The Power of ELFA Advocacy

What you need to know about the key issues and key players at the association defending your interests against harmful laws and regulations.

IN 1961, representatives from a handful of equipment finance companies convened in Chicago to discuss forming an association. Little known in the wider business community, and even less understood at the time, the industry was small and fledgling. Yet, with the right vehicle to promote leasing as a financing option and—most importantly—to ensure federal and state laws set the right playing field, they believed the industry could achieve explosive growth. Several meetings later, the Association of Equipment Lessors (AEL) was born.  

The timing could not have been more auspicious.  

Soon thereafter, President John F. Kennedy proposed a new Investment Tax Credit (ITC). While ostensibly designed to stimulate growth in the wider economy, it failed to address the emergent needs of the leasing industry. That would have been the end of the story in the days before AEL. But the association was able to jump in and score a major advocacy win. The credit was widened to make lessors eligible and its useful life requirement was reduced from eight years to four so that equipment would also qualify. It was a huge advocacy success that induced major companies to actively engage in tax-oriented leasing, and it provided the nascent industry with its first engine for growth: causing it, as expected, to explode.  

In the 60-some years since, there have been many ups and downs in the advocacy space. The issue sets, personalities and even the association’s name have changed. The ITC has come and gone. The nature of the industry itself has shifted many times over. And all of this caused the association’s advocacy to evolve substantially over the decades. Yet, the mission has remained the same: to achieve the level playing field that AEL’s founders first sought back in the 1960s. In other words, to ensure a legislative and regulatory environment conducive to sustained long-term growth for the industry and member companies.

There are a lot of lobbyists in Washington, but ELFA is the only association advocating for the interests of equipment finance companies.

- Ralph Petta, ELFA

AEL’s, and later ELFA’s, success in achieving that certainty and transparency is key to why the industry has been so successful over the years. It remains the animating focus of the association’s advocacy team today. Yet, exactly how ELFA achieves these outcomes is not widely understood by every member of the association. Members often ask for a peek behind the curtain, or express curiosity about how they can get involved themselves. Others simply want to better understand how the association’s advocacy efforts set it apart.  

“There are a lot of lobbyists in Washington, but ELFA is the only association out there advocating for the interests of equipment leasing and finance companies,” explained ELFA President and CEO Ralph Petta. “We’re the only game in town when it comes to the specific needs of our industry—and our influence extends far beyond just the nation’s capital.”  

Advocacy is a multifaceted undertaking, but it all begins in the same place: with educating policymakers and regulators about who ELFA members are, what they do, why they matter and how equipment finance impacts the economy as a whole. This proactive education is critical when politicians seek to put proposals in place that affect the industry. It’s also when ELFA’s advocacy team springs into action with blocking and tackling, as well as parlaying those educational efforts into policy outcomes that benefit the industry—both in Washington, and in state capitals across the country. 

Section 1071 is bad for the industry, but our advocacy is paying off—and regardless of the outcome, we’ll make sure our members are prepared.

-  Andy Fishburn, ELFA 

The industry’s voice in Washington 

The first place that comes to mind when the word “advocacy” comes up is Washington, D.C. Congress and executive branch regulators wield significant power when it comes to setting the policies that affect the bottom lines of companies across the country. That was true in 1961 and it’s still true today. And Andy Fishburn, ELFA’s Vice President of Federal Government Relations, is the industry’s man on the ground when it comes to influencing policy in the nation’s capital. Fishburn’s days are often filled with meetings: with regulators, members of Congress and a variety of other industry and policy stakeholders. His job is to represent the collective voice of the equipment finance industry and to get a pulse on what’s happening in D.C.—or about to happen—so that he can devise legislative strategies for the policies that matter most to ELFA members.   

“Our federal advocacy efforts span a range of issues—from technology and bankruptcy to taxes—but among the most important right now is financial-services regulatory policy. In particular, we are focused on ensuring Dodd-Frank is implemented in the fairest possible way for ELFA members,” said Fishburn. 

The Dodd-Frank Act, introduced in the wake of the financial crash of 2008, was designed to achieve a substantial overhaul of the regulatory structure governing “Wall Street.” But the massive 800-page bill impacted many other sections of the economy too, including equipment finance. And, as is often the case with such complicated laws, Dodd-Frank’s passage into law in 2010 was simply the precursor to years of implementation by the executive branch.  

Nearly every section of Dodd-Frank has been contentious for one industry or another. The area of greatest concern for equipment finance is Section 1071, which would require financial institutions to collect and annually report to the federal government extensive financial data and demographic information about credit applicants. The administration’s implementation of Section 1071 has been a point of contention for over a decade now and it remains the biggest issue on Fishburn’s plate.

The to-ing and fro-ing with administration bureaucrats over how to interpret each line of a particular law is hardly flashy work, but it’s one of the most important things that industry advocates do.  

Our strategy was to get to other states before they introduced legislation. That allowed us to be highly effective.

-  Scott Riehl, ELFA 

It is through this regulatory process that Fishburn’s team was able to secure a favorable “first use” interpretation in the Tax Cuts and Jobs Act of 2017 (i.e., tax reform) as well as the “beneficial ownership” rule that ELFA members rely upon every day. And it is through the same process that Fishburn and his team, with ELFA member support, were successful in securing a series of significant carveouts for the industry in Section 1071, including a true lease exemption and longer implementation times. They also fought off bad ideas like a proposed requirement for individual companies to respond to public requests for information (a responsibility that was ultimately transferred to the federal government). 
 
After a decade’s worth of work, the efforts may still not be near the finish line.  

On March 30, the administration released its final rule implementing Section 1071. Then, in a single week in late July, the rule suffered blows from two branches of government. Legislatively, the House Financial Services Committee approved a resolution that sought to overturn it entirely. A few days later, a federal judge issued an injunction delaying implementation of Section 1071 for a swath of covered institutions (i.e., banks but not captive members). ELFA intervened in the underlying lawsuit in order to expand the injunction to include all ELFA members. On Oct. 26 the court issued a nationwide injunction, which functionally delays compliance by approximately 10 months for all ELFA member companies.  

If ELFA succeeds, Section 1071 would effectively fall away. It would be a massive win for the industry and Fishburn’s team is working hard to make the best case possible. But that outcome is impossible to ensure, which is why ELFA’s advocacy strategy has a second dimension too: preparing ELFA members for what to do in case the government prevails. That includes providing a variety of training and other resources on ELFA’s website at www.elfaonline.org/1071. 

“This is uncharted territory,” Fishburn added. “Section 1071 is bad for the industry, but our advocacy is paying off—and regardless of the outcome, we’ll make sure our members are prepared.” 

Looking out to the states 

ELFA also actively monitors and engages legislation and regulations that affect the industry in all 50 states. Led by Vice President of State Government Relations Scott Riehl, the association’s efforts focus on identifying and addressing measures that might impact ELFA member interests while also promoting legislation that can proactively address industry needs. Riehl’s team is involved in advocacy on a wide array of fronts, including data security, electronic recycling, taxation and protection of the Uniform Commercial Code (UCC). But perhaps most notable today is ELFA’s work to mitigate the threat of consumer-like enhanced finance disclosure requirements for equipment-lease transactions. 

It’s a trend that began with California’s passage of SB 1235 in 2018, which sought to require lenders and other commercial-financing companies to provide onerous financial disclosures. Riehl and his team knew that this wasn’t just bad policy for ELFA members—it was a trend that had to be managed with effective and targeted advocacy. “The train was moving down the tracks whether we liked it or not. Our job was to ensure that the industry would be appropriately protected before the idea started spreading to other states,” Riehl explained.  

ELFA worked constructively with California lawmakers to amend the legislation and ensure exemptions for all UCC 2A true leases. When New York followed California’s lead, Riehl’s team was able to secure even better industry protections with exemptions for bank affiliates and subsidiaries on top of the true lease carveouts. And, in the 13 states that have introduced or passed similar legislation since, ELFA was able to successfully negotiate a complete suite of exemptions to protect the industry—including all the above plus protections for UCC 9 purchase money obligations and captive transactions. 

“Our strategy was to get to other states before they introduced legislation,” Riehl said. “That allowed us to be highly effective in obtaining the exact set of protections our industry needed—each and every time.”  

Getting that done required a lot of educational effort. Indeed, state advocacy often revolves around educating state legislators who know little about commercial equipment-lease financing. But, once they understand how the industry’s leases and loans help people acquire equipment and inventory—and when they realize what the negative impact of bad policy could be for the state or their own legislative district—they are usually open to the type of carveouts that ELFA secured in the disclosure debate.  

You can’t just wish bad policies away or say ‘they’ll get it’—they won’t, at least not without the efforts of our association’s state government team.

-  Dominic Liberatore, DLL

“You can’t just wish bad policies away or say ‘they’ll get it’—they won’t, at least not without the efforts of our association’s state government team,” said ELFA member Dominic Liberatore, Deputy General Counsel at DLL. “This stuff affects everyone in our industry. It impacts my company directly. That’s why I’m so grateful for Andy and Scott’s work to effectively protect our interests and serve as the voice of the industry in all 50 states.”  

Getting involved and looking ahead 

One of the most important ways to advance the equipment finance industry’s interests is by leveraging the power of ELFA members. In fact, member participation is critical to helping the association deliver the equipment finance message to policymakers—and there are a variety of ways for interested member companies to get involved. Perhaps most notable is the annual Capitol Connections (Cap Con) fly-in event in D.C. There, ELFA members can meet directly with agencies and legislators in both parties to discuss legislation impacting the industry. At the 2023 Cap Con, approximately 140 representatives from ELFA member companies met with approximately 140 congressional offices. 

Capitol Connections draws ELFA members to Washington, D.C. to represent the industry.

But there are many other ways for members to get involved too, from arranging in-district meetings with local legislators to raising funds to support ELFA’s efforts and even just reading the association’s monthly state and federal newsletters. There are also opportunities to join the volunteer committees that work with Andy and Scott to devise ELFA’s legal and political strategies on the top issues facing the industry. More information on the above can be found by visiting the Advocacy section of the ELFA website at www.elfaonline.org/advocacy/. 

ELFA’s ability to bring member companies together to amplify our voices is invaluable and sets it apart from other organizations that I could potentially join.

-  James Cress, Stryker Flex Financial

“ELFA’s ability to bring member companies together to amplify our voices is invaluable and sets it apart from other organizations that I could potentially join. I’m grateful for the work they do and how easy they make it for us to participate and have a voice in our industry,” said James Cress, Vice President and General Manager at Stryker Flex Financial. “As leaders in the industry,” Cress continued, “we have an obligation to shape the policy that governs us.”  

It’s the same ethos that spurred the association’s founders when they met in Chicago decades ago. And, in the view of ELFA’s current President and CEO, it’s just as important now as it was then. “Our association was founded to be an advocate for our industry, and while the issues have changed over the years the mission has not,” said Petta. “I’m really proud of everything we’ve achieved together in the years since. Our effectiveness in this space is what really sets us apart—and I’m confident about what the association will be able to do as it looks ahead to 2024 and beyond.”  

Advocacy Milestones 

This is a brief — and by no means comprehensive — timeline of some of the legislative and regulatory events that helped shape ELFA and the equipment leasing and finance industry since the association’s founding in 1961 (click image below to enlarge).

---