Brace yourselves because California is shaking things up in the world of commercial financing, again. The Golden State just passed a bill in the State Senate and will move on to the Assembly. If it continues to be passed as is, it will make waves across the industry.
The Lowdown
Senate Bill 1482 sailed through the Senate with a unanimous vote (talk about bipartisanship!), and it's now headed to the Assembly. This bad boy aims to bring a whole new level of regulation to the commercial financing game.
Here's the kicker: if this bill becomes law, providers and brokers of certain commercial financing products – think merchant cash advances, factoring, and lease financing – will have to register with the California Department of Financial Protection and Innovation (DFPI). That's right, no more flying under the radar!
Definition of “commercial financing” as defined in California Financial Code Section 22800(d), includes, among other things, closed-end and open-end loans, factoring, and accounts receivable purchase transactions (including merchant cash advances)
Double Trouble?
Now, here's where things get a little quirky. The bill doesn't seem to exempt companies that are already licensed under the California Financing Law (CFL). So, if you offer both CFL-regulated products and products covered by this new bill, you might have to register twice. Talk about bureaucratic redundancy!
The Nitty-Gritty
But wait, there's more! This registration process isn't just a formality. Applicants will have to provide detailed information about their business activities, control persons, and even submit their disclosure documents, contracts, and application flows for DFPI's review. And let's not forget the annual registration and assessment fees based on your gross income. Ouch!
Article 3. Annual Assessment and Reporting
90040.
(a) A registrant shall pay to the commissioner an annual registration fee of one hundred dollars ($100) plus an assessment equal to its pro rata share of all costs and expenses...
(b) A registrant who reports in its annual report no gross income from subject products during the year or whose reported gross income from subject products results in an assessment amount of less than five hundred dollars ($500) as calculated under subdivision (a) shall pay an assessment of five hundred dollars ($500) for that year.
The Bigger Picture
This bill is part of a nationwide trend toward tighter regulation of commercial financing providers. California is often a trendsetter so other states might follow suit in the coming months and years but other states like Virginia already have something similar in place. Better keep an eye on those legislative developments, folks!
So, there you have it – a sneak peek into California's latest move to shake up the commercial financing world. Whether you love it or hate it, one thing's for sure: SB-1482 is bound to keep things interesting.
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