10-1-393.18. Required disclosures for commercial financing transactions; exceptions; limitations on brokers; enforcement; civil penalties.

As used in this Code section, the term:#

1. (1)

   “Accounts receivable purchase transaction” means a transaction in which a business forwards or otherwise sells to a person all or a portion of the business’s accounts, as defined in Code Section 11-9-102, or payment intangibles, as defined in Code Section 11-9-102, at a discount to the accounts’ or payment intangibles’ expected value.#

2. (2)

   “Advance fee” means any consideration which is assessed or collected prior to the closing of a commercial financing transaction by a broker.#

3. (3)

   “Broker” means a person who, for compensation or the expectation of compensation, arranges a commercial financing transaction between a third party and a business in the state that would, if executed, be binding upon that third party and communicates that offer to a business located in this state. Such term excludes a “provider,” and any individual or entity whose compensation is not based or dependent upon on the terms of the specific commercial financing transaction obtained or offered.#

4. (4)

   “Business” means a private enterprise carried on for the purpose of gain or economic profit.#

5. (5)

   1. (A)

      “Business purpose transaction” means a transaction from which the resulting proceeds that a business receives are:#

      1. (i)

         Provided to the business; or#

      2. (ii)

         Intended to be used to carry on the business.#

   2. (B)

      Such term shall not include a transaction from which the resulting proceeds are intended to be used for personal, family, or household purposes.#

   3. (C)

      For purposes of determining whether a transaction is a business purpose transaction, a provider may rely on a written statement of intended purpose, signed by an individual authorized to sign on behalf of the business. Such written statement may be contained in an application, agreement, or other document signed by an individual authorized to sign on behalf of the business.#

6. (6)

   “Commercial financing transaction” means a business purpose transaction:#

   1. (A)

      Under which a person extends a business a commercial loan or a commercial open-end credit plan; or#

   2. (B)

      That is an accounts receivable purchase transaction.#

7. (7)

   “Commercial loan” means a loan to a business, regardless of whether the loan is secured.#

8. (8)

   “Commercial open-end credit plan” means commercial financing extended to a business on terms under which:#

   1. (A)

      The creditor reasonably contemplates repeat transactions; and#

   2. (B)

      Subject to any limit set by the creditor, the amount of financing that the creditor may extend to the business during the term of the plan is made available to the extent that any outstanding balance is repaid.#

9. (9)

   “Motor vehicle dealer” means a dealer as defined in Code Section 40-2-39 or a used motor vehicle dealer as defined in Code Section 43-47-2.#

10. (10)

    “Provider” means a person who consummates more than five commercial financing transactions in this state during any calendar year and includes, but is not limited to, a person who, under a written agreement with a depository institution, offers one or more commercial financing products provided by the depository institution via an online platform that the person administers.#

The provisions of this Code section shall not apply to:#

1. (1)

   A provider that is a federally insured depository financial institution;#

2. (2)

   A provider that is:#

   1. (A)

      A subsidiary, an affiliate, or a holding company of a federally insured depository financial institution; or#

   2. (B)

      A service corporation for a federally insured depository financial institution;#

3. (3)

   A provider that is regulated under the federal Farm Credit Act, 12 U.S.C. Section 2001, et seq.;#

4. (4)

   A provider that is licensed as a money transmitter in accordance with Article 4 of Chapter 1 of Title 7;#

5. (5)

   A provider that consummates five or fewer commercial financing transactions in the state during any 12 month period;#

6. (6)

   A commercial financing transaction secured by real property;#

7. (7)

   A commercial financing transaction that is a lease as defined in Code Section 11-2A-103;#

8. (8)

   A commercial financing transaction that is a purchase money obligation as defined in Code Section 11-9-103;#

9. (9)

   A commercial financing transaction that:#

   1. (A)

      Involves a commercial loan or a commercial open-end credit plan;#

   2. (B)

      Is $50,000.00 or more; and#

   3. (C)

      Extends the commercial loan or the commercial open-end credit plan to:#

      1. (i)

         A motor vehicle dealer or the motor vehicle dealer’s affiliate; or#

      2. (ii)

         A motor vehicle rental company as defined in Code Section 40-2-167 or the motor vehicle rental company’s affiliate;#

10. (10)

    A commercial financing transaction offered by a person in connection with the sale or lease of a product or service that:#

    1. (A)

       The person manufactures, licenses, or distributes; or#

    2. (B)

       The person’s parent company or any of such parent company’s directly or indirectly owned and controlled subsidiaries manufactures, licenses, or distributes;#

11. (11)

    A commercial financing transaction of more than $500,000.00; or#

12. (12)

    A commercial financing product that is a factoring transaction, purchase, sale, advance, or similar of accounts receivables owed to a healthcare provider because of a patient’s personal injury treated by the healthcare provider.#

For purposes of Chapter 1 of Title 7, a provider’s characterization of an accounts receivable purchase transaction as a purchase shall be conclusive that the accounts receivable purchase transaction is not a loan or a transaction for the use, forbearance, or detention of money.#

For purposes of Chapter 1 of Title 7, a provider extending a specific offer for a commercial financing transaction on behalf of a depository institution shall not be construed to mean that the provider engaged in lending or financing or originated that loan or financing.#

1. (1)

   Before consummating a commercial financing transaction, a provider shall disclose the terms of the commercial financing transaction in accordance with this Code section.#

2. (2)

   Only one disclosure must be provided for each commercial financing transaction, and a disclosure is not required as a result of the modification, forbearance, or change to a consummated commercial financing transaction.#

3. (3)

   A provider shall disclose the following information in connection with each commercial financing transaction:#

   1. (A)

      The total amount of funds provided to the business under the terms of the commercial financing transaction;#

   2. (B)

      The total amount of funds disbursed to the business under the terms of the commercial financing transaction, if less than the amount described in subparagraph (A) of this paragraph, as a result of any fees deducted or withheld at disbursement, any amount paid to the provider to satisfy a prior balance, and any amount paid to a third party on behalf of the business;#

   3. (C)

      The total amount to be paid to the provider under the terms of the commercial financing transaction;#

   4. (D)

      The total dollar cost of the commercial financing transaction, calculated by finding the difference between:#

      1. (i)

         The amount described in subparagraph (A) of this paragraph; and#

      2. (ii)

         The amount described in subparagraph (C) of this paragraph;#

   5. (E)

      1. (i)

         The manner, frequency, and amount of each payment; or#

      2. (ii)

         If the amount of each payment may vary, the manner, frequency, and estimated amount of the initial payment; and#

   6. (F)

      A statement of whether there are any costs or discounts associated with prepayment under the commercial financing transaction, including a reference to the paragraph in the commercial financing transaction agreement that creates each cost or discount.#

4. (4)

   The commercial financing transaction agreement shall include a description of the methodology for calculating any variable payment amount and the circumstances that may cause a payment amount to vary.#

5. (5)

   The provisions of this subsection shall apply to any commercial financing transaction consummated on or after January 1, 2024.#

No broker shall:#

1. (1)

   Assess, collect, or solicit an advance fee from a business to provide services as a broker; provided, however, that nothing contained in this paragraph shall preclude a broker from soliciting a potential business to pay for, or preclude a potential business from paying for, actual services necessary to apply for a commercial financing transaction, including, but not limited to, a credit check or an appraisal of security, where such payment is made by check or money order payable to a party independent of the broker;#

2. (2)

   Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a broker, notwithstanding the absence of reliance by the buyer; or#

3. (3)

   Make or use any false or deceptive representation in its business dealings.#

The Attorney General may:#

1. (1)

   Receive and act on complaints;#

2. (2)

   Take action designed to obtain voluntary compliance with this Code section; and#

3. (3)

   Commence administrative or judicial proceedings on the Attorney General’s own initiative to enforce compliance with this Code section.#

A person who violates a provision of this Code section is subject to a civil penalty of $500.00 per violation, not to exceed $20,000.00 for all violations arising from the use of the same transaction documentation or materials.#

A person who violates a provision of this Code section after receiving written notice of a prior violation is subject to a civil penalty of $1,000.00 per violation, not to exceed $50,000.00 for all violations arising from the use of the same transaction documentation or materials.#

Nothing in this Code section creates a private right of action against any person based on failure to comply with the provisions of this Code section.#

A violation of this Code section shall not affect the enforceability of any underlying agreement.#