States Propose New Financial Disclosure Requirements

ELFA has been fighting to exclude the equipment finance industry from onerous commercial disclosure requirements that have been introduced in a number of states. In our last column, we discussed new laws in California and New York. In this issue, we look at new legislation proposed in Missouri and Mississippi. Please share your assessments of these bills to ELFA Vice President, State Government Relations, Scott Riehl.

Missouri Commercial Financing Disclosure Legislation

Missouri Senate Bill 963, a pre-filed bill known as the Commercial Financing Disclosure Law, would mandate disclosure of specific information relating to certain commercial financing if the provider transacts more than five commercial financings in any calendar year. “Provider” also includes those entering into a written agreement with a depository institution to arrange for the extension of commercial financing by the depository institution to a business via an online lending platform administered by the provider. 

The fact that a provider extends a specific offer for a commercial financing product on behalf of a depository institution shall not be construed to mean that the provider engaged in or originated the lending or financing.  A provider shall disclose the following with each commercial financing product: the total amount of funds provided; total of funds disbursed if less than the total of funds provided, as a result of any fees deducted or withheld and any payment to a third party; total paid to the provider; total dollar cost derived by subtracting the total of funds provided from the total of payments including any fees or charges deducted; manner, frequency, and amount of each payment; statement of any costs or discounts associated with prepayment; and whether the provider will pay compensation directly to a broker.  

Exemptions found in Section 4 include depository institutions; providers regulated under the federal Farm Credit Act; motor vehicle dealers or an affiliate; providers licensed as a money transmitter by Missouri, or any other state, district, territory, or commonwealth; and providers with no more than five commercial financings per year. Senate Bill 963 does not create a private right of action against any person or other entity based upon compliance or noncompliance. Authority to enforce compliance is vested exclusively in the attorney general. 

The sponsor is Senator Justin Brown (R-Rolla).  His committee assignments include Insurance and Banking and Appropriations. Senator Brown has worked as a commercial loan officer, specializing in agricultural financing, while owning and operating a family farm. He currently farms more than 2,200 acres, primarily raising corn and soybeans but also maintains a cow-calf operation. 

ELFA received early warning and went to work immediately, reaching out to leadership and working closely with the sponsor and interested parties to secure and expand upon industry exemptions to this legislation.

Mississippi Commercial Financing Disclosure Law  

Mississippi Senate Bill 2699, titled the Commercial Financing Disclosure Law, was introduced by Sen. Jeremy England (R-Vancleave) who is Vice Chairman of the Senate Judiciary Committee – Division B, member of the Senate Finance Committee, Senate Economic & Workforce Development and other committees. 

The bill defines “commercial financing product” as meaning any commercial loan, accounts receivable purchase transaction, commercial open-end credit plan or each to the extent the transaction is a business purpose transaction and declares that a provider that consummates more than five (5) commercial financing products to a business in any calendar year must disclose the following: 

• Total funds provided to the business labeled as “total amount of funds provided”
• Total amount of funds disbursed, if less than the total amount of funds provided, as a result of any fees deducted or withheld as well as any amount paid to a third party and labeled “total amount of funds disbursed”
• Total amount paid to the provider labeled “total of payments”
• Total dollar cost of the commercial financing, derived by subtracting the total amount of funds provided from the total of payments including any fees or charges and labeled as “total amount of funds provided” and further labeled “total dollar cost of financing”
• The manner, frequency and amount of each payment labeled “payments”
• If payments vary, the manner, frequency and estimated amount of the initial payment labeled “estimated payments” and methodology for calculating any variable payment and when payments may vary
• A statement of any costs or discounts associated with prepayment including contractual rights of the parties labeled “prepayment”; and 
• A statement of whether the provider will pay compensation directly to a broker and the amount of compensation. 

SB 2699 also asserts “nothing in this act is intended to, or does, create a private right of action against any person or other entity based upon compliance or noncompliance with its provisions.”Further information on this legislation features exemptions, which are:

a) A provider that is a depository institution. 
b) A provider that is a lender regulated under the federal Farm Credit Act (12 USC Section 2001 et seq.). 
c) A commercial financing product secured by real property. 
d) A commercial financing product in which the recipient is a motor vehicle dealer or an affiliate of such a dealer, or a vehicle rental company, or an affiliate of such a company, pursuant to a commercial loan or commercial open-end credit plan of at least Fifty Thousand Dollars ($50,000.00). 
e) A provider that is licensed as a money transmitter in accordance with a license, certificate, or charter issued by this state, or any other state, district, territory, or commonwealth of the United States. 
f) A provider that consummates no more than five (5) commercial financing products in this state in a twelve-month period.  

Here again, ELFA was provided early warning and immediately reached out to leadership and began efforts to secure and build upon industry exemptions achieved in California and New York.