Update on California Senate Bill 1235

ON JAN. 21, ELFA submitted comments regarding California Senate Bill 1235 to the California Department of Business Oversight (DBO) as invited by the Commissioner. Even though ELFA won hard-fought exemptions within this legislation, the comments filed seek to provide clarity and our ongoing industry guidance. The comments were created by an ELFA workgroup over a four-month period and can be seen by going to: http://bit.ly/2DhoGxy.

SB 1235 Compliance Delayed While the DBO Solicits Comments 

An important reminder to all ELFA members: As we alerted you earlier this year, ELFA has been informed by the DBO that compliance with SB 1235 will not be required through 2019 while the DBO receives comments, drafts regulations and promulgates rules, and compliance will then only be required after final regulations become effective. 

The DBO follows a comprehensive set of requirements that include pre-text and post-text comment periods, and when complete, the formal text will be submitted to the Office of Administrative Law for their approval. The legislation will not become effective until the quarter following their approval.

Background

California Senate Bill 1235 requires consumer-like disclosures to be made on certain commercial finance products under $500,000, including small business loans and merchant cash advances, and leases with nominal purchase options, among other things. It does not cover true leases.

The new law requires that the following be included in qualifying commercial loans (including leases with nominal purchase options): 

1. The total amount of funds provided.
2. The total dollar cost of the financing.
3. The term or estimated term.
4. The method, frequency and amount of payments.
5. A description of prepayment policies.
6. The total cost of the financing expressed as an annualized rate.