As the new year dawns a new era of compliance begins. You might be aware of regulations for the commercial finance industry that have been talked about, passed, and will likely have an effect on you, but which ones will go into effect starting the new year?
Below we will highlight some of the key laws and provisions that will go into effect on Jan 1, 2024, and if you haven't already made preparations for these you are behind the eight ball. However, there is still time. You should contact your legal counsel for any advice on the below.
New laws/provisions
Georgia and Florida both have disclosure laws that go into effect Jan 1. Under the new law, funding providers will be obligated to provide borrowers with specific information, including the total amount of funds provided and the cost of capital.
Georgia and Florida brokers will be banned from charging an 'advance fee' before successfully obtaining financing for a merchant. 'Advance fee' means any consideration that is assessed or collected prior to the closing of a commercial financing transaction by a broker.
In Florida, brokers will be required to disclose their address and telephone number in all advertisements promoting their services, enhancing transparency and ensuring businesses can make informed decisions.
For Georgia, no broker shall "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." Violating these provisions can result in fines starting at $500 per violation in the same transaction levied by the state Attorney General.
California will limit fees, such as fees beyond the normal scope of an 'origination fee' or higher cost fees than what it takes to provide a service like filing a UCC. So for example, if it costs $50 to file a UCC then a funding provider cannot charge the merchant $100.
In California, the APR disclosure will stay in the disclosure requirements given the win in court by the State of California recently.
These are just some of the new laws so please do your own due diligence to find the laws that you need to abide by coming the new year.