New commercial financing disclosure laws loom

New commercial financial disclosure laws take effect in 2024 in three states, with eight others considering proposals. 

California and New York have enacted new disclosure laws in the past 12 months, Lewis Cohn, managing partner at Boston-based commercial law firm Cohn & Dussi, told Equipment Finance News. Cohn chairs the firm’s financial services practice, according to its website. 

New commercial finance disclosure requirements are set to go into effect in Connecticut, Florida and Georgia next year, according to the Equipment Leasing and Finance Association (ELFA). Laws in Florida and Georgia will take effect Jan. 1, 2024, while Connecticut’s law will take effect July 1, 2024 according to financial services law firm McGlinchey. 

The Florida and Georgia laws require commercial lenders to disclose in writing the total amount of money provided and distributed to businesses, as well as the amount to be repaid and the total dollar cost of the transaction. 

In Connecticut, commercial finance lenders must disclose the total financing amount, the disbursement amount, the finance charge, the total repayment amount, the estimated payment periods required for equal periodic payment amounts, the payment schedule based on whether the loan is at a fixed or variable rate, and any other fees related to the transaction. 

Under all three laws, lenders must disclose any broker engagements and fees related to the broker transaction.

8 states with disclosure proposals  

Eight states have commercial financial disclosure bills navigating state, according to ELFA: 

• Illinois, 
• Kansas, 
• Maryland, 
• Mississippi,  
• Missouri, 
• New Jersey, 
• North Carolina, and 
• Texas. 

The presence of bills in some of the largest states makes them a concern for the entire equipment finance industry, Moorari Shah, partner at national business law firm Sheppard Mullin Richter & Hampton, said during ELFA’s annual convention in October. Shah leads Sheppard Mullin’s consumer finance team and chairs ELFA’s legislative and regulatory subcommittee, according to the firm’s website. 

“There are five big jurisdictions — Florida, California, Texas, Georgia, New York and Illinois — that are five of the biggest population states, and the biggest transaction fees are in play now so that you can’t avoid these disclosures,” he said.