USA- New York Senate Bill on Commercial Financing Disclosure Requirements
A new law has been introduced through SB5470 which will impose disclosure requirements on providers of commercial financing. The new law that shall come into force on 21st June 2021 lays down that non-exempt provider of commercial financing must disclose transaction terms to the borrower and obtain their signature before concluding the transaction. The new law is similar to the Federal Truth in Lending Act and Regulation Z, imposed on loans.
The requirements prescribed under the law are said to vary according to the type of commercial financing involved. Essentially, the following necessary information is required to be disclosed:
The total amount of commercial funding, or the disbursement amount
The finance charge
The annual percentage rate calculated according to TILA and Regulation Z
The repayment amount
Term of finance
Description of prepayment
In case a provider requires a recipient to pay off a commercial loan before renewal, the new amount being applied for shall be disclosed in addition to the interest under financing and prepayment charges. A retail financing provider must obtain the recipient's signature, which may be in the electronic format on all such disclosures before proceeding with the transaction application.
Certain entities and transactions are exempted under the Act. Federal or State financial institutions, bank holding companies and their non-bank subsidiaries do not fall under financial institutions' definition. Further, technology service providers are also exempted as longs as the provider has no interest in or agreement to purchase any interest in the commercial financing extended to it. Lastly, entities that fall under the federal Farm Credit Act are also exempted under the new Act.
Transactions secured by real property leases defined under the NY Uniform Commercial Code and individual transactions exceeding 500,000 dollars are also exempted under the Act.
The Act authorizes Department of Financial Services to penalize violations by imposing civil penalties that do not exceed $ 2000 per violation and in case of willful violations $10,000 per violation. The DFS can also order additional relief in the form of preliminary and permanent injunctions.