U.S. states continue to consider and adopt statutes requiring TILA-like disclosures in connection with various types of commercial financing transactions. Most recently, Georgia passed a law, effective January 1, 2024, requiring financing providers to provide such disclosures, following the adoption of similar laws recently passed in California, New York, Utah and Virginia. A similar law has passed both houses of the Florida legislature and would become effective on July 1, 2023 if the Governor signs or fails to veto it. Finally, a similar law, which would become effective on July 1, 2024, passed both houses of the Connecticut legislature on June 7 and is awaiting the Governor's signature. Other states have proposed bills which would enact similar requirements.

Georgia and Florida

The Georgia and Florida laws apply to any "commercial financing transaction," defined to include any commercial loan, commercial open-end credit plan, and accounts receivable purchase transaction, in an amount of $500,000 or less. Entities excluded from the laws include federally insured depository institutions and any subsidiary, affiliate or holding company thereof.

The disclosure requirements under the Georgia and Florida laws are similar to the Utah law, in that they require providers to disclose certain specific pieces of information, including the total amount of funds provided to the borrower and the cost of credit, but allow for flexibility regarding the form and presentation of the disclosures. Notably, like the Utah statute but unlike the similar laws passed in California and New York, the Georgia and Florida laws do not require providers to disclose an APR. This is a welcome approach in these more recent laws, as calculation of an APR, especially in the case of certain financing arrangements unique to the commercial financing world, has been highly problematic.

The laws also impose obligations on brokers, prohibiting such persons from collecting advance fees from a business to provide services as a broker (subject to certain exceptions) and from making any false or deceptive representations in their business dealings. Unlike the Georgia law, the Florida law additionally requires brokers to disclose their address and telephone number in any advertisement offering the broker's services.

With respect to enforcement, the laws permit the respective state attorneys general to enforce compliance with the disclosure requirements (including imposing monetary penalties), but do not create a private right of action. Neither law authorizes the issuance of regulations implementing the requirements.

Connecticut

The Connecticut law would apply only to extensions of sales-based financing in an amount not exceeding $250,000. Exemptions from the law include state or federally chartered banks or any affiliates or subsidiaries thereof. Notably, the law would require sales-based financing providers and brokers to register with the state Banking Commissioner by October 1, 2024.

The law would require providers to disclose ten specified items of information in a format prescribed by the state Banking Commissioner when extending a specific offer of sales-based financing. The Banking Commissioner would also have general authority to adopt regulations to implement other aspects of the law.

Connecticut would not require an APR disclosure, but it would require a disclosure similar to the "double dipping" disclosure required by New York, although the Connecticut law does not use that terminology. The law would also prohibit providers from revoking, withdrawing or modifying an offer of financing until midnight of the third calendar day after the date of the offer. Providers would also be prohibited from including in financing contracts any provision waiving the recipient's right to notice, judicial hearing or court order in connection with the provider obtaining any prejudgment remedy.

With respect to enforcement, violations of the law are punishable by civil penalties, and for knowing violations, the Banking Commissioner may additionally seek an injunction and take any enforcement action permitted by Conn. Gen. Stat. § 36a-50. The bill does not provide for a private right of action.

These new laws likely are not the end of the story, and it is probable that more states will consider such laws as well, making nationwide commercial financing services increasingly challenging. If you have any questions regarding the above or if you would like our assistance with compliance, please contact any of the authors or the Manatt professional with whom you work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.