Lenders manage risk amid evolving regulations 

Equipment lenders are facing growing compliance and risk challenges, navigating state usury laws, regulatory shifts, digitalization and evolving cybersecurity threats. 

State-level variations in usury and loan rules create compliance risks for equipment lenders that must accurately apply rate caps across jurisdictions, Sarah Milovich, general counsel and vice president of compliance at lending software provider Carleton, told Equipment Finance News. 

“The key here is not just applying the rules; that’s a very important part, but determining what rules apply.” — Sarah Milovich, general counsel and vice president of compliance, Carleton

She added that lenders should have a rules engine built into their software as an additional check.

By focusing on businesses with historically strong cash flow and metrics, lenders can structure deals to exit earlier if regulatory or market changes pose future risks, Rick Pierman, vice president of commercial finance business development at financial services provider Pathward, told EFN.   

“We’re not immune to regulation changes, so we’re on top of it,” he said. “Our compliance team is on top of that; they keep us up to date, and we structure around that.” 

More than half of organizations reported compliance challenges in the past three years, with 56% experiencing at least one issue and 36% facing multiple issues, according to compliance management software provider Navex’s 2025 State of Risk & Compliance report.  

Many businesses are updating policies, risk assessments, training and codes of conduct in response to U.S. enforcement shifts. Meanwhile, 38% are increasing compliance staffing and resources and 52% plan no reductions, according to the survey, conducted between April 23 and May 29. 

Digitalization a benefit 

Digitalization can streamline complex loan processes, strengthen compliance and data management, and enhance the borrower experience through automation, real-time updates and improved risk management across the loan life cycle, Eric Capehart, associate director of market strategy for Wolters Kluwer’s digital lending solutions, said during an Aug. 21 webinar. 

“The benefits of secure e-sign technology and the electronic document management that streamlines the creation, the negotiation, the execution of contracts and leveraging e-contracting will reduce admin burdens that you have,” he said. “It’ll help ensure compliance with regulatory requirements, and it makes the contracting process efficient and secure.”  

In addition, the rapidly evolving cybersecurity landscape is reshaping legal agreements in equipment finance, making contracting more complex and limiting automation as firms grapple with liability, insurance and risk allocation, Gary Brackenridge, executive vice president at global software, data and analytics provider Linedata, told EFN. 

“The big changes we see in a lot of these standard or master agreements have to do with security, cybersecurity and fraud,” he said. “Those clauses are getting added and modified all the time because the nature of that part of the industry. The cyber and technical threat side of the industry is rapidly evolving.” 

Managing risks as environments change 

Still, lenders should embrace diverse perspectives, accept that the future is unpredictable and focus on managing rather than avoiding risk to handle inevitable uncertainties, 1st Source Corp. Chairman and Chief Executive Christopher Murphy III told EFN. 

“There’s no lender who never makes a bad loan; it just happens,” he said. “When you’re doing analysis, be substantive, ask the questions, [and] dig deep. Curiosity is an important element that I want all of our people to have because if you’re curious, you learn.” 

Effective compliance in equipment finance requires not only accurate calculations but also robust system safeguards, state-specific checks and access to experts to ensure regulations on rates, fees and consistently applied taxes. This all makes finding the right partner key, Carleton’s Milovich said. 

 “If you have a custom change that’s needed because of a new state that you’re going into, or a new product line that you’re starting to serve, make sure that you have a technology partner that’s willing to work with you and actually address those needs for that new segment.” 

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