ELFA Files Final Comments on California Enhanced Financial Disclosure Law

ON APRIL 26, ELFA filed our fourth and final comments to the California Department of Financial Protection and Innovation regarding the revised draft rules implementing SB 1235, the California enhanced financial disclosure law. 

ELFA’s hard-fought-for exemption for true leases is protected; however, there were several issues in the latest revised Department draft that ELFA believed strongly needed to be addressed. Those issues included:

1. Due to the substantial administrative and operational issues and costs (particularly to small business providers) involved in interpreting and implementing the disclosure requirements, we requested confirmation that providers will not be required to comply with the disclosure requirements until at least 180 days after final regulations have been adopted and have become effective.
   
   
2. We requested that the Department revise and post template disclosure forms compliant with the new law and final regulations.

ELFA further stressed and highlighted:

• As revised, we believe certain language goes far beyond the clear language and intent of the statute, and in doing so far exceeds the disclosure requirements found even in the consumer loan context. 
• As revised, a lender must now spend significant time and resources even before the loan is documented in making the separate disclosures. The revisions now appear to create a second document to be provided to the customer pre loan approval and documentation. 
• ELFA fears that contrary to the sponsors’ stated intent, due to these revisions lenders will not want to go through this process given the time and cost involved but if they choose to do so, the cost and time will be passed on to the borrowers in some fashion resulting in higher rates or costs. 

Lastly, ELFA reminded the Department what the sponsors’ scope and intent for the legislation truly was—see Sen. Steve Glazer Protecting Equipment Leasing.

As the rule promulgation process continues, ELFA expects the Department to finalize the regulations by Jan. 1, 2022, at which time the final rules will be sent to the Office of Administrative Law for final approval. Once OAL approves, ELFA predicts lenders will not be required to comply with the disclosure requirements until at least 180 days after final regulations have been adopted or about June 2022. 

New Jersey Commercial Lending Disclosure Bill Passes Committee

After no activity for 1 ½ years, New Jersey Senate Bill 233 COMMITTEE SUBSTITUTE, which “requires certain disclosures by providers of commercial financing,” was reported out of committee without notice or a hearing on June 16, 2021.  Please note the text of the leasing exemption in the original version of the NJ Bill was revised. The updated exemption provisions with leasing cited in 15 a (4) reads as follows:

15. a. This act shall not apply to:

 (1) a financial institution;
 (2) a lender regulated under the federal “Farm Credit Act” (12 U.S.C. s.2001 et seq.);
 (3) a commercial financing transaction secured by real property;
 (4) a lease as defined in N.J.S.12A:2A-103;
 (5) a person or provider who makes not more than five commercial financing transactions in this State in a 12-month period; or
 (6) an individual commercial financing transaction in an amount over $500,000 dollars.

ELFA continues to work closely with the sponsor and leadership to ensure ELFA member interests are considered and promoted. Your comments can be shared with ELFA Vice President, State Government Relations, Scott Riehl.

North Carolina Disclosure and NMLS Registration Bill Introduced

North Carolina House Bill 969, introduced in May by Finance Committee Senior Chairman Rep. Mitchell Setzer (R-Catawba), would mandate enhanced finance disclosure as seen in California and New York. The bill goes a step further, mandating registration with the state by any “covered lender” defined in part as encompassing “a person that extends a specific offer of commercial financing to a borrower” with definition of a “person” expanded to involve corporations as well as other business entities. The meaning of commercial financing contains various forms of financing “of which the borrower does not intend to use primarily for personal, family, or household purposes.” Section § 53-442 of the legislation lists exemptions, and as found in California and New York the measure includes a true lease exemption as defined in G.S. 25-2A-103. ELFA has reached out to leadership in North Carolina and has begun efforts to address the many concerns this legislation creates. Your comments can be shared with ELFA Vice President, State Government Relations, Scott Riehl.

New Mexico Enacts Leased Manufacturing Equipment Exemption  

New Mexico House Bill 278 (Chapter 66) has been enacted and provides that:

“receipts from selling or leasing qualified equipment may be deducted from gross receipts if the sale is made to, or the lease is entered into with, a person engaged in the business of manufacturing or a manufacturing service provider who delivers a nontaxable transaction certificate to the seller; provided that a manufacturer or manufacturing service provider delivering a nontaxable transaction certificate with respect to the qualified equipment shall not claim an investment credit pursuant to the Investment Credit Act for that same equipment.” 

Qualified equipment means machinery, equipment and tools, including component, repair, replacement and spare parts thereof, that are used directly in the manufacturing process of a manufacturing operation. Qualified equipment includes computer hardware and software used directly in the manufacturing process of a manufacturing operation but excludes any motor vehicle that is required to be registered in this state pursuant to the Motor Vehicle Code. Your views on this legislation can be shared with Scott Riehl.