New California legislation will impose disclosure requirements, similar to those under the federal Truth in Lending Act, on commercial-purpose loans of $500,000 or less, including arrangements such as factoring, merchant cash advances, and certain assignments of accounts and receivables. The disclosures will generally include the total cost of the financing, expressed both as a dollar amount and an annualized rate, with variations applicable to different types of transactions. While the requirements will not apply to depository institutions, they will apply to certain bank partner arrangements, such as a non-depository institution that enters into a written agreement with a depository institution to arrange for commercial financing via an online lending platform. The requirements will not, however, apply to transactions secured by real property, among other exemptions. The law becomes effective January 1, 2019, but providers are not required to comply with the disclosure requirements until final regulations become effective.
Read about the new California requirements in Mayer Brown’s latest Legal Update.