Regulation
New York DFS Provides New Guidance on Disclosure Law, 6 Month Delay
October 20, 2021New York’s Department of Financial Services has provided updated guidance on the impending commercial finance disclosure law scheduled to go into effect on January 1st.
The main news? A six month delay.
“Financiers and brokers shall comply with disclosure requirements six months after the effective date,” the proposals state.
The comment period has also been corrected/extended to December 19, 2021. Comments are to be directed to George Bogdan at DFS.
The regulation’s draft has been amended as well and can be VIEWED HERE.
How to Comment on New York’s Commercial Finance Disclosure Law
October 4, 2021With New York’s commercial financing disclosure law on the horizon for Jan 1, the state’s Department of Financial Services is seeking input on how the law should officially be rolled out. Their draft was published on September 21st. Directions for how to submit a comment were said to be forthcoming, but the when and how to do that, were not easily discernible.
The DFS website says that comments should be submitted via email to George Bogdan, but that the time to do that has already expired, the deadline having been October 1st.
A spokesperson for DFS on social media, however, said that comments on the law can be sent to: Comments@dfs.ny.gov.
This process of emailing comments contrasts with processes at the federal level which typically employ formal portals. While it may apparently be too late, anyone that had hoped to contribute their feedback but didn’t get to, could try the above contacts.
MCA Skeptic Rohit Chopra Confirmed by Senate to Head CFPB
October 1, 2021More than eight months after deBanked announced that FTC Commissioner Rohit Chopra would be the next head of the Consumer Financial Protection Bureau, his appointment has finally been confirmed by the Senate.
The confirmation of Chopra is notable given the agency’s objectives to collect data from small business finance companies and the fact that Chopra himself has been very vocal about merchant cash advances in particular.
One year ago, in his capacity as an FTC commissioner, he referred to the industry as “opaque” with “pay-day style” products whose structure “may be a sham.”
In an interview with NBC around the same time, he used stronger language, saying that he was “looking for a systemic solution that makes sure they can all be wiped out before they do more damage.”
Chopra knows his way around the CFPB. He worked for the agency when it first started in 2010 and was there for five years as the Assistant Director & Student Loan Ombudsman. He later moved to the FTC as a commissioner and now returns back at the CFPB in the director’s seat.
New York DFS: The Commercial Financing Disclosure Requirement is Happening
September 21, 2021New York State’s financial regulator announced that the commercial financing disclosure law is moving forward as planned for the Jan 1, 2022 deadline.
To prepare those that will be subject to it, Acting Superintendent Adrienne A. Harris released a copy of proposed regulations that will be open to comment for 60 days.
Its length, 45 pages, demonstrates the complexity that compliance will require. Anyone involved in commercial or small business financing should take the careful time to read it.
“The Department of Financial Services will then review all received comments and issue a final regulation,” the announcement says.
IRS Snooping Flexes Government Power, but May Drive Crypto
September 14, 2021To fight tax evasion, the federal government wants the IRS to track any account in the United States that transacts more than $600 in or out over the course of a year. The tracking will apply to banks and other financial institutions. The feds claim that they will use any found tax dollars to help finance the administration’s new $3.5 trillion spending plan.
Such a move could push a suspicious populace into crypto, where records, however openly recorded on blockchains, could potentially obscure the parties involved.
Banks have fought against the government’s push to share account transactions, as they argue it will be a major invasion of privacy. This will undoubtedly create an entire new workload for them as well, as the banks will have to provide intricate details on most of the accounts on their books — an unprecedented task.
“I don’t believe that much is going to change,” said Yoel Wagschal, a CPA. Wagschal stresses to his clients to always live their life as if the government has access to the information about their spending habits for the sake of their wellbeing.
“The issue at hand is how far this is going to [go], how far the government’s reach will be,” said Wagschal. “When a government body gets power, they don’t give it back. Look at the power wagon they are on.”
As crypto becomes more of an avenue to store and invest money, it may also be a new channel for coin holders to keep their finances shrouded behind additional layers from the federal government.
More TCPA Lawsuits Could be Inbound
September 12, 2021Despite a significant drop in TCPA cases since 2018, a flurry of new TCPA cases could be on the horizon as TCPA plaintiff attorneys had been telling clients to hold off — pending the reaction of Facebook’s recent Supreme Court case, according to Michael O’Hare, Chairman of Colorado-based Cashyew and operator of the TCPA Litigator List. The Court ultimately narrowed the definition of an autodialer.
O’Hare heads a service that provides names of individuals and their attorneys who have sued under the TCPA law, protecting his clients from what has become an industry in and of itself.
“It’s a fight between free speech and privacy,” said O’Hare, when asked what the hardest part about leading an organization that protects businesses from falling victim to these kinds of suits is. He worries that his clients will be preyed upon by serial litigators that go after businesses searching for some type of settlement. According to O’Hare, some of these cases can cost tens of thousands of dollars to fight in court.
“The government has empowered citizens to become the enforcer,” said O’Hare. The law allows citizens to privately sue unsolicited callers who disrupt their daily lives, subsequently creating an entire industry out of these kinds of suits alone.
“People are making a 6-figure living,” he said.
Since deBanked covered this minefield back in 2016, the TCPA has not changed. Some states like Florida and California have adopted their own versions of the law, but the federal law has gone unchanged for thirty years.
The robocallers have also adapted to the lack of upkeep of the TCPA, as the concept of “spoofing” has become a weird ethical gray area in the telemarketing industry. By showing the area code that’s identical to the number being dialed on that number’s caller ID, the user is believed to be more likely to answer. Not covered by the TCPA, organizations like the FCC have begun to step in and put a stop to the tactic.
This “decentralization of enforcement,” as O’Hare called it, may do more harm than good, giving these serial litigators and their clients more avenues of reason to sue.
The ambiguity of what defines a work phone versus a personal phone is much more prevalent now than it was in 1991. With cell phones, smart watches, and the elimination of the home phone for millions of Americans, the TCPA has become antiquated.
“Do they want us to go back to a rotary phone?” O’Hare sarcastically asked.
O’Hare stressed that lenders respect their clients and abide by basic ethics. “Always be scrubbing,” he said. “Prevention is not expensive, litigation is”.
Besides using services like his, O’Hare suggests using basic ethics and understanding to protect merchants that don’t want their calls. “If someone asks, take them off the list,” he said, “avoid trouble and respect the Do-Not-Call list.”
CFPB Publishes Long Awaited Proposed Rule on Small Business Loan Data Collection
September 1, 2021A 918-page proposed rule published by the Consumer Financial Protection Bureau (if you don’t know what this bureau is, now is a good time to read up), is finally out.
Its application is broad, extending to “loans, lines of credit, credit cards, and merchant cash advances,” the CFPB said today. Initially, the Bureau’s intent was to exclude merchant cash advances, but that has apparently changed. (side note: I predicted this could happen as early as 2014.) Meanwhile, “factoring, leases, consumer-designated credit used for business purposes, and credit secured by certain investment properties” are exempt from the rule.
The rule is designed to assess whether there are disparities in sex, race, and ethnicity, when it comes to small businesses being able to access credit.
Covered financing providers would have to request that applicants disclose these things, which applicants can refuse to answer if they so choose. It could get a bit awkward from there because “if an applicant does not provide any ethnicity, race, or sex information for at least one principal owner, the Bureau is proposing that the financial institution must collect at least one principal owner’s race and ethnicity (but not sex) via visual observation and/or surname if the financial institution meets in person with any principal owners (including meeting via electronic media with an enabled video component).
BUT “minority-owned business status and women-owned business status would only be reported on the basis of information the applicant provides specifically for Section 1071 purposes, and financial institutions would not be permitted or required to report these data points based on visual observation, surname, or any other basis.”
Further, no one involved in the underwriting of the loan or advance would be allowed to know or access the ethnicity, race, or sex of the applicant. However, this would not apply if it isn’t “feasible” to do so.
All of the nuances, which seem to contradict themselves on the surface level, are specified in greater detail in the 918 page document.
When the proposed rule becomes final, lenders and MCA providers would have 18 months before they would be required by law to not only collect this data in the properly established manner, but also be prepared to submit it annually to the CFPB.
This rule will become a standard operating part of the business for companies both large and small whether one agrees with it or not. This law was passed in 2010 and it has taken this long to get to this point. This is a link to the CFPB’s official summary.
NJ Resurrects Small Business Finance Disclosure Bill
July 28, 2021New Jersey’s legislature has revived its small business finance disclosure bill. Having languished since last January, the Senate Commerce Committee quietly gave it a favorable report this past June.
New Jersey’s bill is similar to the law that New York is putting into effect on January 1st. As part of it, non-loan products will be required to calculate an APR even if one cannot be mathematically calculated by “estimating” one.
Brokers would be impacted too:
A broker who charges any fees or commission that would be paid by the recipient of the financing shall provide, at the time of extending a specific offer for a commercial financing transaction and in a form and manner prescribed by the commissioner, a written disclosure, in a document separate from the provider’s contract with the recipient, stating the following, if the information is not contained within the disclosure offered by the provider directly to the recipient:
(1) a list of all fees or commissions that would be paid to the broker by the recipient in connection with the commercial financing;
(2) the total dollar amount of charges listed pursuant to the bill;
and
(3) any increase to the annual percentage rate due to the charges listed above and the resulting dollar cost.
You can read the Senate Commerce Committee’s report here.