Federal court grants California DFPI motion for summary judgment on commercial financing disclosure requirements

Courts DFPI TILA

Recently, the California DFPI announced it was granted a summary judgment by a federal court to uphold the DFPI’s commercial financing disclosure requirements applicable to small businesses as implemented by SB 1235, including the amount of funding provided, APR, finance charges, and payment amounts. The bill was adopted in 2018 and was previously covered by InfoBytes here, as well as when the California Office of Administrative Law approved the DFPI’s commercial financial disclosure regulations here in June 2022.

In this case, the plaintiff is an advocacy organization that sued the Commissioner of the DFPI, asserting two claims: (i) that the DFPI violated 42 U.S.C. § 1983 based on a violation of the First Amendment; and (ii) that the DFPI’s regulation is preempted by the Truth in Lending Act (TILA). The DFPI disagreed and sought summary judgment on three grounds: (i) the plaintiff lacks the standing to challenge the regulations; (ii) the regulations do not violate the First Amendment; and (iii) the regulations are not preempted by TILA.

The court granted the DFPI’s motion for summary judgment because it found that although the plaintiff had standing to bring suit, the DFPI’s disclosure requirements were lawful under the First Amendment and were not preempted by federal law.