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Financial Services Law Insights and Observations

New NYDFS proposal to implement Commercial Finance Disclosure Law

State Issues Agency Rule-Making & Guidance Bank Regulatory State Regulators NYDFS Commercial Finance Disclosures New York CFDL California DFPI

State Issues

On September 14, NYDFS published a notice of proposed rulemaking under New York’s Commercial Financing Disclosure Law (CFDL) related to disclosure requirements for certain providers of commercial financing transactions in the state. As previously covered by InfoBytes, the CFDL was enacted at the end of December 2020, and amended in February to expand coverage and delay the effective date. (See S5470-B, as amended by S898.) Under the CFDL, providers of commercial financing, which include persons and entities who solicit and present specific offers of commercial financing on behalf of a third party, are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less. Last December, NYDFS announced that providers’ compliance obligations under the CFDL will not take effect until the necessary implementing regulations are issued and effective (covered by InfoBytes here).

The newest proposed regulations (see Assessment of Public Comments for the Revised Proposed New Part 600 to 23 NYCRR) introduce several revisions and clarifications following the consideration of comments received on proposed regulations published last October (covered by InfoBytes here). Updates include:

  • A new section stating that a “transaction is subject to the CFDL if one of the parties is principally directed or managed from New York, or the provider negotiated the commercial financing from a location in New York.”
  • A new section requiring notice be sent to a recipient if a change is made to the servicing of a commercial financing agreement.
  • An revised definition of “recipient” to now “include entities subject to common control if all such recipients receive the single offer of commercial financing simultaneously.”
  • Clarifying language stating that the “requirements pertaining to the statement of a rate of finance charge or a financing amount, as that term appears in Section 810 of the CFDL, shall be in effect only upon the quotation of a specific commercial financing offer.”
  • Provisions allowing providers to perform calculations based upon either a 30-day month/360-day year or a 365-day year, with the acknowledgment that different methods of computation may lead to slightly different results.
  • An amendment stating that “a ‘provider is not required to provide the disclosures required by the CFDL when the finance charge of an existing financing is effectively increased due to the incurrence, by the recipient, of avoidable fees and charges.’”
  • An acknowledgement of comments asking that 23 NYCRR Part 600 be identical to California’s disclosure requirements (covered by InfoBytes here) “or as consistent as possible.” In response, NYDFS said that while it generally agrees, and has consulted with the California Department of Financial Protection and Innovation (DFPI), the regulations cannot be identical because the CFDL differs from the California Consumer Financial Protection Law and the Department cannot anticipate any future revisions DFPI may make to its proposed regulations.

Comments on the proposed regulations are due October 31.

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