On February 1, the Superintendent of Financial Services Adrienne A. Harris announced that the New York State Department of Financial Services completed the process for adopting a new regulation relating to disclosure requirements for commercial financing. The regulation, 23 NYCRR 600, applies to multiple types of commercial financing products and requires providers to issue disclosures when “extending a specific offer” for various types of commercial financing.
As explained in the press announcement, the new regulation “requires certain providers of commercial financing in amounts of up to $2,500,000 to provide standardized disclosures to potential borrowers at the time financing offers are extended. These standardized disclosures are designed to help businesses and individuals understand and compare the terms of different commercial financing offers. The regulation implements the [Commercial Finance Disclosure Law or CFDL] and provides specific instructions to commercial financing providers on how to comply with the CFDL.”
Among other things, the regulation:
- Explains how providers should calculate the finance charge and annual percentage rate (APR);
- Sets forth detailed formatting requirements for disclosures required for sales-based financing, closed-end financing, open-end financing, factoring transaction financing, lease financing, and general asset-based financing;
- Describes how the CFDL’s disclosure threshold of $2,500,000 is calculated; and
- Prescribes a process under which certain providers calculating estimated APRs will report data to the superintendent of financial services relating to the actual retrospective APRs of completed transactions, in order to facilitate accurate estimates for future transactions.
We previously reported on an industry group lawsuit challenging California’s similar disclosure regulations asserting those disclosure requirements violate the First Amendment by compelling inaccurate speech and are preempted by TILA. New York’s regulations may be subject to similar industry attacks in the future.