TILA for Business Loans and Purchases of Receivables? Factors, MCAs, Fintechs and Commercial Lenders Subject to New CA TILA-Like Disclosure Rules

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TILA for Business Loans and Purchases of Receivables? Factors, MCAs, Fintechs and Commercial Lenders Subject to New CA TILA-Like Disclosure Rules

TILA for Business Loans and Purchases of Receivables? Factors, MCAs, Fintechs and Commercial Lenders Subject to New CA TILA-Like Disclosure Rules

H/T DUBIN LAW OFFICES

 

Mayor Brown-

California enacts a first-of-its-kind legislation imposing disclosure requirements on commercial purpose loans similar to those that the federal Truth in Lending Act (“TILA”) and Regulation Z impose on consumer purpose loans. And it extends those provisions to factoring, merchant cash advances and other types of arrangements that involve assignments of accounts and receivables.

On September 30, 2018, California Governor Jerry Brown signed S.B. 1235 into law, which will amend the California Financing Law (“CFL”) to require certain providers of “commercial financing” to disclose information to a recipient at the time of extending a commercial financing offer that is $500,000 or less and to obtain the recipient’s signature on the disclosure before consummating the commercial financing transaction. S.B. 1235 does not create new licensing obligations. Rather, it imposes new disclosure requirements on those who fall within S.B. 1235’s coverage, including both those who are licensed under the CFL and those who are not required to obtain a CFL license.

This change will impact a broad range of non-bank fintech companies offering smaller balance commercial loans. In fact, one purpose of the bill was to require disclosures in so-called bank partnership arrangements, when a commercial finance provider works through an online platform.

[MAYOR BROWN]

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