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DFPI modifies CCFPL proposal

State Issues State Regulators DFPI California Agency Rule-Making & Guidance Commercial Finance CCFPL Disclosures

State Issues

On February 24, the California Department of Financial Protection and Innovation (DFPI) released modifications to proposed regulations for implementing and interpreting certain sections of the California Consumer Financial Protection Law (CCFPL) related to commercial financial products and services. As previously covered by InfoBytes, DFPI issued a notice of proposed rulemaking (NPRM) last June to implement sections 22159, 22800, 22804, 90005, 90009, 90012, and 90015 of the CCFPL related to the offering and provision of commercial financing and other financial products and services to small businesses, nonprofits, and family farms. According to DFPI, section 22800 subdivision (d) authorizes the Department to define unfair, deceptive, and abusive acts and practices in connection with the offering or provision of commercial financing. Section 90009, subdivision (e), among other things, authorizes the Department’s rulemaking to include data collection and reporting on the provision of commercial financing or other financial products and services.

After considering comments received on the NPRM, changes proposed by the DFPI include the following:

  • Amended definitions. The proposed modification defines a “commercial financing transaction” to mean “a consummated commercial financing transaction for which a disclosure is provided in accordance with California Code of Regulations, title 10, section 920, subdivision (a).” The modifications to the definitions also amend a “covered provider” to exclude “any person exempted from division 24 of the Financial Code under Financial Code section 90002,” and defines a “small business” to be “a business entity organized for profit with annual gross receipts of no more than $16,000,000 or the annual gross receipt level as biennially adjusted by the Department of General Services in accordance with Government Code section 14837, subdivision (d)(3), whichever is greater.” In determining a business entity’s annual gross receipts, the proposed modifications state that covered providers “may rely on any relevant written representation by the business entity, including information provided in any application or agreement for commercial financing or other financial product or service.”
  • UDAAP. In addition to making several technical changes, the proposed modifications clarify that “[i]t is unlawful for a covered provider to engage or have engaged in any unfair, deceptive, or abusive act or practice in connection with the offering or provision of commercial financing or another financial product or service to a covered entity.” The changes remove text that would have made it unlawful should a covered provider “propose to engage” in any if these practices.
  • Annual reporting requirements. The proposed modifications specify that covered providers who offer commercial financing will be required to electronically file reports to the DFPI on or before March 15 of each year starting in 2025. The proposed changes to the reporting requirements also clarify certain terms, address when covered providers are not required to calculate or report certain information, and stipulate that covered providers “licensed under division 9 (commencing with section 22000) of the Financial Code shall not include in the report required under this section information for activity conducted under the authority of that license.”

Comments on the proposed modifications are due March 15.