Regulation
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, 2023According 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.
Georgia Governor Signs Commercial Financing Disclosure Law
May 9, 2023Georgia’s governor signed the state’s commercial financing disclosure bill into law as anticipated. The full text is available here. It is scheduled to go into effect on January 1, 2024. Georgia’s new law is merely the latest in a series aimed at the small business and commercial financing industries.
Others include:
- Virginia’s sales-based financing disclosure law – Went into effect July 1, 2022
- California’s commercial financing disclosures – Went into effect December 9, 2022.
- Utah’s commercial financing disclosures – Went into effect January 1, 2023.
- New York’s commercial financing disclosure law – Goes into effect August 1, 2023
- CFPB’s small business lending data collection law – Goes into effect October 1, 2024
Small Business Financing Industry Representatives Testified in New York Senate Hearing on Licensing
April 26, 2023Several representatives from across the small business finance industry testified in a New York State Senate hearing on Tuesday. Up for debate was Senate Bill S1450, which would require a license to engage in commercial financing. As part of that, Banking Committee Chairman Senator James Sanders Jr. fielded testimony and asked questions about bad actors, usury caps, non-compliance penalties, and more. Those called upon at the hearing included:
- Natalie Pappas, Deputy General Counsel, Rapid Finance, on behalf of the SBFA
- Amy Carpenter Holmes, Deputy Counsel, Kapitus
- Chris Grimm, Head of State Government Relations, ILPA
- Katherine C. Fisher, Esq., Partner at Hudson Cook, LLP, on behalf of the RBFC
- Phil Goldfeder, CEO, American Fintech Council
- Chuck Bell, Programs Director of Advocacy, Consumer Reports
Almost all of the organizations were in favor of some form of licensing system in New York except for the Innovative Lending Platform Association (ILPA). The ILPA, more famously known for its previous SMART Box initiative, explained that high compliance costs, inflation, and rising interest rates were putting significant pressure on its member’s businesses.
The video below, which curates just the relevant parts of the day, consists of two separate panels on the same subject. Be sure to watch them both.
Georgia’s Commercial Financing Disclosure Bill Now on the Governor’s Desk
April 10, 2023Georgia is on track to become the latest state to pass a commercial financing disclosure law. This state’s bill passed through both the House and Senate and was delivered to Governor Brian P. Kemp on April 5th to await his signature. When that happens, Georgia will join a list of mandatory disclosure states that includes California, New York, Virginia, and Utah.
Other states that currently have disclosure bills up for debate in their respective legislatures include: Connecticut, Missouri, North Carolina, Florida, New Jersey, Kansas, and Illinois.
Federal Regulator Enacts New 888-Page Law Covering Small Business Finance
March 30, 2023This is NOT an April Fool’s joke. On Thursday, the CFPB released the final rules that govern how small business finance companies will have to collect and report data to the federal government. Such rules had been anticipated since the Dodd-Frank Act, passed in 2010, mandated that they be put in place. Thirteen long years later, the only part that may come as unexpected is the sheer magnitude of the language, 888 pages of fine print.
Transactions within the scope of the rule include loans, lines of credit, credit cards, merchant cash advances, and credit products used for agricultural purposes.
According to the CFPB’s executive summary, compliance appears to start next year.
- A financial institution must begin collecting data and otherwise complying with the final rule on October 1, 2024 if it originated at least 2,500 covered originations in both 2022 and 2023.
- A financial institution must begin collecting data and otherwise complying with the final rule on April 1, 2025 if it: Originated at least 500 covered originations in both 2022 and 2023; Did not originate 2,500 or more covered originations in both 2022 and 2023; and Originated at least 100 covered originations in 2024.
- A financial institution must begin collecting data and otherwise complying with the final rule on January 1, 2026 if it originated at least 100 covered originations in both 2024 and 2025.
Call your lawyer.
Georgia on Verge of Passing a Commercial Financing Disclosure Law
March 27, 2023Georgia is on pace to become the next state to pass a commercial financing disclosure law. SB 90 has sailed through both the state’s House and Senate with strong bi-partisan support and is potentially heading for the governor’s desk. The text of the bill is similar to the disclosure law recently enacted in Utah. It also explicitly states that brokers may not make or use any false or misleading representations in the course of its business.