Georgia, Illinois, Kansas and Mississippi Latest States to Push for Commercial Finance Disclosures

Several more states are attempting to pass commercial finance disclosures bills, including Georgia, Illinois, Kansas and Mississippi. The law firm of Parker Hudson Rainer & Dobbs has supplied a summary of the Georgia legislation. We will publish analyses of the other states shortly. SFNet continues to work with our legislative consultant and other channels to effect the most advantageous outcome for SFNet members. If you have any questions or comments, please reach out to Michele Ocejo at mocejo@sfnet.com. 

The bill requires disclosures of certain provisions of “commercial financing transactions.”

• A “commercial financing transaction” is defined as a “business purpose transaction” under which a person extends a commercial loan [regardless of whether secured] or commercial open-end credit plan (e.g., a revolver), or an accounts receivable purchase transaction.
• The bill requires disclosures of total amount of funds provided to the business, the total amount actually disbursed to the borrower (if less than total amount provided due to fee deductions and the like), the total amount to be paid to the “provider” [a person who consummates more than 5 commercial financing transactions per calendar year in the state],  and the total dollar cost of the financing, as well as disclosing payment amounts and timing.
• The bill does NOT apply to, among other things,
• a provider that is a federally insured depository financial institution, a subsidiary, affiliate or a holding company of a federally insured depository financial institution, a service corporation for a federally insured depository financial institution or a provider that is regulated under the federal Farm Credit Act or is licensed as a money transmitter,  
•  a provider that consummates 5 or fewer commercial financing transactions in the state during any 12-month period,
•  commercial financing transactions secured by real property or that are leases under 11-2A-103 or purchase money obligations;
• a commercial financing transaction of more than $500,000.
• The bill restricts activities of “brokers” from collecting advance fees.
• The bill prescribes penalties for violations  - (i) $500 per violation, not to exceed $20,000 for all violations arising from the use of the same transaction documents or materials and (ii) a person who violates the provision after receiving written notice of a prior violation is subject to a penalty of $1,000 per violation, not to exceed $50,000 for all violations arising from the use of the same transaction documents or materials.
• The bill would apply to commercial financing transactions consummated on or after January 1, 2024.

The bill was voted out of the House Committee on Banks and Banking on February 9.  The bill must be passed by the House on or before March 9, otherwise it is dead for the year.