Featuring BizFinLaw – November 2024 | Hudson Cook, LLP

Featuring BizFinLaw – November 2024 | Hudson Cook, LLP

CounselorLibrary is proud to offer BizFinLaw, a legal reporter to help providers of business finance navigate the evolving landscape of state and federal law. Subscribers of BizFinLaw can stay up to date on legal developments that impact the small business finance industry.

Here is a round-up of recent developments reported in BizFinLaw:

Federal Developments

In Texas Bankers Association v. Consumer Financial Protection Bureau, the U.S. District Court for the Southern District of Texas denied a summary judgment motion by the Texas Bankers Association and other plaintiffs to set aside the CFPB’s final small business lending data collection rule under § 1071 of the Dodd-Frank Act (15 U.S.C. § 1691c-2). See the “Litigation” section below for more information.

State Developments

California SB 1286 passed the state legislature and was signed into law by Governor Gavin Newsom. We reported on this bill in September. The new law expands the scope of the Rosenthal Fair Debt Collection Practices Act to cover collection of some commercial-purpose debts beginning on January 1, 2025. The RFDCPA applies to anyone collecting a covered debt, including a person collecting the person’s own debts in the person’s own name. Although much of the RFDCPA overlaps with the federal Fair Debt Collection Practices Act, the RFDCPA imposes some additional requirements, including additional disclosures in certain situations.

California SB 1482 failed to pass the state legislature before the end of the legislative session. The bill’s original version would have required certain providers of commercial financing to obtain licenses under the California Financing Law beginning on January 1, 2026. Amendments changed the licensing requirement to a registration requirement and imposed substantive restrictions on certain commercial financing transactions, and the last amendment eliminated the registration requirement, leaving only the substantive restrictions.

Missouri SB 1359 passed the state legislature and was signed into law by Governor Mike Parson. We reported on this bill, along with the start of implementation of Connecticut’s commercial financing disclosure law, in July. The new law requires disclosures by providers of sales-based financing and commercial-purpose closed-end and open-end loans. A provider is subject to the law if the provider originates more than five commercial financing transactions with businesses located in Missouri in a calendar year. Transactions of more than $500,000 are exempt. The law does not require disclosure of estimated or actual APR. Brokers must register with the Division of Finance of the Missouri Department of Commerce and Insurance and file surety bonds. The registration and bonding requirements do not apply to providers. The law will take effect six months after the Division of Finance finalizes rules under the law or on February 28, 2025, if it does not intend to promulgate rules.

Significant Litigation

In Texas Bankers Association v. Consumer Financial Protection Bureau, the U.S. District Court for the Southern District of Texas denied a summary judgment motion by the Texas Bankers Association and other plaintiffs to set aside the CFPB’s final small business lending data collection rule under § 1071 of the Dodd-Frank Act (15 U.S.C. § 1691c-2). The court also granted the CFPB’s motion for summary judgment. The plaintiffs had argued that the promulgation of the SBL rule violated the Administrative Procedure Act. Specifically, the plaintiffs had argued (among other things) that the CFPB exceeded its statutory authority under § 1071 by expanding the 13 data points mentioned in § 1071 to 81 data points. The court responded that the CFPB had added only nine data points, not 68, and that the list of data points in § 1071 is not exhaustive. The plaintiffs have stated that they plan to appeal the ruling to the U.S. Court of Appeals for the Fifth Circuit.