S2262 —

S2262 1R SS Senate Statement 12/17/181/31/19 STATEMENT TO   [First Reprint]   SENATE SUBSTITUTE FOR SENATE, No.

DECEMBERJANUARY 17,31, 20182019         TheThese amendments requiredefine that“cash brokersadvance” who arrange or offer to arrangemean small business financing or assist or advise a small business concern in obtaining financing foroption considerationthat mustallows provide a written disclosure to the small business concern and to thesell providerall statingor thea totalportion dollar amount of feesits chargedfuture tosales thecollections smallor businessother concernfuture byrevenues the broker.  The broker must provide this disclosure in aexchange documentfor separatean fromimmediate thepayment. provider’s contract with the small business concern, prior to the consummation of the small business financing transaction.

      The amendments providerequire thatproviders nothingwho inoffer thecash billadvances prevents a provider from providing additional disclosure information on financing being offered to amake smallthe businessfollowing concern.disclosures:

      The(1) amendmentsthe includetotal andollar accountscosts receivableto purchasebe transactioncharged thatto includesa ansmall agreementbusiness toconcern, purchaseassuming futurethe small business concern delivers all purchased receivables to providers at the time they are generated or receiptsat ina mutually agreed upon time, and all required fees and charges that are paid by the definitionsmall ofbusiness factoring.concern and that cannot be avoided by the small business concern;

      The(2) amendmentsthe requireamount providersfinanced, thatwhich extendshall smallmean businessthe financingadvance toamount disclose:less any prepaid finance charges;

and       (1) (3) for a closed-endcash loan,advance that calculates repayment costs dependent on the small business concern’s future receivables, the estimated annual percentage rate, expressedprovided as a nominalrange, yearlywith rate,at inclusiveleast ofthree anydifferent feesrepayment times provided and financea charges;narrative explanation of how each rate was derived.  Any estimated annual percentage rate is to be calculated using a projected sales volume that is based on the small business concern’s average historical sales or the sales projections relied on by the provider in underwriting the cash advance;

or       (2) (4) for ana open-endcash loan,advance the estimated annual percentage rate.  In providing an estimated annual percentage rate, the rate shall be calculated using the daily, weekly, or monthly payments from the small business concern that arecalculates assumedrepayment bycosts theas providera infixed thepayment, underwriting process.  The disclosure shall state that the estimated annual percentage raterate, isexpressed intended as a goodnominal faithyearly estimate,rate, andinclusive mayof notany befees accurateand iffinance thecharges. business repays more quickly or slowly that the estimated term;

and       (3) The forbill aalso factoringmakes orchanges asset-basedto transaction, the factordisclosures rate,required expressedfor asproviders aof decimal, and the factoring commissionor rate,asset-based expressedtransactions asconcerning ahow percentagethe ofpurchase salesprice orand claims,advance includingrates anyfor minimumthose ortransactions maximumare paymentto amounts.be expressed.

      The amendments require the Commissioner of Banking and Insurance to promulgate regulations to require providers that extend small business financing to notify small business concerns before any change that significantly affects any of the disclosures otherwise required under the bill.

      The amendments change the penalties available under the bill to provide for a $10,000 penalty against providers that violate the provisions of the bill, regardless of the number of small business concerns subject to that violation.  If the commissioner demonstrates that a provider knowingly violated any provision of the bill, the provider is liable to a civil penalty of not more than $10,000 for each small business concern subject to the violation.

      The amendments also exempt the following parties from the requirements of the bill:

insured depository institution-affiliated parties;

credit unions insured by the National Credit Union Administration’s National Credit Union Share Insurance Fund;

and credit union service organizations.