United States:
Utah Enacts Commercial Financing Disclosure Requirement
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On March 24, Utah Governor Spencer Cox signed SB 183 into law making Utah the third
state in the country to enact a Truth in Lending-like commercial
financing disclosure law. Utah joins California and New York
to adopt such statutory commercial financing disclosure
requirements. As opposed to similar laws in California and
New York, however, the Utah Commercial Financing Registration and
Disclosure Act (the Act) does not include an “APR”
disclosure requirement and requires commercial lenders to register
as commercial loan providers with the Nationwide Multistate
Licensing System and Registry and Utah Department of Financial
Institutions (DFI). The law has an effective date of January
1, 2023.
Scope
The Act applies to commercial-purpose transactions in amounts of
$1 million or less that qualify as commercial loans, commercial
open-end credit plans or accounts receivable purchase transactions,
the latter being defined to reach typical merchant cash advance or
factoring transactions. The Act does not apply to a
transaction of at least $50,000 where the recipient of the funding
is a motor vehicle dealer. Depository institutions, licensed
money transmitters, commercial equipment lessors, and purchase
money lenders, among others, are also exempt.
Disclosures
Commercial lenders will be required to disclose the
following:
- The total amount of funding provided to the business
- The total amount of funding disbursed to the business, if less
than the total amount of the funding - The total amount that the business must pay to the commercial
lender - The total dollar cost of the commercial financing transaction,
to be calculated by subtracting the total funding provided from the
total amount to be paid to the lender - The manner, frequency, and amount of each payment, or if
payment amounts may vary, the manner and frequency of payments and
an estimate of the amount of the first payment - A statement of whether there are any costs or discounts
associated with prepayment of the commercial loan, including a
reference to the section of the agreement that creates such cost or
discount. - Any part of the funding that the provider pays to a
broker. - A description of the methodology that will be used to calculate
any variable payment amount and the circumstances that may cause
variations in the payment amount.
Penalties
While the Act does not create a private right of action, each
violation of the Act’s disclosure requirements is subject to
a civil penalty of $500, up to $20,000 for all violations resulting
from the use of the same transaction disclosures. Higher
monetary penalties apply to a person that continues to violate
after receiving notice of a prior violation.
Putting it Into Practice: Commercial
lenders will likely need to prepare for additional disclosure laws
being considered in several other states, including in Connecticut,
Maryland, Mississippi, Missouri, New Jersey, North Carolina, and
Virginia. However, for now, commercial lenders impacted by
the laws in New York, California, and Utah should be prepared to
potentially implement three separate disclosure processes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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