal Legislators Jump on Commercial Financing Disclosure Bandwagon, Renew Push to Give CFPB Authority Over Industry
June 16, 2023
Feel like there’s a lot of state-level disclosure going around lately? Well now some members of Congress believe another layer is needed at the federal level. In a bill titled the “Small Business Financing Disclosure Act of 2023,” the language looks awfully familiar. There’s a Double Dipping clause in it, for example, which was a term first seen in a New York State law.
The federal bill, which was introduced by US Senator Robert Menendez and Congresswoman Nydia M. Velázquez, seeks to place the small business finance industry under the authority of the Consumer Financial Protection Bureau (CFPB). As part of that, the Director (currently Rohit Chopra) would be responsible for devising all the rules and formulas, according to the bill. Furthermore, with regards to sales-based financing, the bill specifically states:
1. The provider must disclose an APR.
2. The estimated term of repayment and periodic payments based on projected sales volume must be disclosed.
“Small businesses are the lifeblood of the American economy,” said Congresswoman Velázquez. “But for too long, predatory lenders have taken advantage of businesses in need of capital by offering loans and similar products with unclear terms and exorbitant interest rates.”
Supporters of the bill, including Senator Sherrod Brown and Senator Ron Wyden, also stated that the bill is aimed at “predatory lenders.”
In Senator Menendez’s press statement for the bill, it cites Funding Circle, a small business lending company, as a supporter.
“We believe a free and fair market operates most efficiently when there is transparency in pricing, terms and conditions,” said Ryan Metcalf, Head of U.S. Public Affairs at Funding Circle U.S. When a small business has all of the necessary information up front including the annual percentage rate (APR), they can comparison shop and make informed decisions that are best for their business. Funding Circle supports one national uniform small business financing disclosure law because it is in the best interests of small businesses and interstate commerce.”
The push for a small business financing bill is not new. A similar bill introduced by Velázquez last year did not move forward, nor did the one from 2021, nor the one from 2019. The difference is that previous versions focused on Confessions of Judgment and fairness in small business lending. The latest version takes on the air of disclosure while attempting to subjugate the whole industry to CFPB regulatory authority.
Congressional Resolution Aims to Undo CFPB’s Small Business Lending Rules
June 12, 2023
After 13 years of regulatory debate and 888-pages of official rules finally ready to go into effect, some members of Congress have decided that the whole thing is all wrong. At issue is a section of a 2010 federal law that requires the CFPB to collect data from companies engaged in small business financing. However, for more than a decade the statute became a political football, creating delays and sowing confusion over who it is that is supposed to be covered. Lawsuits filed against the CFPB finally prompted it to move forward with its mandate which culminated in an 888-page rulebook that was published in March.
On May 31, however, members of the House and Senate introduced a Joint Resolution to invalidate the rules.
“Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Consumer Financial Protection Bureau relating to “Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)” (88 Fed. Reg. 35150), and such rule shall have no force or effect.”
A hearing on the matter is scheduled to be heard on June 14 at 10am. As part of it, CFPB Director Rohit Chopra is expected to testify.
Update: Hearing is here:
It remains to be seen whether the Resolution will carry weight. There are 23 Republican co-sponsors of the bill and 0 Democrats.
Connecticut Passes Commercial Financing Disclosure Bill
June 7, 2023
Connecticut has passed a commercial financing disclosure bill. See: SB1032. The bill now just needs to be signed by the governor. The planned effective date is July 1, 2024.
Connecticut’s bill has several unique rules in addition to standard disclosures already seen in other states. They include:
1. A provider shall not revoke, withdraw or modify a specific offer until midnight of the third calendar day after the date of the specific offer.
2. Providers and brokers must register with the Banking Commissioner.
3. No commercial financing contract shall contain any provision waiving a recipient’s right to notice, judicial hearing or prior court order in connection with the provider obtaining any prejudgment remedy, including, but not limited to, attachment, execution, garnishment or replevin, upon commencing any litigation against the recipient.
The bill has been added to deBanked’s state regulation map.
Connecticut Nears Passage of a Unique Commercial Financing Disclosure Bill
June 5, 2023
Connecticut’s General Assembly came one step closer to passing its own commercial financing disclosure bill when SB1032 passed the Senate on Monday. The State’s legislative session ends on June 7 so the House would have to also pass it by then in order to send it off to the governor.
Connecticut’s bill has several unique rules in addition to standard disclosures already seen in other states.
1. A provider shall not revoke, withdraw or modify a specific offer until midnight of the third calendar day after the date of the specific offer.
2. Providers and brokers must register with the Banking Commissioner.
3. No commercial financing contract shall contain any provision waiving a recipient’s right to notice, judicial hearing or prior court order in connection with the provider obtaining any prejudgment remedy, including, but not limited to, attachment, execution, garnishment or replevin, upon commencing any litigation against the recipient.
Given the likelihood this bill could pass, it has been added to deBanked’s state regulation map.
Pending Florida Law Draws From DailyFunder’s Rulebook
May 17, 2023Florida’s impending disclosure law is not so unique after all. As one user pointed out, Florida’s plan to require that brokers disclose their actual address and phone number in any advertisement is actually a copy & paste of a rule on DailyFunder.
On October 24, 2015, for example, DailyFunder declared that any company soliciting business would have to disclose their physical address and phone number. The rule was stickied in the Promotions subforum and is the first thing shown to users visiting that area.
This phone number and address requirement did not appear in commercial financing disclosure laws passed by other states yet it reared its head in Florida’s bill, a state with a strong user base of DailyFunder users.
The bill is currently awaiting the signature of Governor DeSantis. If enacted, the DailyFunder rule as a legal statute would be the first of its kind.
How Many Funders and Brokers Are There?
May 17, 2023
According to the State of Virginia, there are only 115 total sales-based financing providers lawfully registered to transact with merchants in the state. That includes all funders and brokers combined. The figure seems… low, although there are potential exceptions to the rule.
All MCA funders AND BROKERS were required to register with the state in accordance with the law before November 1, 2022. The initial registration fee is $1,000 and the annual fee is $500, but more importantly applicants must disclose any judgment, Memorandums of Understanding, cease & desist orders, or convictions resulting from a crime or an act of fraud, breach of trust, or money laundering “with respect to that person or any officer, director, manager, operator, or individual who otherwise controls the operations of such provider or broker.”
An automatically updated live list of registered providers can be viewed here.
Florida Set to Enact Commercial Financing Disclosure Law With Unique Broker Rule
May 15, 2023Update: the governor signed the bill into law on June 23.
It’s a new state disclosure law but with a twist. Florida’s bill, which passed both chambers of the legislature on May 4th and now awaits the governor’s signature, has a specific code of conduct aimed directly at brokers.
Among these rules is that the broker cannot:
- Offer its services in any advertisement without disclosing the actual address and telephone number of the business of the broker and the address and telephone number of any forwarding service the broker may use, if any.
- 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.
- Make or use any false or deceptive representation in its business dealings.
- 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.
The bill, as written, says it is poised to go into effect on July 1, 2023 (assuming the governor signs it). deBanked first reported on this bill on March 16th.
