CA DFPI Issues Fourth Modifications to Proposed Regulations to Implement 2018 Law Requiring Consumer-Like Disclosures for Commercial Financing

The California Department of Financial Protection and Innovation has published a fourth
round of modifications to implement SB 1235,
the bill signed into law on September 30, 2018 that requires consumer-like
disclosures to be made for certain commercial financing products, including
small business loans and merchant cash advances.  The law contains
exemptions and carve-outs for, among other things, depository institutions,
financings of more than $500,000, closed-end loans with a principal amount of
less than $5,000, and transactions secured by real property.  Compliance
with the new disclosure requirements is not required until the DFPI’s final
regulations become effective.

The small number of changes made by the DFPI in the fourth
modifications suggests that the DFPI is close to finalizing its proposal. 
The most significant changes in the fourth modifications concern the
definitions of  “Average monthly cost” and “Estimated monthly cost,” items
which must be included in the disclosures for certain products.

Comments on the fourth modifications are due by November 22,
2021.