Lots of Movement on Responsible Business Lending in California

In 2018, SB 1235 was signed into law with the support of CAMEO and our partners in the California Responsible Business Lending Coalition (RBLC). The legislation is the first in the nation for truth-in-lending protections for small businesses. Since then, we have continued working with the Department of Financial Protection and Innovation (DFPI) during the regulatory process to represent the interests of small business borrowers.

Last week, DFPI released an updated rule for implementing the law, and is inviting interested parties to submit comments on the proposed rule by Tuesday, August 24, 2021. The DFPI is also seeking comments on draft text defining unfair, deceptive, and abusive acts and practices in connection with the offering of commercial financing and other financial products and services to small businesses. The invitation to submit comments and draft text related to the offering of commercial financing and other financial products and services to small businesses may be found here.

The RBLC will submit a comment letter with three recommendations for the updated rule:

  1. Prevent misleading “gaming” of APR estimations – Ensure that merchant cash advance companies’ flexibility in estimating terms for disclosure is paired with sufficient accountability by requiring reporting to DFPI that compares estimated terms disclosed vs. actual retrospective terms.
  2. Disclosure must enable comparison between financing options – Clarify that, in instances where multiple financing options are being presented, the full disclosure will be made available on all options to aid comparison between them, rather than only on the single option the applicant chooses.
  3. Formatting should “fit” where it appears – Use a principles-based approach on disclosure formatting so that disclosure can match a provider’s “look and feel” and work on mobile devices. 

If your organization signed the RBLC’s comment letter to DFPI from October 2020 and would like to sign on to this letter, no further action is needed on your part. If you are not already a signatory and would like to be included in this letter, please contact Amyra Hasan by COB Monday, August 23, 2021.