Small Business Lending UDAAP Protections!

Thanks to our colleagues Amyra Hassan and Louis Caditz-Peck (Lending Club and CAMEO board member) of the Responsible Business Lending Coalition for this post.

Exciting news! Last year, you joined the Responsible Business Lending Coalition in a comment letter supporting the California Department of Financial Protection’s (DFPI) efforts to provide financial protection for small businesses. That letter made a difference. On Friday, June 24, DFPI released an updated, proposed rule, adopts some our recommendations:

  1. DFPI is proceeding with the proposed protections against “unfair, deceptive, and abusive acts or practices.”
  2. Data on the pricing of small business financing will be collected in the form of APR, not dollar cost, in recognition that APR, unlike dollar cost, enables comparison of the cost of financing over time. 

The Department is now one step closer to establishing California as a safe haven for our hard-working entrepreneurs! Our collective voices were essential to this achievement.

To cement California’s role as a leader in the small business protection space, we are preparing a comment letter in response to DFPI’s request for feedback. In the upcoming letter, we will urge DFPI to close two important gaps that remain in the proposed regulations:

  1. DFPI should not rely on merchant cash advance companies to police themselves for misleading disclosures and slap their own wrists. Instead, DFPI should collect data on the disclosed vs. actual retrospective APR for merchant cash advance companies that choose to estimate the APRs they disclose.
  2. DFPI should collect APR data on all small business financing under its jurisdiction, to create complete information and a level playing field. 

The deadline to submit a comment letter is Monday, August 8,2022. We will circulate the draft letter before this deadline.Please fill out this form by August 1, 2022 if you would like your organization to be added to our new comment letter.