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Update On SB 1235 – August Amendments – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Update On SB 1235 – August Amendments

SB 1235 targets commercial transactions by requiring some commercial lenders to disclose interest rates in some commercial loans. SB 1235 would require commercial finance companies to disclose various costs, rates, and fees. Since June, the bill has been amended again, this time most recently on August 24, with much of the explanatory language contained in the legislation’s definitions deleted.

A provider is now simply required to provide all of the following disclosures:

*The total amount of funds provided;

*The total dollar cost of the financing;

*The term or estimated term;

*The method, frequency, and amount of payments;

*A description of prepayment policies; and

*The total cost of the financing expressed as an annualized rate.

Providers, defined as persons who extend a specific offer of commercial financing to a recipient, including a nondepository institution, which enters into a written agreement with a depository institution to arrange for the extension of commercial financing by the depository institution to a recipient through an online lending platform administered by the nondepository institution.

Here, SB 1235 specifically states that the fact that a provider extends a specific offer of commercial financing or lending on behalf of a depository institution should not be construed to mean that the provider engaged in lending or originated that loan or financing.

Providers who offer commercial financing that is factoring or asset-based and that offers the recipient an agreement that describes the general terms and conditions of the commercial financing transaction that will occur under the agreement, may provide the following disclosures as an example of a transaction that could occur under the general agreement for a given amount of accounts receivables:

*An amount financed;

*The total dollar cost;

*The term or estimated term;

*The method, frequency, and amount of payments;

*A description of prepayment policies; and

*The total cost of the financing expressed as an annualized rate.

While the majority of these terms seem straightforward, the bill provides no explanatory guidance in defining in detail how any of these terms are actually defined or what information is actually required under the new law. Language in prior versions of the bill was much more extensive and left little for interpretation, for the most part.

Instead, the bill directs the Commissioner of Business Oversight to adopt regulations including “definitions, contents, or methods of calculations for each of the disclosure terms.” Also, the commissioner is to formulate the requirements concerning the time, manner, and format of the disclosures.

Prior versions of the bill required that providers submit an annual report, but all provisions related to this requirement have been struck from the legislation as it currently stands. The bill’s requirements do not become operative until January 1, 2024.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services, and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

 

 

 

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